Document:

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                                                                    Exhibit 10.5

                                                                  EXECUTION COPY

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                            FIRSTSERVICE CORPORATION

                            FIRSTSERVICE DELAWARE, LP

                                U.S.$100,000,000

                 8.06% Guaranteed Senior Secured Notes due 2011

                                   ----------

                          NOTE AND GUARANTEE AGREEMENT

                                   ----------

                            Dated as of June 21, 2001

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                                TABLE OF CONTENTS

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<CAPTION>

Section                                                                                               Page
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<S>      <C>                                                                                            <C>
1.       AUTHORIZATION OF NOTES..........................................................................1

2.       SALE AND PURCHASE OF NOTES......................................................................2

3.       CLOSING.........................................................................................2

4.       CONDITIONS TO CLOSING...........................................................................2
         4.1.     Representations and Warranties.........................................................3
         4.2.     Performance; No Default................................................................3
         4.3.     Compliance Certificates................................................................3
         4.4.     Opinions of Counsel....................................................................3
         4.5.     Purchase Permitted By Applicable Law, etc..............................................4
         4.6.     Sale of Other Notes....................................................................4
         4.7.     Payment of Special Counsel Fees, etc...................................................4
         4.8.     Private Placement Number...............................................................4
         4.9.     Changes in Corporate Structure.........................................................4
         4.10.    Evidence of Consent to Receive Service of Process......................................5
         4.15.    Subsidiary Guarantee; Undertakings to Secure...........................................5
         4.12.    Financing Documents; Security Interests................................................5
         4.13.    Lien Searches..........................................................................5
         4.14.    Intercreditor Agreement................................................................5
         4.15.    Proceedings and Documents..............................................................6

5.       REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS..................................................6
         5.1.     Organization; Power and Authority......................................................6
         5.2.     Authorization, etc.....................................................................6
         5.3.     Disclosure.............................................................................7
         5.4.     Organization and Ownership of Shares of Subsidiaries; Affiliates.......................7
         5.5.     Financial Statements...................................................................8
         5.6.     Compliance with Laws, Other Instruments, etc...........................................8
         5.7.     Governmental Authorizations, etc.......................................................9
         5.8.     Litigation; Observance of Agreements, Statutes and Orders;
                  Call Option Triggering Events..........................................................9
         5.9.     Taxes; Foreign Taxes..................................................................10
         5.10.    Title to Property; Leases.............................................................10
         5.11.    Licenses, Permits, etc................................................................11
         5.12.    Compliance with ERISA.................................................................11
         5.13.    Private Offering by the Obligors......................................................12
</TABLE>

                                       i

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<TABLE>
<CAPTION>
<S>      <C>                                                                                            <C>
         5.14.    Use of Proceeds; Margin Regulations...................................................13
         5.15.    Existing Indebtedness; Future Liens...................................................13
         5.16.    Foreign Assets Control Regulations, etc...............................................14
         5.17.    Status under Certain Statutes.........................................................14
         5.18.    Environmental Matters.................................................................14
         5.19.    Ranking...............................................................................15
         5.20.    Subsidiary Guarantee..................................................................15
         5.21.    Ownership; Security Documents.........................................................16
         5.22.    Chief Executive Office................................................................16

6.       REPRESENTATIONS OF THE PURCHASERS..............................................................16
         6.1.     Purchase for Investment...............................................................16
         6.2.     Source of Funds.......................................................................16

7.       INFORMATION AS TO THE OBLIGORS.................................................................18
         7.1.     Financial and Business Information....................................................18
         7.2.     Officer's Certificate.................................................................21
         7.3.     Inspection............................................................................22

8.       PREPAYMENT OF THE NOTES........................................................................23
         8.1.     Required Prepayments..................................................................23
         8.2.     Optional Prepayments with Make-Whole Amount...........................................23
         8.3.     Prepayment in Connection with a Payment under Section 13..............................23
         8.4.     Notices, Etc..........................................................................24
         8.5.     Allocation of Partial Prepayments.....................................................25
         8.6.     Maturity; Surrender, etc..............................................................25
         8.7.     Purchase of Notes.....................................................................25
         8.8.     Make-Whole Amount.....................................................................25

9.       AFFIRMATIVE COVENANTS..........................................................................27
         9.1.     Compliance with Law...................................................................27
         9.2.     Insurance.............................................................................27
         9.3.     Maintenance of Properties.............................................................28
         9.4.     Payment of Taxes and Claims...........................................................28
         9.5.     Corporate Existence, etc..............................................................28
         9.6.     Ownership of the Company..............................................................29
         9.7.     Ranking...............................................................................29
         9.8.     Subsidiary Guarantors; Undertakings to Secure.........................................29
         9.9.     Further Assurances; Release of Collateral.............................................29
         9.10.    Lines of Business.....................................................................30

10.      NEGATIVE COVENANTS.............................................................................30
</TABLE>

                                       ii

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<TABLE>
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<S>      <C>                                                                                            <C>
         10.1.    Transactions with Affiliates..........................................................30
         10.2.    Merger, Consolidation, etc............................................................31
         10.3.    Liens.................................................................................32
         10.4.    Consolidated Net Worth................................................................34
         10.5.    Leverage Ratio........................................................................34
         10.6.    Fixed Charge Coverage Ratio...........................................................34
         10.7.    Subsidiary Indebtedness...............................................................35
         10.8.    Disposition of Assets.................................................................35
         10.9.    Call Options..........................................................................36

11.      EVENTS OF DEFAULT..............................................................................36

12.      REMEDIES ON DEFAULT, ETC.......................................................................39
         12.1.    Acceleration..........................................................................40
         12.2.    Other Remedies........................................................................40
         12.3.    Rescission............................................................................40
         12.4.    No Waivers or Election of Remedies, Expenses, etc.....................................41

13.      TAX INDEMNIFICATION............................................................................41

14.      GUARANTEE, ETC.................................................................................43
         14.1.    Guarantee.............................................................................43
         14.2.    Obligations Unconditional.............................................................44
         14.3.    Guarantees Endorsed on the Notes......................................................46

15.      REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..................................................46
         15.1.    Registration of Notes.................................................................47
         15.2.    Transfer and Exchange of Notes........................................................47
         15.3.    Replacement of Notes..................................................................47

16.      PAYMENTS ON NOTES..............................................................................48
         16.1.    Place of Payment......................................................................48
         16.2.    Home Office Payment...................................................................48

17.      EXPENSES, ETC..................................................................................49
         17.1.    Transaction Expenses..................................................................49
         17.2.    Taxes.................................................................................49
         17.3.    Survival..............................................................................50

18.      SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...................................50

19.      AMENDMENT AND WAIVER...........................................................................50
</TABLE>

                                      iii

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<TABLE>
<CAPTION>
<S>      <C>                                                                                            <C>
         19.1.    Requirements..........................................................................50
         19.2.    Solicitation of Holders of Notes......................................................51
         19.3.    Binding Effect, etc...................................................................51
         19.4.    Notes held by Obligors, etc...........................................................51

20.      NOTICES........................................................................................52

21.      REPRODUCTION OF DOCUMENTS......................................................................52

22.      CONFIDENTIAL INFORMATION.......................................................................53

23.      SUBSTITUTION OF PURCHASER......................................................................54

24.      JURISDICTION AND PROCESS.......................................................................54

25.      OBLIGATION TO MAKE PAYMENTS IN U.S. DOLLARS....................................................55

26.      MISCELLANEOUS..................................................................................56
         26.1.    Successors and Assigns................................................................56
         26.2.    Payments Due on Non-Business Days.....................................................56
         26.3.    Severability..........................................................................56
         26.4.    Construction..........................................................................56
         26.5.    Statement of Interest Rate............................................................57
         26.6.    Counterparts..........................................................................57
         26.7.    Governing Law.........................................................................57
</TABLE>

      SCHEDULE A                --   INFORMATION RELATING TO PURCHASERS

      SCHEDULE B                --   DEFINED TERMS

      SCHEDULE 4.9              --   Changes in Corporate Structure

      SCHEDULE 4.12             --   Filings and Recordings

      SCHEDULE 5.3              --   Disclosure Materials

      SCHEDULE 5.4              --   Subsidiaries and Ownership
                                       of Subsidiary Stock

      SCHEDULE 5.5              --   Financial Statements

      SCHEDULE 5.8              --   Certain Litigation

                                       iv

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      SCHEDULE 5.11             --   Patents, etc.

      SCHEDULE 5.14             --   Use of Proceeds

      SCHEDULE 5.15             --   Existing Indebtedness/Liens

      SCHEDULE 5.21             --   Security Documents

      EXHIBIT 1                 --   Form of 8.06% Guaranteed Senior Secured
                                     Note due 2001

      EXHIBIT 1-A               --   Form of Guarantee

      EXHIBIT 4.4(a)(i)         --   Matters to be Covered in Opinion of U.S.
                                     Counsel for the Obligors

      EXHIBIT 4.4(a)(ii)        --   Matters to be Covered in Opinion of
                                     Canadian Counsel for the Obligors

      EXHIBIT 4.4(b)            --   Form of Opinion of Special U.S. Counsel
                                     for the Purchasers

      EXHIBIT 4.10              --   Form of Subsidiary Guarantee

      EXHIBIT 4.11              --   Form of Undertaking to Secure

                                       v

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                            FIRSTSERVICE CORPORATION

                                 1140 Bay Street
                                   Suite 4000
                                Toronto, Ontario
                                 Canada M5S 2B4

                            FIRSTSERVICE DELAWARE, LP

                               1526 Braken Avenue
                              Wellington, Delaware
                         United States of America 19808

                 8.06% Guaranteed Senior Secured Notes due 2011

                                                            As of June 21, 2001

TO THE  PURCHASERS  WHOSE NAMES
        APPEAR IN THE  ACCEPTANCE
        FORM AT THE END HEREOF:

Ladies and Gentlemen:

                  FIRSTSERVICE  DELAWARE,  LP, a limited  partnership  organized
under the laws of Delaware (the  "Company"),  and  FIRSTSERVICE  CORPORATION,  a
company  incorporated  under the laws of Ontario,  Canada (the  "Guarantor" and,
together with the Company,  the  "Obligors"),  agree with each of the purchasers
whose names appear in the acceptance form at the end hereof (each, a "Purchaser"
and, collectively, the "Purchasers") as follows:

1. AUTHORIZATION OF NOTES.

                  The   Company   will   authorize   the   issue   and  sale  of
U.S.$100,000,000  aggregate  principal  amount  of its 8.06%  Guaranteed  Senior
Secured Notes due 2011 (the "NOTES",  such term to include any such notes issued
in  substitution   therefor   pursuant  to  Section  15).  The  Notes  shall  be
substantially in the form set out in Exhibit 1, with such changes therefrom,  if
any, as may be approved by each Purchaser and the Company.  Certain  capitalized
terms  used in this  Agreement  are  defined  in  Schedule  B;  references  to a
"Schedule" or an "Exhibit" are, unless otherwise specified,  to a Schedule or an
Exhibit attached to this Agreement. The Notes will be secured by the Collateral,
all as provided in the Security Documents.

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                  Payment of the  principal of,  Make-Whole  Amount (if any) and
interest on the Notes and other amounts owing hereunder shall be unconditionally
guaranteed  by the  Guarantor as provided in Section 14 (and each Note will have
the guarantee (the  "GUARANTEE") of the Guarantor  endorsed  thereon in the form
set out in Exhibit 1-A).

2. SALE AND PURCHASE OF NOTES.

                  Subject to the terms and  conditions  of this  Agreement,  the
Company will issue and sell to each  Purchaser and each  Purchaser will purchase
from the  Company,  at the  Closing  provided  for in  Section  3,  Notes in the
principal amount  specified  opposite such Purchaser's name in Schedule A at the
purchase  price  of  100%  of the  principal  amount  thereof.  The  Purchasers'
obligations  hereunder  are several and not joint  obligations  and no Purchaser
shall have any liability to any Person for the performance or non-performance of
any obligation by any other Purchaser hereunder.

3. CLOSING.

                  The sale and  purchase  of the Notes to be  purchased  by each
Purchaser shall occur at the offices of Milbank, Tweed, Hadley & McCloy LLP, One
Chase  Manhattan  Plaza,  New York, New York 10005, at 10:00 a.m., New York City
time, at a closing (the  "CLOSING")  on June 26, 2001 or on such other  Business
Day thereafter as may be agreed upon by the Obligors and the Purchasers.  At the
Closing the Company will deliver to each  Purchaser the Notes to be purchased by
such  Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least  U.S.$100,000 as such Purchaser may request) dated the
date of the Closing and registered in such  Purchaser's  name (or in the name of
such Purchaser's nominee), with the Guarantee of the Guarantor endorsed thereon,
against  delivery by such  Purchaser to the Company or its order of  immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately  available  funds for the account of the  Company to account  number
5142288 at Bank One, NA, Chicago,  Illinois,  ABA# 071000013.  If at the Closing
the Company shall fail to tender such Notes to any  Purchaser as provided  above
in this  Section 3, or any of the  conditions  specified  in Section 4 shall not
have been fulfilled to such Purchaser's  satisfaction,  such Purchaser shall, at
such Purchaser's  election,  be relieved of all further  obligations  under this
Agreement,  without thereby waiving any rights such Purchaser may have by reason
of such failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

                  Each Purchaser's  obligation to purchase and pay for the Notes
to be sold to such  Purchaser  at the Closing is subject to the  fulfillment  to
such  Purchaser's  satisfaction,  prior to or at the Closing,  of the  following
conditions:

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4.1.     REPRESENTATIONS AND WARRANTIES.

                  The  representations  and  warranties  of the Obligors in each
Financing Document shall be correct when made and at the time of the Closing.

4.2.     PERFORMANCE; NO DEFAULT.

                  Each  Obligor  shall  have  performed  and  complied  with all
agreements and conditions  contained in each Financing  Document  required to be
performed  or complied  with by it prior to or at the  Closing and after  giving
effect to the issue and sale of the Notes (and the  application  of the proceeds
thereof as  contemplated  by Schedule 5.14) no Default or Event of Default shall
have occurred and be continuing.  Neither Obligor nor any Subsidiary  shall have
entered into any  transaction  since the date of the Memorandum  that would have
been  prohibited  by Section 10.1,  10.3,  10.7 or 10.8 hereof had such Sections
applied since such date.

4.3.     COMPLIANCE CERTIFICATES.

                  (a) OFFICER'S  CERTIFICATE.  Each Obligor shall have delivered
to such  Purchaser  an  Officer's  Certificate,  dated the date of the  Closing,
certifying that the conditions  specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.

                  (b) SECRETARY'S CERTIFICATE.  Each Obligor and each Subsidiary
Guarantor shall have delivered to such Purchaser a certificate  certifying as to
the  resolutions  attached  thereto  and  other  corporate  or  partnership  (as
applicable) proceedings relating to the authorization, execution and delivery of
each  Financing  Document to which such  Obligor or  Subsidiary  Guarantor  is a
party.

4.4. OPINIONS OF COUNSEL.

                  Such  Purchaser  shall  have  received  opinions  in form  and
substance satisfactory to such Purchaser, dated the date of the Closing (a) from
(i)  Shearman & Sterling,  U.S.  counsel  for the  Obligors  and the  Subsidiary
Guarantors,  (ii) Fogler Rubinoff LLP, Canadian counsel for the Obligors and the
Subsidiary  Guarantors  and  (iii)  local  counsel  for  the  Obligors  and  the
Subsidiary  Guarantors  in  applicable  jurisdictions  (which  counsel  shall be
reasonably  acceptable  to the  Purchasers),  covering  the matters set forth in
Exhibit 4.4(a)(i),  4.4(a)(ii) and 4.4(a)(iii),  respectively,  (and the Company
hereby instructs its counsel to deliver such opinions to the Purchasers) and (b)
from  Milbank,  Tweed,  Hadley & McCloy LLP,  the  Purchasers'  special New York
counsel in  connection  with such  transactions,  substantially  in the form set
forth in  Exhibit  4.4(b)  and  covering  such other  matters  incident  to such
transactions as such Purchaser may reasonably  request.

                                       3

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4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

                  On the date of the Closing such Purchaser's  purchase of Notes
shall (i) be permitted by the laws and regulations of each jurisdiction to which
such  Purchaser  is subject,  without  recourse to  provisions  (such as Section
1405(a)(8) of the New York  Insurance  Law)  permitting  limited  investments by
insurance  companies  without  restriction as to the character of the particular
investment,  (ii) not  violate  any  applicable  law or  regulation  (including,
without  limitation,  Regulation  T, U or X of the  Board  of  Governors  of the
Federal Reserve System) and (iii) not subject such Purchaser to any tax, penalty
or liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by such Purchaser,
such Purchaser shall have received an Officer's  Certificate  from the Guarantor
certifying as to such matters of fact as such Purchaser may  reasonably  specify
to enable such Purchaser to determine whether such purchase is so permitted.

4.6.     SALE OF OTHER NOTES.

                  Contemporaneously  with the Closing the Company  shall sell to
each other  Purchaser and each other  Purchaser  shall  purchase the Notes to be
purchased by it at the Closing as specified in Schedule A.

4.7.     PAYMENT OF SPECIAL COUNSEL FEES, ETC.

                  Without  limiting the provisions of Section 17.1, the Obligors
shall  have  paid on or  before  the  Closing  any  fees  due and  owing  to the
Collateral  Agent and the  reasonable  fees,  charges and  disbursements  of the
Purchasers'  special counsel  referred to in Section 4.4 to the extent reflected
in a statement of such counsel  rendered to the  Guarantor at least one Business
Day prior to the Closing.  In  addition,  all taxes due in  connection  with the
preparation,   execution,   delivery,  filing,  recordation,   registration  and
notarization  of any Financing  Document or any document  furnished  under or in
connection  with any  Financing  Document  shall  have  been paid in full by the
Obligors and such  Purchaser  shall have received  evidence  thereof  reasonably
satisfactory to such Purchaser.

4.8.     PRIVATE PLACEMENT NUMBER.

                  A Private  Placement  number issued by Standard & Poor's CUSIP
Service  Bureau (in  cooperation  with the  Securities  Valuation  Office of the
National  Association of Insurance  Commissioners)  shall have been obtained for
the Notes.

4.9.     CHANGES IN CORPORATE STRUCTURE.

                  Except as specified in Schedule  4.9,  neither  Obligor  shall
have changed its  jurisdiction of  incorporation or formation (as applicable) or
been a party to any merger or

                                       4

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consolidation  or shall have  succeeded  to all or any  substantial  part of the
liabilities  of any other  entity,  at any time  following  the date of the most
recent financial statements referred to in Schedule 5.5.

4.10. EVIDENCE OF CONSENT TO RECEIVE SERVICE OF PROCESS.

                  Such  Purchaser  shall have  received,  in form and  substance
satisfactory to such Purchaser, evidence of the consent of CT Corporation System
in New York, New York to the appointment and designation provided for by Section
24 hereof and Section 5.03 of the  Subsidiary  Guarantee for the period from the
date of Closing  through  June 21,  2012 (and the payment in full of all fees in
respect thereof).

4.11. SUBSIDIARY GUARANTEE; UNDERTAKINGS TO SECURE

                  Such Purchaser shall have received a true and complete copy of
the  Subsidiary  Guarantee,  duly  executed  and  delivered  by each  Subsidiary
Guarantor  identified in Schedule 5.4, and the Subsidiary  Guarantee shall be in
full  force and  effect;  and such  Purchaser  shall  have  received  a true and
complete copy of each Undertaking to Secure, duly executed and delivered by each
Undertaking  Subsidiary identified in Schedule 5.4, and each of the Undertakings
to Secure shall be in full force and effect.

4.12. FINANCING DOCUMENTS; SECURITY INTERESTS.

                  This  Agreement and each other  Financing  Document shall have
been duly executed and  delivered by each of the parties  hereto and thereto and
shall be in full  force and  effect.  In  addition,  such  Purchaser  shall have
received  evidence  reasonably  satisfactory to such Purchaser that the Obligors
shall have taken all actions (including,  without limitation,  the making of all
recordings  and  filings  set forth in  Schedule  4.12) as may be  necessary  or
appropriate in order to create and perfect the security interests intended to be
created pursuant to the Security Documents.

4.13. LIEN SEARCHES.

                  Such  Purchaser  shall  have  received  the  results of recent
searches,  conducted by a Person reasonably  satisfactory to such Purchaser,  of
PERSONAL  PROPERTY SECURITY ACT (Ontario),  Uniform  Commercial Code and similar
registrations  and filings and tax and judgment  Liens filed with respect to the
Collateral in such filing offices as such Purchaser may reasonably request.

4.14. INTERCREDITOR AGREEMENT.

                  The Intercreditor  Agreement shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect.

                                       5

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4.15. PROCEEDINGS AND DOCUMENTS.

                  All partnership, corporate and other proceedings in connection
with the transactions  contemplated by the Financing Documents and all documents
and  instruments  incident to such  transactions  shall be  satisfactory to such
Purchaser  and the  Purchasers'  special  counsel,  and such  Purchaser and such
special counsel shall have received all such counterpart  originals or certified
or other copies of such documents as such Purchaser or such special  counsel may
reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.

                  The Company and the Guarantor jointly and severally  represent
and warrant to each Purchaser that:

5.1. ORGANIZATION; POWER AND AUTHORITY.

                  Each  Obligor  is a  corporation  or limited  partnership  (as
applicable) duly organized, validly existing and in good standing under the laws
of  its  jurisdiction  of  organization,  and is  duly  qualified  as a  foreign
corporation  or  partnership  (as  applicable)  and, if  applicable,  is in good
standing in each  jurisdiction in which such  qualification  is required by law,
other than those  jurisdictions as to which the failure to be so qualified or in
good  standing  could  not,  individually  or in the  aggregate,  reasonably  be
expected to have a Material  Adverse  Effect.  Each Obligor has the corporate or
partnership (as  applicable)  power and authority to own or hold under lease the
properties  it purports to own or hold under lease,  to transact the business it
transacts  and proposes to transact as described in the  Memorandum,  to execute
and deliver this Agreement, the Notes and each other Financing Document to which
the  Company is a party (in the case of the  Company)  and this  Agreement,  the
Guarantees and each other  Financing  Document to which the Guarantor is a party
(in the  case of the  Guarantor),  and to  perform  the  provisions  hereof  and
thereof.

5.2. AUTHORIZATION, ETC.

                  This Agreement, the Notes and each other Financing Document to
which  the  Company  is a party  have  been  duly  authorized  by all  necessary
partnership action on the part of the Company,  and this Agreement  constitutes,
and upon  execution  and  delivery  thereof  each Note and each other  Financing
Document to which the  Company is a party will  constitute,  a legal,  valid and
binding obligation of the Company  enforceable against the Company in accordance
with its terms,  and this  Agreement,  the Guarantees  and each other  Financing
Document  to which the  Guarantor  is a party have been duly  authorized  by all
necessary  corporate  action on the part of the  Guarantor,  and this  Agreement
constitutes  and, upon execution and delivery  thereof,  each Guarantee and each
other Financing  Document to which the Guarantor is a party will  constitute,  a
legal,  valid and binding  obligation of the Guarantor  enforceable  against the
Guarantor  in  accordance  with  its  terms,  except,  in  each

                                       6

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case,  as such  enforceability  may be  limited  by (i)  applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or other  similar laws  affecting  the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless  of whether such  enforceability  is  considered  in a proceeding in
equity or at law).

5.3. DISCLOSURE.

                  The Obligors,  through  their agent,  Merrill  Lynch,  Pierce,
Fenner  & Smith  Incorporated,  have  delivered  to each  Purchaser  a copy of a
Private Placement Memorandum,  dated April 2001 (the "MEMORANDUM"),  relating to
the transactions  contemplated  hereby. The Memorandum fairly describes,  in all
material respects,  the general nature of the business and principal  properties
of the Guarantor and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement,  the  other  Financing  Documents,  the  Memorandum,  the  documents,
certificates  or other  writings  delivered to the Purchasers by or on behalf of
the Obligors in connection  with the  transactions  contemplated  hereby and the
financial  statements  listed in Schedule 5.5, taken as a whole,  do not contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
necessary  to make  the  statements  therein  not  misleading  in  light  of the
circumstances  under which they were made. Except as disclosed in the Memorandum
or as  expressly  described  in  Schedule  5.3,  or in  one  of  the  documents,
certificates  or  other  writings   identified  therein,  or  in  the  financial
statements  listed in  Schedule  5.5,  since March 31,  2000,  there has been no
change,  and there is no fact  known to the  Company  that could  reasonably  be
expected to result in a change, in the financial condition, operations, business
or  properties  of  either  Obligor  or  any  Subsidiary   except  changes  that
individually  or in the  aggregate  could not  reasonably  be expected to have a
Material Adverse Effect.

5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

                  (a) Schedule 5.4 contains  (except as noted therein)  complete
and  correct  lists (i) of the  Guarantor's  Subsidiaries,  showing,  as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,  and
the  percentage of shares of each class of its capital  stock or similar  equity
interests  outstanding  owned by the  Guarantor  and each other  Subsidiary  and
whether  such  Subsidiary  shall be a  Subsidiary  Guarantor  or an  Undertaking
Subsidiary  as of the date of Closing  and (ii) of the  Guarantor's  Affiliates,
other than Subsidiaries.

                  (b) All of the outstanding  shares of capital stock or similar
equity  interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Guarantor  and its  Subsidiaries  have been validly  issued,  are fully paid and
nonassessable  and are owned by the  Guarantor  or another  Subsidiary  free and
clear of any Lien (except as  otherwise  disclosed in Schedule 5.4 and except as
created by any Security Document and in connection with the Credit Agreement).

                                       7

<PAGE>

                  (c)  Each   Subsidiary   identified   in  Schedule  5.4  is  a
corporation  or other legal  entity duly  organized,  validly  existing  and, if
applicable, in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign  corporation or other legal entity and is, if
applicable, in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified  or in good  standing  could not,  individually  or in the  aggregate,
reasonably be expected to have a Material  Adverse Effect.  Each such Subsidiary
has the  corporate  or other power and  authority to own or hold under lease the
properties  it purports to own or hold under lease and to transact  the business
it transacts and proposes to transact as described in the Memorandum.

                  (d) No Subsidiary  is a party to, or otherwise  subject to any
legal  restriction or any agreement  (other than this Agreement,  the agreements
listed on Schedule 5.4, the Credit Agreement and customary  limitations  imposed
by corporate law  statutes)  restricting  the ability of such  Subsidiary to pay
dividends out of profits or make any other similar  distributions  of profits to
the Guarantor or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.

5.5. FINANCIAL STATEMENTS.

                  The Obligors have  delivered to each  Purchaser  copies of the
financial  statements  listed on Schedule 5.5. All of said financial  statements
(including in each case the related  schedules and notes) fairly  present in all
material respects the consolidated  financial  position of the Guarantor and its
Subsidiaries  as of the  respective  dates  specified  in such  Schedule and the
consolidated earnings and cash flows for the respective periods so specified and
have been prepared in accordance with U.S. GAAP consistently  applied throughout
the periods involved except as set forth in the notes thereto  (subject,  in the
case of any interim financial statements, to normal year-end adjustments).

5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

                  The execution, delivery and performance by the Company of this
Agreement, the Notes and the other Financing Documents to which the Company is a
party and by the  Guarantor  of this  Agreement,  the  Guarantees  and the other
Financing  Documents to which the Guarantor is a party will not (i)  contravene,
result  in any  breach  of, or  constitute  a  default  under,  or result in the
creation  of any Lien  (other than the Liens  created  pursuant to the  Security
Documents) in respect of any property of either Obligor or any Subsidiary under,
any indenture,  mortgage,  deed of trust,  loan,  purchase or credit  agreement,
lease,  corporate  charter  or  by-laws,  partnership  agreement  or  any  other
agreement or instrument to which either Obligor or any Subsidiary is bound or by
which either Obligor or any Subsidiary or any of their respective properties may
be bound or

                                       8

<PAGE>

affected,  (ii)  conflict  with  or  result  in a  breach  of any of the  terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental  Authority having jurisdiction over either Obligor or
any  Subsidiary  or (iii)  violate any provision of any statute or other rule or
regulation of any  Governmental  Authority  applicable to either  Obligor or any
Subsidiary.

5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.

                  No consent,  approval or  authorization  of, or  registration,
filing or declaration with, any Governmental Authority (other than the making of
the  recordings  and filings set forth in Schedule 4.12 for purposes of creating
and perfecting  the security  interests  intended to be created  pursuant to the
Security  Documents) is required in connection  with the execution,  delivery or
performance by the Company of this  Agreement,  the Notes or the other Financing
Documents to which the Company is a party or by the Guarantor of this Agreement,
the  Guarantees  or the other  Financing  Documents to which the  Guarantor is a
party including, without limitation, any thereof required in connection with the
obtaining of U.S. Dollars to make payments under this Agreement,  the Notes, the
Guarantees or the other Financing Documents and the payment of such U.S. Dollars
to Persons  resident in the United  States of America or Canada,  other than the
execution  and filing of a report of exempt  trade on Form  45-501F1  under Rule
45-501 made under the  SECURITIES  ACT  (Ontario)  together  with the  requisite
filing  fee with the  Ontario  Securities  Commission  (or any other  applicable
Canadian  securities  regulatory  authority),  within  ten  days of the sale and
purchase of the Notes.  It is not  necessary to ensure the  legality,  validity,
enforceability or admissibility  into evidence in Canada of this Agreement,  the
Notes,  the Guarantees or the other Financing  Documents that any thereof or any
other document be filed,  recorded or enrolled with any Governmental  Authority,
or that any such  agreement or document be stamped with any stamp,  registration
or similar transaction tax.

5.8. LITIGATION;  OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS; CALL OPTION
     TRIGGERING EVENTS.

                  (a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of either Obligor,  threatened
against or affecting  either Obligor or any Subsidiary or any property of either
Obligor or any  Subsidiary in any court or before any  arbitrator of any kind or
before or by any Governmental Authority that,  individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

                  (b) Neither of the Obligors nor any  Subsidiary  is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment,  decree or ruling of any court,  arbitrator
or Governmental  Authority or is in violation of any applicable law,  ordinance,
rule or regulation  (including  without  limitation  Envi-

                                       9

<PAGE>

ronmental  Laws) of any  Governmental  Authority,  which  default or  violation,
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
Material Adverse Effect.

                  (c)  No Call Option Triggering Event has occurred and is
continuing.

5.9. TAXES; FOREIGN TAXES.

                  (a) The  Obligors  and  each  Subsidiary  have  filed  all tax
returns that are required to have been filed in any jurisdiction,  and have paid
all taxes  shown to be due and  payable on such  returns and all other taxes and
assessments levied upon them or their properties,  assets, income or franchises,
to the extent such taxes and assessments  have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not  individually  or in the aggregate  Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Guarantor or a Subsidiary,
as the case may be, has  established  adequate  reserves in accordance with U.S.
GAAP.  Neither  Obligor knows of any basis for any other tax or assessment  that
could reasonably be expected to have a Material Adverse Effect.

                  (b) No  liability  for any tax (whether  income,  documentary,
sales, stamp,  registration,  issue,  capital,  property,  excise or otherwise),
duty, levy,  impost,  fee, charge or withholding  (each a "TAX" and collectively
"TAXES"),  directly or indirectly,  imposed, assessed, levied or collected by or
for the account of any  Governmental  Authority of or in Canada or any political
subdivision  thereof or  therein  (an  "APPLICABLE  TAXING  AUTHORITY")  will be
incurred by either  Obligor or any holder of a Note as a result of the execution
or delivery of this Agreement, the Notes or the Guarantees and, based on present
law,  no  deduction  or  withholding  in respect of Taxes  imposed by or for the
account of any  Applicable  Taxing  Authority  is  required  to be made from any
payment by the Company  under this  Agreement  or the Notes or by the  Guarantor
under  this  Agreement  or the  Guarantees  except for any such  withholding  or
deduction  arising  out of the  conditions  described  in the proviso to Section
13(a).

5.10. TITLE TO PROPERTY; LEASES.

                  The  Obligors  and each  Subsidiary  have good and  sufficient
title to their respective  properties that  individually or in the aggregate are
Material,  including all such  properties  reflected in the most recent  audited
balance  sheet  referred to in Section 5.5 or purported to have been acquired by
either  Obligor or any  Subsidiary  after said date (except as sold or otherwise
disposed of in the ordinary course of business),  in each case free and clear of
Liens prohibited by this Agreement or any other Financing  Document.  All leases
that  either  Obligor  or  any  Subsidiary  is  party  to  as  lessee  and  that
individually  or in the

                                       10

<PAGE>

aggregate are Material are valid and subsisting and are in full force and effect
in all material respects.

5.11. LICENSES, PERMITS, ETC.

                  Except as disclosed in Schedule 5.11,

                  (a) the  Obligors  and each  Subsidiary  own,  possess  or are
         licensed  to use all  licenses,  permits,  franchises,  authorizations,
         patents,  copyrights,  service marks,  trademarks  and trade names,  or
         rights  thereto,  that  individually  or in the aggregate are Material,
         without known conflict with the rights of others;

                  (b) to the best  knowledge  of the  Obligors,  no  product  of
         either Obligor or any Subsidiary  infringes in any material respect any
         license, permit, franchise,  authorization,  patent, copyright, service
         mark,  trademark,  trade name or other right owned by any other Person;
         and

                  (c)  to  the  best  knowledge  of the  Obligors,  there  is no
         Material  violation by any Person of any right of either Obligor or any
         Subsidiary  with  respect  to  any  patent,  copyright,  service  mark,
         trademark, trade name or other right owned or used by either Obligor or
         any Subsidiary.

5.12.    COMPLIANCE WITH ERISA.

                  (a) The Obligors and each ERISA  Affiliate  have  operated and
administered  each Plan in compliance  with all applicable  laws except for such
instances of  noncompliance  as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither of the Obligors nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax  provisions of the Code  relating to employee  benefit
plans (as defined in section 3 of ERISA), and no event, transaction or condition
has  occurred  or exists  that could  reasonably  be  expected  to result in the
incurrence of any such liability by either Obligor or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights,  properties or assets of either
Obligor or any ERISA  Affiliate,  in either  case  pursuant  to Title I or IV of
ERISA or to such penalty or excise tax  provisions  or to section  401(a)(29) or
412  of the  Code,  other  than  such  liabilities  or  Liens  as  would  not be
individually or in the aggregate Material.

                  (b) The present  value of the  aggregate  benefit  liabilities
under each of the Plans (other than Multiemployer  Plans),  determined as of the
end of such Plan's most  recently  ended plan year on the basis of the actuarial
assumptions  specified for funding purposes in such Plan's most recent actuarial
valuation  report,  did not exceed the aggregate  current value of the assets of
such Plan allocable to such benefit  liabilities by more than

                                       11

<PAGE>

U.S.$5,000,000  in the aggregate for all Plans.  The term "BENEFIT  LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.

                  (c) The  Obligors and each ERISA  Affiliate  have not incurred
withdrawal   liabilities   (and  are  not  subject  to   contingent   withdrawal
liabilities)  under  section  4201 or 4204 of ERISA in respect of  Multiemployer
Plans that individually or in the aggregate are Material.

                  (d) The expected postretirement benefit obligation (determined
as of the  last  day of the  Guarantor's  most  recently  ended  fiscal  year in
accordance with Financial  Accounting Standards Board Statement No. 106, without
regard to liabilities  attributable to continuation coverage mandated by section
4980B of the Code) of the Guarantor and its Subsidiaries is not Material.

                  (e) The  execution  and  delivery  of this  Agreement  and the
issuance  and sale of the Notes and  Guarantees  hereunder  will not involve any
transaction  that is subject to the  prohibitions  of section 406 of ERISA or in
connection   with   which  a  tax  could  be   imposed   pursuant   to   section
4975(c)(1)(A)-(D)  of the Code. The  representation by the Obligors in the first
sentence of this  Section  5.12(e) is made in  reliance  upon and subject to the
accuracy of the Purchasers'  representation  in Section 6.2 as to the sources of
the funds used to pay the  purchase  price of the Notes to be  purchased  by the
Purchasers.

                  (f)  Each  Foreign   Pension  Plan  has  been   maintained  in
compliance  with its terms and with the  requirements  of any and all applicable
laws, statutes,  rules,  regulations and court orders and has been maintained in
good standing with  applicable  regulatory  authorities  except for instances of
non-compliance  which have not resulted and could not  reasonably be expected to
result in a Material  Adverse Effect.  For purposes of this paragraph,  "FOREIGN
PENSION  PLAN"  means  any  plan,  fund  (including,   without  limitation,  any
superannuation  fund) or other similar program established or maintained outside
the United States of America by either Obligor or any  Subsidiary  primarily for
the benefit of employees  residing  outside the United States of America of such
Obligor or such Subsidiary  which plan,  fund or other similar program  provides
for retirement  income for such  employees,  results in a deferral of income for
such  employees in  contemplation  of  retirement or provides for payments to be
made to such  employees upon  termination  of employment,  and which plan is not
subject to ERISA or the Code.

5.13. PRIVATE OFFERING BY THE OBLIGORS.

                  Neither the  Obligors  nor anyone  acting on their  behalf has
offered the Notes or the  Guarantees or any similar  securities  for sale to, or
solicited  any offer to buy any of the same from,  or  otherwise  approached  or
negotiated in respect thereof with, any Person other

                                       12

<PAGE>

than  the  Purchasers  and not  more  than 125  other  Institutional  Accredited
Investors,  each of which  has been  offered  the  Notes at a  private  sale for
investment. Neither the Obligors nor anyone acting on their behalf has taken, or
will take,  any action that would  subject the  issuance or sale of the Notes or
the Guarantees to the  registration  requirements of Section 5 of the Securities
Act.

5.14. USE OF PROCEEDS; MARGIN REGULATIONS.

                  The Company  will apply the  proceeds of the sale of the Notes
as set forth in  Schedule  5.14.  No part of the  proceeds  from the sale of the
Notes hereunder will be used, directly or indirectly,  for the purpose of buying
or carrying any margin stock within the meaning of  Regulation U of the Board of
Governors of the United States  Federal  Reserve System (12 CFR 221), or for the
purpose  of  buying  or  carrying  or  trading  in  any  securities  under  such
circumstances  as to involve  either  Obligor in a violation of  Regulation X of
said Board (12 CFR 224) or to involve  any  broker or dealer in a  violation  of
Regulation T of said Board (12 CFR 220).  Margin stock does not constitute  more
than  5% of the  value  of the  consolidated  assets  of the  Guarantor  and its
Subsidiaries  and the Guarantor does not have any present  intention that margin
stock will constitute more than 5% of the value of such assets.  As used in this
Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have
the meanings assigned to them in said Regulation U.

5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.

                  (a) Except as described  therein,  Schedule  5.15 sets forth a
complete and correct list of all  outstanding  Indebtedness of the Guarantor and
its  Subsidiaries  as of March 31,  2001,  since  which  date  there has been no
Material  change in the amounts,  interest  rates,  sinking  funds,  installment
payments or maturities of the Indebtedness of the Guarantor or its Subsidiaries.
Neither  of the  Obligors  nor any  Subsidiary  is in  default  and no waiver of
default is currently in effect,  in the payment of any  principal or interest on
any  Indebtedness of either Obligor or such Subsidiary and no event or condition
exists with respect to any Indebtedness of either Obligor or any Subsidiary that
would permit (or that with notice or the lapse of time,  or both,  would permit)
one or more Persons to cause such  Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.

                  (b) A true and complete copy of the Credit  Agreement has been
provided to each Purchaser.

                  (c)  Except as  disclosed  in  Schedule  5.15,  neither of the
Obligors  nor any  Subsidiary  has agreed or consented to cause or permit in the
future (upon the happening of a contingency  or otherwise)  any of its property,
whether now owned or hereafter  acquired,  to be subject to a Lien not permitted
by Section 10.3.

                                       13

<PAGE>

5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.

                  Neither  the sale of the Notes by the Company  hereunder  with
the benefit of the  Guarantees  of the  Guarantor  nor the  Company's use of the
proceeds  thereof will violate the United States  Trading with the Enemy Act, as
amended,  or any of the foreign assets control  regulations of the United States
Treasury  Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive  order  relating  thereto.

5.17.  STATUS UNDER CERTAIN STATUTES.

                  Neither of the Obligors nor any  Subsidiary  is required to be
registered under the United States  Investment  Company Act of 1940, as amended,
the United States Public Utility  Holding  Company Act of 1935, as amended,  the
United States Interstate  Commerce Act, as amended, or the United States Federal
Power Act, as amended.

5.18. ENVIRONMENTAL MATTERS.

                  Neither of the Obligors nor any  Subsidiary  has  knowledge of
any claim or has received any notice of any claim,  and no  proceeding  has been
instituted  raising any claim against either Obligor or any Subsidiary or any of
their  respective real  properties now or formerly owned,  leased or operated by
any of them or other assets, alleging any damage to the environment or violation
of any Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.  Except as otherwise  disclosed
to the Purchasers in writing,

                           (a) neither of the  Obligors nor any  Subsidiary  has
                  knowledge  of any facts  which  would  give rise to any claim,
                  public or  private,  of  violation  of  Environmental  Laws or
                  damage to the environment  emanating from,  occurring on or in
                  any way  related to real  properties  now or  formerly  owned,
                  leased or operated by any of them or to other  assets or their
                  use,  except,  in each case,  such as could not  reasonably be
                  expected to result in a Material Adverse Effect;

                           (b) neither of the  Obligors nor any  Subsidiary  has
                  stored  any  Hazardous  Materials  on real  properties  now or
                  formerly owned,  leased or operated by any of them and has not
                  disposed of any  Hazardous  Materials in a manner  contrary to
                  any  Environmental  Laws in each case in any manner that could
                  reasonably be expected to result in a Material Adverse Effect;
                  and

                           (c) all buildings on all real  properties  now owned,
                  leased or operated by either  Obligor or any Subsidiary are in
                  compliance with applicable

                                       14

<PAGE>

                  Environmental  Laws,  except where failure to comply could not
                  reasonably be expected to result in a Material Adverse Effect.

5.19. RANKING.

                  All  liabilities  of the  Company  under  the Notes and of the
Guarantor  under the Guarantees  constitute  direct,  unconditional  and general
obligations  of such  Obligor and rank in right of payment  either PARI PASSU or
senior to all other  Indebtedness of such Obligor,  except for such Indebtedness
which is  preferred  as a result  of being  secured  by  assets  other  than the
Collateral  (but then only to the  extent of such  security).

5.20.  SUBSIDIARY GUARANTEE.

                  The   representations   and  warranties  of  each   Subsidiary
Guarantor  contained in the Subsidiary  Guarantee are true and correct as of the
date they are made and will be true and correct at the time of Closing.

5.21. OWNERSHIP; SECURITY DOCUMENTS.

                  The  Obligors  are  the  sole  and  beneficial  owners  of the
Collateral  being  provided  thereby  and no Lien exists or will exist upon such
Collateral  at any  time,  except  for the  security  interest  in  favor of the
Collateral  Agent for the benefit of the Secured Parties created or provided for
in the  Security  Documents  (except  as  otherwise  permitted  by the  Security
Documents and except for Liens arising in connection  with the Credit  Agreement
and any other  Permitted  Liens).  The provisions of the Security  Documents are
effective to create,  in favor of the Collateral  Agent on behalf of the Secured
Parties,  legal,  valid  and  enforceable  Liens on or in all of the  Collateral
intended to be covered thereby,  and as of the date of the Closing all necessary
recordings and filings will have been made in all necessary public offices (such
recordings  and  filings  being  identified  on  Schedule  4.12)  and all  other
necessary and appropriate  action will have been taken so that the Liens created
by  the  Security  Documents  will  constitute  perfected  Liens  on or  in  the
Collateral intended to be covered thereby, prior and superior to all other Liens
(other than Liens arising in connection with the Credit  Agreement and any other
Permitted  Liens),  and  all  necessary  consents,  if  any,  to  the  creation,
effectiveness,  priority and perfection of each such Lien have been obtained. No
mortgage or financing statement or other instrument or recordation  covering all
or any part of the Collateral is on file in any recording office, except such as
may have been  filed in favor of the  Collateral  Agent for the  benefit  of the
Secured Parties.  Schedule 5.21 sets forth a complete and correct list of all of
the  Security  Documents in effect on the date of the  Closing.  The  Collateral
being  provided  on and as of the date of Closing in favor of the  holders  from
time to time of Notes  and the  Collateral  Agent is the same as the  collateral
being  provided in favor of the Lenders and the  Collateral  Agent (under and as
defined in the Credit Agreement) on and as of such date.

                                       15

<PAGE>

5.22. CHIEF EXECUTIVE OFFICE.

                  The chief place of business and chief executive  office of the
Guarantor,  and the office where the Guarantor keeps its records  concerning the
Collateral,  is 1140 Bay Street, Suite 4000, Toronto,  Ontario,  Canada M5S 2B4.
The chief place of business and chief executive  office of the Company,  and the
office where the Company keeps its records  concerning the  Collateral,  is 1526
Braken Avenue, Wellington, Delaware, United States of America 19808.

6.       REPRESENTATIONS OF THE PURCHASERS.

6.1.     PURCHASE FOR INVESTMENT.

                  Each  Purchaser  represents  that  such  Purchaser  is  (i) an
Institutional  Accredited  Investor  and (ii)  purchasing  the Notes for its own
account or for one or more separate accounts maintained by it or for the account
of one or more  pension or trust  funds and not with a view to the  distribution
thereof,  PROVIDED that the  disposition  of such  Purchaser's or their property
shall at all times be within such  Purchaser's or their control.  Each Purchaser
understands that the Notes have not been registered under the Securities Act and
may be resold only if registered  pursuant to the  provisions of the  Securities
Act  or  if  an  exemption  from   registration   is  available,   except  under
circumstances  where neither such registration nor such an exemption is required
by law, and that neither Obligor is required to register the Notes.

6.2. SOURCE OF FUNDS.

                  Each Purchaser  represents  that at least one of the following
statements is an accurate representation as to each source of funds (a "Source")
to be used by such  Purchaser  to pay the  purchase  price  of the  Notes  to be
purchased by such Purchaser hereunder:

                  (a) the Source is an "insurance  company general  account" (as
         the term is defined in PTE 95-60  (issued July 12, 1995)) in respect of
         which the reserves and liabilities (as defined by the annual  statement
         for life insurance  companies  approved by the National  Association of
         Insurance  Commissioners (the "NAIC ANNUAL STATEMENT")) for the general
         account  contract(s)  held by or on behalf of any employee benefit plan
         together  with the  amount  of the  reserves  and  liabilities  for the
         general account  contract(s) held by or on behalf of any other employee
         benefit plans maintained by the same employer (or affiliate  thereof as
         defined  in PTE  95-60)  or by the same  employee  organization  in the
         general account do not exceed 10% of the total reserves and liabilities
         of the general account (exclusive

                                       16

<PAGE>

         of separate account  liabilities) plus surplus as set forth in the NAIC
         Annual Statement filed with such Purchaser's state of domicile; or

                  (b) the Source is a separate account that is maintained solely
         in connection with such Purchaser's fixed contractual obligations under
         which the amounts  payable,  or credited,  to any employee benefit plan
         (or its related  trust) that has any interest in such separate  account
         (or to any  participant  or  beneficiary  of such plan  (including  any
         annuitant))   are  not  affected  in  any  manner  by  the   investment
         performance of the separate account; or

                  (c) the  Source  is either  (i) an  insurance  company  pooled
         separate  account,  within the meaning of PTE 90-1 (issued  January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         the PTE 91-38  (issued July 12, 1991) and,  except as disclosed by such
         Purchaser to the Company in writing  pursuant to this paragraph (c), no
         employee benefit plan or group of plans maintained by the same employer
         or employee organization  beneficially owns more than 10% of all assets
         allocated  to such pooled  separate  account or  collective  investment
         fund; or

                  (d) the  Source  constitutes  assets of an  "investment  fund"
         (within  the  meaning  of Part V of the QPAM  Exemption)  managed  by a
         "qualified professional asset manager" or "QPAM" (within the meaning of
         Part V of the QPAM  Exemption),  no employee benefit plan's assets that
         are included in such investment  fund, when combined with the assets of
         all other employee benefit plans  established or maintained by the same
         employer or by an affiliate  (within the meaning of Section  V(c)(1) of
         the  QPAM   Exemption)  of  such  employer  or  by  the  same  employee
         organization  and managed by such QPAM,  exceed 20% of the total client
         assets managed by such QPAM, the conditions of Part I(c) and (g) of the
         QPAM Exemption are satisfied, neither the QPAM nor a person controlling
         or  controlled  by the QPAM  (applying  the  definition of "control" in
         Section V(e) of the QPAM  Exemption)  owns a 5% or more interest in the
         Company  and (i) the  identity  of such  QPAM and (ii) the names of all
         employee  benefit  plans whose assets are  included in such  investment
         fund have been  disclosed  to the  Company in writing  pursuant to this
         paragraph (d); or

                  (e) the Source  constitutes  assets of a "plan(s)" (within the
         meaning of Section IV of PTE 96-23 (the "INHAM Exemption"))  managed by
         an "in-house  asset manager" or "INHAM"  (within the meaning of Part IV
         of the INHAM  Exemption),  the  conditions of Part I(a), (g) and (h) of
         the  INHAM  Exemption  are  satisfied,  neither  the INHAM nor a person
         controlling  or  controlled by the INHAM  (applying  the  definition of
         "control" in Section  IV(h) of the INHAM  Exemption)  owns a 5% or more
         interest in the Company and (i) the identity of such INHAM and (ii) the
         name(s) of the employee  benefit  plan(s) whose assets

                                       17

<PAGE>

         constitute  the Source  have been  disclosed  to the Company in writing
         pursuant to this paragraph (e); or

                  (f)  the Source is a governmental plan; or

                  (g) the Source does not include assets of any employee benefit
         plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms  "EMPLOYEE  BENEFIT PLAN",  "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

7.       INFORMATION AS TO THE OBLIGORS.

7.1.     FINANCIAL AND BUSINESS INFORMATION.

                  The Obligors  shall deliver to each holder of Notes that is an
Institutional Investor:

                  (a)  QUARTERLY  STATEMENTS  -- within 45 days after the end of
         each of the first  three  quarterly  periods in each fiscal year of the
         Guarantor, duplicate copies of,

                       (i)      a consolidated  balance sheet of the Guarantor
                       and its  Subsidiaries  as at the end of such period, and

                       (ii)     consolidated  statements  of  earnings  and cash
                       flows of the Guarantor and its Subsidiaries, for such
                       period  and (in the case of the second and third
                       quarterly  periods) for the portion of the fiscal year
                       ending with such period,

         setting  forth in each case in  comparative  form the  figures  for the
         corresponding  period in the previous  fiscal year,  all in  reasonable
         detail,  prepared in accordance  with U.S.  GAAP  applicable to interim
         financial  statements  generally,  and certified by a Senior  Financial
         Officer  of  the  Guarantor  as  fairly  presenting,  in  all  material
         respects, the financial position of the companies being reported on and
         their  earnings  and cash  flows,  subject  to changes  resulting  from
         year-end  adjustments,  PROVIDED that  delivery  within the time period
         specified above of copies of the Guarantor's  Quarterly  Report on Form
         10-Q prepared in compliance  with the  requirements  therefor and filed
         with the United  States  Securities  and Exchange  Commission  shall be
         deemed to satisfy the requirements of this Section 7.1(a);

                                       18

<PAGE>

                  (b)      ANNUAL STATEMENTS -- within 90 days after the end of
         each fiscal year of the Guarantor, duplicate copies of,

                           (i)   a consolidated  balance sheet of the Guarantor
         and its Subsidiaries, as at the end of such year, and

                           (ii)  consolidated  statements  of earnings  and cash
                  flows of the Guarantor and its Subsidiaries, for such year,

         setting  forth in each case in  comparative  form the  figures  for the
         previous fiscal year, all in reasonable detail,  prepared in accordance
         with U.S. GAAP, and accompanied by

                           (A)  an  opinion  thereon  of  independent  chartered
                  accountants  of  recognized   international  standing,   which
                  opinion  shall state that such  financial  statements  present
                  fairly, in all material  respects,  the financial  position of
                  the companies  being reported upon and their earnings and cash
                  flows and have been prepared in conformity with U.S. GAAP, and
                  that the  examination of such  accountants in connection  with
                  such  financial  statements  has been made in accordance  with
                  generally  accepted  auditing  standards,  and that such audit
                  provides  a   reasonable   basis  for  such   opinion  in  the
                  circumstances, and

                           (B) a certificate  of such  accountants  stating that
                  they have  reviewed  this  Agreement  and the other  Financing
                  Documents and stating further whether,  in making their audit,
                  they have  become  aware of any  condition  or event that then
                  constitutes a Default or an Event of Default, and, if they are
                  aware that any such condition or event then exists, specifying
                  the  nature  and  period of the  existence  thereof  (it being
                  understood that such accountants shall not be liable, directly
                  or  indirectly,  for any  failure to obtain  knowledge  of any
                  Default or Event of Default  unless  such  accountants  should
                  have  obtained   knowledge  thereof  in  making  an  audit  in
                  accordance with generally  accepted auditing  standards or did
                  not make such an audit),

         PROVIDED that the delivery  within the time period  specified  above of
         the  Guarantor's  Annual  Report  on Form  10-K  for such  fiscal  year
         prepared in accordance  with the  requirements  therefor and filed with
         the United States Securities and Exchange Commission, together with the
         accountant's certificate described in clause (B) above, shall be deemed
         to satisfy the requirements of this Section 7.1(b);

                  (c) OTHER REPORTS -- promptly upon their  becoming  available,
         one copy of (i)  each  financial  statement,  report,  notice  or proxy
         statement sent by either

                                       19

<PAGE>

         Obligor or any Subsidiary to public securities holders  generally,  and
         (ii) each regular or periodic  report and each  registration  statement
         (without  exhibits except as expressly  requested by such holder) filed
         by either Obligor or any Subsidiary  with the Toronto Stock Exchange or
         any other stock  exchange or the United States  Securities and Exchange
         Commission  and  of  all  press  releases  and  other  statements  made
         available  generally by either  Obligor or any Subsidiary to the public
         concerning developments that are Material;

                  (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly,  and in
         any  event  within  five  Business  Days  after a  Responsible  Officer
         becoming  aware of the  existence of any Default or Event of Default or
         that any Person has given any notice or taken any action  with  respect
         to a claimed default  hereunder or that any Person has given any notice
         or taken any  action  with  respect  to a claimed  default  of the type
         referred to in Section 11(e),  a written  notice  specifying the nature
         and period of existence thereof and what action the Obligors are taking
         or propose to take with respect thereto;

                  (e) ERISA MATTERS -- promptly, and in any event within 15 days
         after a Responsible  Officer becoming aware of any of the following,  a
         written notice setting forth the nature thereof and the action, if any,
         that the  Guarantor  or the Company or an ERISA  Affiliate  proposes to
         take with respect thereto:

                           (i) with respect to any Plan, any  reportable  event,
                  as  defined in  section  4043(c) of ERISA and the  regulations
                  thereunder,  for  which  notice  thereof  has not been  waived
                  pursuant to such  regulations  as in effect on the date hereof
                  that  could  reasonably  be  expected  to result in a Material
                  Adverse Effect; or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under  section  4042 of ERISA for the  termination  of, or the
                  appointment  of a trustee  to  administer,  any  Plan,  or the
                  receipt by either  Obligor or any ERISA  Affiliate of a notice
                  from a  Multiemployer  Plan that such action has been taken by
                  the PBGC with respect to such Multiemployer Plan; or

                           (iii) any event,  transaction or condition that could
                  result in the incurrence of any liability by either Obligor or
                  any ERISA Affiliate  pursuant to Title I or IV of ERISA or the
                  penalty  or excise  tax  provisions  of the Code  relating  to
                  employee  benefit  plans,  or in the imposition of any Lien on
                  any of the rights,  properties or assets of either  Obligor or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax  provisions,  if such liability or Lien,
                  taken  together with any other such  liabilities or

                                       20

<PAGE>

                  Liens then  existing,  could  reasonably be expected to have a
                  Material Adverse Effect;

                  (f) NOTICES FROM  GOVERNMENTAL  AUTHORITY -- promptly,  and in
         any event  within 30 days of receipt  thereof,  copies of any notice to
         either  Obligor  or any  Subsidiary  from  any  Governmental  Authority
         relating to any order, ruling,  statute or other law or regulation that
         could reasonably be expected to have a Material Adverse Effect;

                  (g) ANNUAL BUSINESS PLAN AND  PROJECTIONS -- promptly,  and in
         any event  within 90 days of the  beginning  of each fiscal year of the
         Guarantor, copies of the Guarantor's annual business plan and financial
         projections  (for  each  fiscal  quarter),  including  profit  and loss
         statements,  cash-flow statements, balance sheets and projected capital
         expenditures  for the fiscal year then begun,  such  business  plan and
         financial projections not to be prepared in a manner and not to contain
         any statements inconsistent with GAAP;

                  (h) CALL OPTION  TRIGGERING  EVENT - promptly upon the earlier
         of either Obligor (i) receiving a Call Option  Triggering  Event Notice
         or (ii)  otherwise  becoming aware of the occurrence of any Call Option
         Triggering Event, written notice of such occurrence (which notice shall
         identify  the name of the  relevant  Subsidiary  and the amount of such
         Subsidiary's intercompany  Indebtedness,  and, if the Total Debt/EBIDTA
         Ratio at such time is equal to or  greater  than 3.25 to 1, the  EBITDA
         for the  applicable  fiscal  quarter  and  the  amount  of  outstanding
         intercompany Indebtedness of each Subsidiary); and

                  (i) REQUESTED INFORMATION -- with reasonable promptness,  such
         other  data  and  information  relating  to the  business,  operations,
         affairs, financial condition, assets or properties of either Obligor or
         any  Subsidiary  or relating to the ability of the  Obligors to perform
         their respective obligations under the Financing Documents as from time
         to time may be reasonably requested by any such holder of Notes.

7.2. OFFICER'S CERTIFICATE.

                  Each set of  financial  statements  delivered  to a holder  of
Notes  pursuant to Section  7.1(a) or Section 7.1(b) hereof shall be accompanied
by a certificate of a Senior Financial Officer of the Guarantor setting forth:

                  (a) COVENANT COMPLIANCE -- the information (including detailed
         calculations)  required in order to establish whether the Obligors were
         in compliance  with the  requirements  of Section 10.3 through  Section
         10.8 hereof,  inclusive,  during the quarterly or annual period covered
         by the statements then being furnished

                                       21

<PAGE>

         (including  with respect to each such Section,  where  applicable,  the
         calculations of the maximum or minimum amount, ratio or percentage,  as
         the case may be, permissible under the terms of such Sections,  and the
         calculation of the amount,  ratio or percentage then in existence,  and
         also  including  details  of any  adjustments  to EBITDA as a result of
         Normalizing Adjustments); and

                  (b) EVENT OF  DEFAULT -- a  statement  that such  officer  has
         reviewed the relevant  terms hereof and has made, or caused to be made,
         under  his  or her  supervision,  a  review  of  the  transactions  and
         conditions of the Guarantor and its Subsidiaries  from the beginning of
         the quarterly or annual  period  covered by the  statements  then being
         furnished to the date of the certificate and that such review shall not
         have  disclosed  the  existence  during such period of any condition or
         event that constitutes a Default or an Event of Default or, if any such
         condition or event existed or exists  (including,  without  limitation,
         any such  event or  condition  resulting  from the  failure  of  either
         Obligor  or any  Subsidiary  to  comply  with any  Environmental  Law),
         specifying  the nature and period of existence  thereof and what action
         the Obligors shall have taken or propose to take with respect thereto.

7.3. INSPECTION.

                  The Obligors shall permit the  representatives  of each holder
of Notes that is an Institutional Investor:

                  (a) NO  DEFAULT  -- if no  Default  or Event of  Default  then
         exists,  at the expense of such holder and upon reasonable prior notice
         to the  Guarantor,  to visit  the  principal  executive  office  of the
         Guarantor  and the  Company,  to  discuss  the  affairs,  finances  and
         accounts of the Guarantor and the Company and their  Subsidiaries  with
         the Guarantor's or the Company's officers, and (with the consent of the
         Guarantor or the Company, as the case may be, which consent will not be
         unreasonably withheld) its independent chartered accountants, and (with
         the consent of the Guarantor or the Company,  as the case may be, which
         consent will not be  unreasonably  withheld) to visit the other offices
         and  properties of the  Guarantor and the Company and each  Subsidiary,
         all at  such  reasonable  times  and  as  often  as  may be  reasonably
         requested in writing; and

                  (b) DEFAULT -- if a Default or Event of Default  then  exists,
         at the expense of the Obligors and upon reasonable  prior notice to the
         Guarantor, to visit and inspect any of the offices or properties of the
         Guarantor,  the  Company  or  any  Subsidiary,  to  examine  all  their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,
         finances and accounts with their  respective  officers and  independent
         chartered  accountants  (and by this  provision the Obligors  authorize
         said  accountants

                                       22

<PAGE>

         to discuss the affairs, finances and accounts of the Obligors and their
         Subsidiaries), all at such times and as often as may be requested.

8. PREPAYMENT OF THE NOTES.

8.1. REQUIRED PREPAYMENTS.

                  On June  29,  2005  and on  each  June  29  thereafter  to and
including June 29, 2010 the Company will prepay U.S.$14,286,000 principal amount
(or such lesser  principal  amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole  Amount or any premium,  PROVIDED that
upon any  partial  prepayment  of the Notes  pursuant  to Section 8.2 or 8.3 the
principal  amount of each required  prepayment  of the Notes  becoming due under
this  Section 8.1 on and after the date of such  prepayment  shall be reduced in
the same  proportion as the aggregate  unpaid  principal  amount of the Notes is
reduced  as  a  result  of  such  prepayment.

8.2.  OPTIONAL  PREPAYMENTS  WITH MAKE-WHOLE AMOUNT.

                  The Company  may,  at its  option,  upon notice as provided in
Section  8.4,  prepay  at any time all,  or from  time to time any part of,  the
Notes,  in an amount not less than 5% of the aggregate  principal  amount of the
Notes  then  outstanding  in the case of a  partial  prepayment,  at 100% of the
principal amount so prepaid,  plus the applicable  Make-Whole  Amount determined
for the prepayment date with respect to such principal amount.

8.3.  PREPAYMENT IN CONNECTION WITH A PAYMENT UNDER SECTION 13.

                  (a) Subject to  Subsection  (b) below,  if, as a result of the
occurrence  of any Tax Event,  the Company or the Guarantor  (assuming  that the
Guarantor  is  required  to make a  payment)  on any date  shall have (i) made a
payment  under  Section 13 with respect to any Note or the  Guarantee in respect
thereof or become  obligated to make a payment  under Section 13 with respect to
any Note or the Guarantee in respect thereof on the next date on which a payment
of interest is scheduled to be made (such payment in either case being in excess
of the amount  that such  Obligor  would have been  required  to pay but for the
occurrence  of such Tax  Event)  (in either  case,  any such Note  being  herein
referred  to as an  "AFFECTED  NOTE") and (ii)  furnished  to each holder of any
Affected Note a notice from a Responsible  Officer of such Obligor setting forth
in  reasonable  detail  the nature of such Tax Event and an  explanation  of the
basis on which such Obligor is then so obligated to make payment  under  Section
13, the Company may,  upon notice  given as provided in Section 8.4,  prepay the
Affected  Notes in  whole  (and  not in  part)  at a price  equal to the  unpaid
principal  amount of such Notes,  together with interest  accrued thereon to the
date fixed for such prepayment, plus the applicable Make-Whole Amount determined
for the prepayment date with respect to such principal amount.

                                       23

<PAGE>

                  (b)  Notwithstanding  Subsection  (a) above,  no Affected Note
shall be prepaid  pursuant to this Section 8.3 if the holder  thereof,  at least
five Business Days prior to the  prepayment  date under this Section 8.3,  shall
have delivered a notice to the Company stating that such holder waives any right
to any future payment under Section 13 in respect of the specific Tax Event that
shall have given rise to the Company's  prepayment right under this Section 8.3;
PROVIDED that

                  (1) no such waiver (x) shall be deemed to  constitute a waiver
         of any right to receive a payment  in full under  Section 13 in respect
         of any other Tax Event that  shall  have  given  rise to the  Company's
         prepayment  right under this  Section 8.3 or (y)  preclude  the Company
         from  exercising  any such right of prepayment in respect of such other
         Tax Event; and

                  (2) if on any date the amount of any payment  that a holder of
         a Note would be entitled to receive under Section 13 shall increase (in
         proportion  to the total amount in respect of which the amount  payable
         under Section 13 is determined),

                           (x) the  occurrence  of any  such  increase  shall be
                  deemed to be a new Tax Event giving rise to a prepayment right
                  under this Section 8.3, and

                           (y)  such  holder  thereafter  shall be  entitled  to
                  receive the full amount of any future  payment  provided under
                  Section 13,  notwithstanding  any waiver previously  delivered
                  pursuant to this  Section  8.3 unless  such holder  shall have
                  delivered a notice under Section 8.3(b) in respect of any such
                  prepayment.

                  In  addition,  no  prepayment  of any Note shall be  permitted
pursuant to Section 8.3(a) if the underlying Tax payment under Section 13 arises
as a result of the  failure of the  Company  to make any  request  specified  in
Section 13(a)(ii) or any other act or omission by either Obligor.

8.4. NOTICES, ETC.

                  The Company will give each holder of Notes  written  notice of
each optional  prepayment under Section 8.2 and each holder of any Affected Note
written notice of each prepayment  under Section 8.3, in each case not less than
30 days and not more than 60 days prior to the date  fixed for such  prepayment.
Each such notice shall specify such date, the aggregate  principal amount of the
Notes or  Affected  Notes,  as the case may be, to be prepaid on such date,  the
principal amount of each Note or Affected Note, as the case may be, held by such
holder to be prepaid,  and the interest to be paid on the  prepayment  date with
respect to such  principal  amount  being  prepaid.  Each such  notice  shall be

                                       24

<PAGE>

accompanied by a certificate of a Senior  Financial  Officer as to the estimated
applicable Make-Whole Amount due in connection with such prepayment  (calculated
as if the date of such notice were the date of the  prepayment),  setting  forth
the details of such computation, and two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes or Affected Notes, as the case
may be, a certificate of a Senior Financial  Officer  specifying the calculation
of such Make-Whole Amount as of the specified  prepayment date.

8.5.  ALLOCATION OF PARTIAL PREPAYMENTS.

                  In the case of each partial  prepayment of the Notes  pursuant
to Section 8.1 or Section 8.2, the  principal  amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.

8.6. MATURITY; SURRENDER, ETC.

                  In the  case of each  prepayment  of  Notes  pursuant  to this
Section  8, the  principal  amount of each Note to be prepaid  shall  mature and
become  due and  payable on the date fixed for such  prepayment,  together  with
interest  on such  principal  amount  accrued  to such  date and the  applicable
Make-Whole  Amount,  if any. From and after such date,  unless the Company shall
fail to pay such  principal  amount when so due and payable,  together  with the
interest and Make-Whole Amount, if any, as aforesaid, interest on such principal
amount  shall  cease  to  accrue.  Any Note  paid or  prepaid  in full  shall be
surrendered  to the Company and canceled and shall not be reissued,  and no Note
shall be issued in lieu of any prepaid principal amount of any Note.

8.7. PURCHASE OF NOTES.

                  Neither  Obligor  will  nor will  either  Obligor  permit  any
Affiliate  to  purchase,  redeem,  prepay  or  otherwise  acquire,  directly  or
indirectly,  any of the outstanding  Notes except upon the payment or prepayment
of the Notes in accordance  with the terms of this Agreement and the Notes.  The
Company  will  promptly  cancel  all Notes  acquired  by either  Obligor  or any
Affiliate  pursuant to any payment,  prepayment or purchase of Notes pursuant to
any provision of this  Agreement and no Notes may be issued in  substitution  or
exchange for any such Notes.

8.8. MAKE-WHOLE AMOUNT.

                  The term "MAKE-WHOLE  AMOUNT" means, with respect to any Note,
an amount equal to the excess,  if any, of the Discounted Value of the Remaining
Scheduled  Payments  with respect to the Called  Principal of such Note over the
amount of such Called  Principal,  PROVIDED that the Make-Whole Amount may in no
event be less than zero. For

                                       25

<PAGE>

the purposes of determining the Make-Whole  Amount, the following terms have the
following meanings:

                  "CALLED  PRINCIPAL"  means,  with  respect  to any  Note,  the
         principal of such Note that is to be prepaid pursuant to Section 8.2 or
         8.3 or has become or is  declared  to be  immediately  due and  payable
         pursuant to Section 12.1, as the context requires.

                  "DISCOUNTED VALUE" means, with respect to the Called Principal
         of any Note, the amount obtained by discounting all Remaining Scheduled
         Payments with respect to such Called  Principal  from their  respective
         scheduled due dates to the Settlement  Date with respect to such Called
         Principal,  in  accordance  with accepted  financial  practice and at a
         discount  factor  (applied on the same periodic  basis as that on which
         interest on the Notes is payable) equal to the Reinvestment  Yield with
         respect to such Called Principal.

                  "REINVESTMENT   YIELD"  means,  with  respect  to  the  Called
         Principal of any Note, the sum of (x)(i) if such Called Principal is to
         be  prepaid  pursuant  to  Section  8.3,  1.00% or (ii) if such  Called
         Principal is to be prepaid  pursuant to Section 8.2 or has become or is
         declared to be  immediately  due and payable  pursuant to Section 12.1,
         0.50%  plus  (y) the  yield  to  maturity  implied  by (i)  the  yields
         reported,  as of 10:00 A.M. (New York City time) on the second Business
         Day  preceding  the  Settlement   Date  with  respect  to  such  Called
         Principal,  on the  display  designated  as "Page 678" on the  Telerate
         Service of Bridge  Information  Services (or such other  display as may
         replace Page 678 on Telerate  Service of Bridge  Information  Services)
         for actively traded U.S. Treasury securities having a maturity equal to
         the  Remaining  Average  Life  of  such  Called  Principal  as of  such
         Settlement  Date,  or (ii) if such  yields are not  reported as of such
         time or the yields reported as of such time are not ascertainable,  the
         Treasury Constant  Maturity Series Yields reported,  for the latest day
         for which such yields  have been so reported as of the second  Business
         Day  preceding  the  Settlement   Date  with  respect  to  such  Called
         Principal,  in U.S. Federal Reserve  Statistical Release H.15 (519) (or
         any comparable successor publication) for actively traded U.S. Treasury
         securities  having a constant  maturity equal to the Remaining  Average
         Life of such Called  Principal as of such Settlement Date. Such implied
         yield will be determined, if necessary, by (a) converting U.S. Treasury
         bill quotations to  bond-equivalent  yields in accordance with accepted
         financial  practice  and (b)  interpolating  linearly  between  (1) the
         actively traded U.S. Treasury security with the duration closest to and
         greater than the  Remaining  Average  Life and (2) the actively  traded
         U.S.  Treasury  security with the duration closest to and less than the
         Remaining Average Life.

                  "REMAINING  AVERAGE  LIFE"  means,  with respect to any Called
         Principal,  the number of years (calculated to the nearest  one-twelfth
         year) obtained by dividing

                                       26

<PAGE>

         (i) such Called Principal into (ii) the sum of the products obtained by
         multiplying  (a) the principal  component of each  Remaining  Scheduled
         Payment  with  respect to such  Called  Principal  by (b) the number of
         years  (calculated  to the nearest  one-twelfth  year) that will elapse
         between the Settlement  Date with respect to such Called  Principal and
         the scheduled due date of such Remaining Scheduled Payment.

                  "REMAINING  SCHEDULED  PAYMENTS"  means,  with  respect to the
         Called Principal of any Note, all payments of such Called Principal and
         interest  thereon  that  would be due  after the  Settlement  Date with
         respect to such Called Principal if no payment of such Called Principal
         were  made  prior to its  scheduled  due  date,  PROVIDED  that if such
         Settlement Date is not a date on which interest  payments are due to be
         made  under  the  terms  of the  Notes,  then  the  amount  of the next
         succeeding  scheduled interest payment will be reduced by the amount of
         interest  accrued to such  Settlement  Date and  required to be paid on
         such Settlement Date pursuant to Section 8.2, 8.3 or 12.1.

                  "SETTLEMENT  DATE" means, with respect to the Called Principal
         of any Note,  the date on which such Called  Principal is to be prepaid
         pursuant  to  Section  8.2 or 8.3 or has  become or is  declared  to be
         immediately  due and payable  pursuant to Section  12.1, as the context
         requires.

9.       AFFIRMATIVE COVENANTS.

                  The Company and the Guarantor  jointly and severally  covenant
that so long as any of the Notes are outstanding:

9.1.     COMPLIANCE WITH LAW.

                  The Obligors will and will cause each of their Subsidiaries to
comply with all laws,  ordinances or governmental  rules or regulations to which
each of them is subject, including, without limitation,  Environmental Laws, and
will  obtain  and  maintain  in  effect  all  licenses,  certificates,  permits,
franchises and other governmental  authorizations  necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that  non-compliance with such laws,
ordinances  or  governmental  rules or  regulations  or  failures  to  obtain or
maintain in effect such licenses,  certificates,  permits,  franchises and other
governmental  authorizations  could  not,  individually  or  in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.

9.2. INSURANCE.

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<PAGE>

                  The Obligors will and will cause each of their Subsidiaries to
(a) maintain,  with  financially  sound and reputable  insurers,  insurance with
respect to their  respective  properties and businesses  against such casualties
and  contingencies,  of such types, on such terms and in such amounts (including
deductibles,   co-insurance  and   self-insurance,   if  adequate  reserves  are
maintained  with  respect  thereto) as is  customary  in the case of entities of
established  reputations engaged in the same or a similar business and similarly
situated and (b), for so long as the Lien of the Security  Documents is required
to be in effect,  ensure that the Collateral  Agent is an additional  named loss
payee under all policies of  insurance,  as the  Obligor's or such  Subsidiary's
interest may appear, and that such policies are not cancellable without at least
30 days' prior  written  notice  being given by the  insurers to the  Collateral
Agent.

9.3. MAINTENANCE OF PROPERTIES.

                  The Obligors will and will cause each of their Subsidiaries to
maintain  and  keep,  or cause  to be  maintained  and  kept,  their  respective
properties in good repair, working order and condition (other than ordinary wear
and tear),  so that the  business  carried  on in  connection  therewith  may be
properly  conducted at all times,  PROVIDED  that this Section shall not prevent
either  Obligor or any  Subsidiary  from  discontinuing  the  operation  and the
maintenance of any of its properties if such  discontinuance is desirable in the
conduct of its business and the Guarantor has concluded that such discontinuance
could not,  individually  or in the aggregate,  reasonably be expected to have a
Material Adverse Effect.

9.4. PAYMENT OF TAXES AND CLAIMS.

                  The Obligors will and will cause each of their Subsidiaries to
file all tax  returns  required to be filed in any  jurisdiction  and to pay and
discharge  all taxes shown to be due and  payable on such  returns and all other
taxes,  assessments,  governmental  charges, or levies imposed on them or any of
their  properties,  assets,  income or franchises,  to the extent such taxes and
assessments have become due and payable and before they have become  delinquent,
and all  claims for which sums have  become due and  payable  that have or might
become a Lien on  properties  or  assets of either  Obligor  or any  Subsidiary,
PROVIDED that neither of the Obligors nor any  Subsidiary  need pay any such tax
or assessment or claims if (i) the amount,  applicability or validity thereof is
contested by such Obligor or such Subsidiary on a timely basis in good faith and
in appropriate proceedings,  and such Obligor or such Subsidiary has established
adequate  reserves  therefor in  accordance  with U.S. GAAP on the books of such
Obligor or such Subsidiary or (ii) the nonpayment of all such taxes, assessments
and claims in the aggregate  could not reasonably be expected to have a Material
Adverse Effect.

9.5. CORPORATE EXISTENCE, ETC.

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<PAGE>

                  Subject to Sections  10.2 and 10.8,  the Obligors  will at all
times preserve and keep in full force and effect their  respective  corporate or
partnership  existences  (as  applicable),  and the  Obligors  will at all times
preserve  and keep in full force and effect the  corporate  existence of each of
their  Subsidiaries  and all rights and  franchises  of the  Obligors  and their
Subsidiaries  unless,  in  the  good  faith  judgment  of  the  Guarantor,   the
termination  of or  failure  to  preserve  and keep in full force and effect the
corporate  existence of any  Subsidiary  (other than the  Company),  or any such
right or franchise could not, individually or in the aggregate,  have a Material
Adverse Effect.

9.6. OWNERSHIP OF THE COMPANY.

                  The Guarantor shall at all times own,  directly or indirectly,
100% of the  partnership  interests  in the  Company  free and clear of any Lien
(other than Liens created under the Security  Documents or arising in connection
with the Credit Agreement).

9.7. RANKING.

                  Each Obligor will ensure that, at all times,  all  liabilities
of such Obligor under the Notes (in the case of the Company) and the  Guarantees
(in the case of the  Guarantor)  will rank in right of payment either PARI PASSU
or senior to all other  Indebtedness  of such  Obligor  except for  Indebtedness
which is  preferred  as a result  of being  secured  by  assets  other  than the
Collateral  (but then  only to the  extent of such  security).

9.8.  SUBSIDIARY GUARANTORS; UNDERTAKINGS TO SECURE.

                  The Obligors will ensure that each Person which after the date
hereof  becomes  (i) a  Wholly-Owned  Subsidiary,  is or  becomes  a  Subsidiary
Guarantor and grants and delivers the other applicable  Direct Security in favor
of the Secured Parties or (ii) a Non Wholly-Owned  Subsidiary,  is or becomes an
Undertaking  Subsidiary,  in each  case,  as soon as  possible  and in any event
within 10  Business  Days  following  the date on which  such  Person  becomes a
Wholly-Owned  Subsidiary or Non Wholly-Owned  Subsidiary (as  applicable).

9.9. FURTHER ASSURANCES; RELEASE OF COLLATERAL.

                  (a) Subject to Section  9.9(b),  the Obligors  shall take,  or
cause to be taken,  all action  required or desirable to maintain good and valid
title to the Collateral and shall maintain and preserve the Liens created by the
Security  Documents  and the  superiority  of the priority  thereof to all Liens
other than the Liens  arising in  connection  with the Credit  Agreement and any
other Permitted Liens.

                  (b) At any time on or after the  release by the Lenders of all
of the Security (each under and as defined in the Credit Agreement) and provided
that no Default or Event

                                       29

<PAGE>

or Default  shall have  occurred  and be  continuing,  the  Company may elect to
require the holders of Notes and the Collateral  Agent to release the Collateral
at such time existing in favor thereof.  Upon such election by the Company,  the
holders of Notes shall (and shall instruct the Collateral  Agent to) (x) release
such Collateral,  (y) surrender to the Company all documents by which perfection
of the  Liens  of  such  holders  and of the  Collateral  Agent  on and in  such
Collateral were perfected by possession and (z) register such PERSONAL  PROPERTY
SECURITY ACT (Ontario),  Uniform  Commercial  Code and other  personal  property
security  discharge  statements with respect to the Liens of such holders and of
the  Collateral  Agent on and in such  Collateral as the Company may  reasonably
request, in each case, at the expense of the Company.

                  (c)  Provided  that no Default or Event or Default  shall have
occurred and be  continuing,  the holders of Notes shall (and shall instruct the
Collateral  Agent to) (x) release  Collateral  in respect of assets  disposed of
pursuant to  Dispositions  permitted  pursuant to Section 10.2, (y) surrender to
the Company all  documents by which  perfection of the Liens of such holders and
of the Collateral  Agent on and in such  Collateral were perfected by possession
and  (z)  register  such  PERSONAL  PROPERTY  SECURITY  ACT  (Ontario),  Uniform
Commercial Code and other personal property security  discharge  statements with
respect to the Liens of such holders and of the Collateral  Agent on and in such
Collateral as the Company may reasonably  request,  in each case, at the expense
of the Company.

9.10. LINES OF BUSINESS.

                  The Obligors will not, and will not permit any  Subsidiary to,
engage to any  substantial  extent in any  business  other than the  business in
which  the  Obligors  and their  Subsidiaries  are  engaged  on the date of this
Agreement as described  in the  Memorandum  and  businesses  reasonably  related
thereto or in furtherance thereof.

10. NEGATIVE COVENANTS.

                  The Company and the Guarantor jointly and severally covenant
that so long as any of the Notes are outstanding:

10.1. TRANSACTIONS WITH AFFILIATES.

                  The Guarantor will not, and will not permit any Subsidiary to,
enter  into  directly  or  indirectly  any   transaction  or  group  of  related
transactions (including without limitation the purchase, lease, sale or exchange
of  properties  of any kind or the  rendering of any service) with any Affiliate
(other than the Guarantor or another Subsidiary),  except in the ordinary course
and  pursuant  to  the  reasonable  requirements  of  the  Guarantor's  or  such
Subsidiary's  business and upon fair and  reasonable  terms no less favorable to
the  Guarantor

                                       30

<PAGE>

or such  Subsidiary  than  would  be  obtainable  in a  comparable  arm's-length
transaction with a Person not an Affiliate.

10.2. MERGER, CONSOLIDATION, ETC.

                  Neither  Obligor  will,  and neither  Obligor  will permit any
Subsidiary Guarantor to, consolidate with or merge with any other corporation or
convey,  transfer  or  lease  substantially  all  of  its  assets  in  a  single
transaction or series of transactions to any Person unless:

                  (a) in the case of either  Obligor,  the  successor  formed by
         such  consolidation  or the  survivor of such merger or the Person that
         acquires  by  conveyance,  transfer or lease  substantially  all of the
         assets of the Guarantor or the Company (the "OBLIGOR SUCCESSOR"), shall
         be a  solvent  corporation  organized  and  existing  under the laws of
         Canada or any  Province  thereof,  the United  States of America or any
         State  thereof  (including  the  District  of  Columbia),  and,  if the
         Guarantor  or the  Company,  as the  case  may be,  is not the  Obligor
         Successor,  (i) the Obligor Successor shall have executed and delivered
         to each  holder  of any Notes its  assumption  of the due and  punctual
         performance  and  observance of each covenant and condition of (x) this
         Agreement,  the Notes and the other  Financing  Documents  to which the
         Company is a party,  in the case of the Company and (y) this Agreement,
         the Guarantees and the other Financing Documents to which the Guarantor
         is a party,  in the case of the Guarantor and (ii) the Guarantor or the
         Company,  as the case may be, shall have caused to be delivered to each
         holder of any Notes an opinion  of  nationally  recognized  independent
         counsel in the appropriate  jurisdiction,  or other independent counsel
         reasonably satisfactory to the Required Holders, to the effect that all
         agreements or instruments  effecting such assumption are enforceable in
         accordance with their terms and comply with the terms hereof; and

                  (b) in the case of any  Subsidiary  Guarantor,  the  successor
         formed by such  consolidation  or the  survivor  of such  merger or the
         Person that acquires by conveyance, transfer or lease substantially all
         of the assets of such Subsidiary Guarantor (the "GUARANTOR SUCCESSOR"),
         shall be (1)  either  Obligor,  such  Subsidiary  Guarantor  or another
         Subsidiary Guarantor,  (2) a solvent corporation organized and existing
         under the laws of Canada or any Province thereof,  the United States of
         America or any State  thereof  (including  the District of Columbia) or
         the jurisdiction of organization of such Subsidiary Guarantor,  and (i)
         such  Guarantor  Successor  shall have  executed and  delivered to each
         holder of any Notes its assumption of the due and punctual  performance
         and  observance  of  each  covenant  and  condition  of the  Subsidiary
         Guarantee  and (ii) the  Obligors  shall have caused to be delivered to
         each  holder  of  any  Notes  an  opinion  of   nationally

                                       31

<PAGE>

         recognized  independent  counsel in the  appropriate  jurisdiction,  or
         other  independent  counsel  reasonably  satisfactory  to the  Required
         Holders,  to the effect that all  agreements or  instruments  effecting
         such  assumption  are  enforceable  in accordance  with their terms and
         comply  with the terms  hereof  or (3) any other  Person so long as the
         transfer of all of the assets of such  Subsidiary  Guarantor would have
         otherwise  been  permitted  by  Sections  10.8(ii)  and  (iii) and such
         transaction  is treated as a  Disposition  of all of the assets of such
         Subsidiary Guarantor for purposes of Sections 10.8(ii) and (iii); and

                  (c) in the case of any such transaction, (i) immediately after
         giving effect to such transaction, no Default or Event of Default shall
         have  occurred  and be  continuing  and (ii) the  Obligors  shall  have
         demonstrated  to the reasonable  satisfaction  of the Required  Holders
         that all actions  necessary  to preserve  and  maintain the Lien of the
         Security  Documents and the Lien arising in connection  with the Credit
         Agreement in each case on the Collateral have been taken.

No such  conveyance,  transfer  or lease of  substantially  all of the assets of
either  Obligor shall have the effect of releasing such Obligor or any successor
corporation that shall  theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under (x) this Agreement,  the Notes or the
other  Financing  Documents to which the Company is a party,  in the case of the
Company or (y) this Agreement,  the Guarantees or the other Financing  Documents
to which the Guarantor is a party, in the case of the Guarantor.

10.3. LIENS.

                  The Guarantor will not, and will not permit any Subsidiary to,
create,  assume,  incur or suffer to exist any Lien upon or with  respect to any
property or assets, whether now owned or hereafter acquired, of the Guarantor or
any Subsidiary, excluding from the operation of this Section the following Liens
(each a "PERMITTED LIEN" and together, the "PERMITTED LIENS"):

                  (a)  Liens  securing  Indebtedness  of  the  Guarantor  or any
         Subsidiary outstanding on the date hereof as specified in Schedule 5.15
         (to the  extent  such  Lien is not  otherwise  permitted  by any  other
         subsections of this Section 10.3);

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

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

                                       32

<PAGE>

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

                  (e) Liens  securing  the  payment  of taxes,  assessments  and
         governmental charges or levies, either (i) not delinquent or (ii) being
         contested in good faith by appropriate proceedings;

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

                  (g) Liens  arising out of the leasing of personal  property by
         the  Guarantor or any of its  Subsidiaries  in the  ordinary  course of
         business up to an amount not exceeding in the aggregate U.S.$15,000,000
         (or the equivalent  thereof,  as of any date of  determination,  in any
         other currency) for the Guarantor and its Subsidiaries;

                  (h) Liens,  subordinate in priority to the Liens created under
         the Security Documents, incurred in the ordinary course of business for
         the purposes of securing the payment of any purchase  price  balance or
         the  refinancing of any purchase price balances not greater than in the
         aggregate U.S.$25,000,000 (or the equivalent thereof, as of any date of
         determination, in any other currency) of any assets (other than current
         assets) acquired by the Guarantor or any of its  Subsidiaries  PROVIDED
         that any such Liens are restricted to the assets so acquired;

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

                  (j) security  given in the ordinary  course of business by the
         Guarantor  or  any of  its  Subsidiaries  to a  public  utility  or any
         municipality  or  governmental  or public  authority in connection with
         operations of the Guarantor or any of its  Subsidiaries  (other than in
         connection  with  borrowed  money)  securing not more

                                       33

<PAGE>

         than an aggregate  amount equal to  U.S.$1,000,000  (or the  equivalent
         thereof, as of any date of determination, in any other currency);

                  (k) Liens granted  pursuant to the Security  Documents and any
         additional or further  security  granted to the Collateral Agent by the
         Obligors or any  Subsidiary  Guarantor or any future  Subsidiary of the
         Guarantor,  and Liens arising in connection  with the Credit  Agreement
         (PROVIDED  that and for so long as the  Intercreditor  Agreement  is in
         full force and effect);

                  (l)      Liens in respect of Permitted Loans; or

                  (m) Liens in addition to those  described in  Subsections  (a)
         through  (l)  above  securing  Indebtedness  of  the  Guarantor  or any
         Subsidiary,  PROVIDED that, upon the incurrence thereof and immediately
         after giving effect thereto,  the sum (without  duplication) of (i) the
         aggregate  unpaid principal amount of Indebtedness of the Guarantor and
         any  Subsidiary  secured  by  Liens  (other  than  Liens  permitted  by
         Subsections  (a)  through  (l) of this  Section  10.3)  PLUS  (ii)  the
         aggregate  unpaid  principal amount of Indebtedness of all Subsidiaries
         (other than  Indebtedness  permitted  by Section  10.7(a)  through (d))
         shall not exceed 10% of Consolidated Total Assets.

10.4. CONSOLIDATED NET WORTH.

                  The  Guarantor  will not  permit  as of the end of any  fiscal
quarter of the Guarantor  Consolidated  Net Worth to be less than the sum of (i)
U.S.$70,000,000  PLUS (ii) an amount equal to the sum of 50% of Consolidated Net
Earnings for each completed  fiscal year of the Guarantor  ending after the date
of Closing (but only if the  Consolidated Net Earnings for such fiscal year is a
positive  number)  PLUS (iii) one  hundred  percent  (100%) of the  consolidated
cumulative  proceeds  from  the  first  occurring  (x)  equity  offering  of the
Guarantor or any Subsidiary including,  without limitation,  securities offering
and (y) equity  injection in any form made into the Guarantor or any  Subsidiary
in either case the aggregate proceeds of which exceed U.S.$10,000,000.

10.5. LEVERAGE RATIO.

                  The   Guarantor   will  not  at  any  time  permit  the  Total
Debt/EBITDA Ratio to exceed 3.5 to 1.0.

10.6. FIXED CHARGE COVERAGE RATIO.

                  The Guarantor will not, as at the end of any fiscal quarter of
the  Guarantor,  permit the Fixed Charge  Coverage  Ratio for the period of four
fiscal quarters of the

                                       34

<PAGE>

Guarantor  ending on the last day of such fiscal quarter, to be less than 1.25
to 1.0.

10.7. SUBSIDIARY INDEBTEDNESS.

                  The Guarantor will not permit any  Subsidiary  (other than the
Company) to create,  assume,  incur,  guarantee  or otherwise  become  liable in
respect of any Indebtedness, excluding from the operation of this Section:

                  (a) Indebtedness  outstanding on the date hereof and specified
         in  Schedule  5.15 and any  extension,  renewal or  refunding  thereof,
         PROVIDED  that the principal  amount  thereof  outstanding  immediately
         before  giving  effect to such  extension,  renewal or refunding is not
         increased;

                  (b)  Indebtedness  of a Person  outstanding  at the time  such
         Person becomes a Subsidiary (and not incurred in anticipation  thereof)
         and any  extension,  renewal or refunding  thereof,  PROVIDED  that the
         principal amount thereof  outstanding  immediately before giving effect
         to such extension, renewal or refunding is not increased;

                  (c)      Indebtedness of any Subsidiary Guarantor incurred
         after the date of Closing;

                  (d)      Indebtedness owing to the Guarantor, the Company or
         any Subsidiary Guarantor; and

                  (e)  Indebtedness in addition to that described in Subsections
         (a) through (d) above,  PROVIDED that, upon the incurrence  thereof and
         immediately after giving effect thereto, the sum (without  duplication)
         of (i) the aggregate  unpaid  principal  amount of  Indebtedness of the
         Guarantor  and all  Subsidiaries  secured  by Liens  (other  than Liens
         permitted  by  Section  10.3(a)  through  (l)) PLUS (ii) the  aggregate
         unpaid principal amount of Indebtedness of all Subsidiaries (other than
         Indebtedness  permitted by Subsections  (a) through (d) of this Section
         10.7) shall not exceed 10% of Consolidated Total Assets.

10.8. DISPOSITION OF ASSETS.

                  The Guarantor will not, and will not permit any Subsidiary to,
directly  or  indirectly,   sell,  lease,   transfer  or  otherwise  dispose  of
(collectively  a  "DISPOSITION")  any of its properties or assets unless,  after
giving effect to such proposed  Disposition,  (i) no Default or Event of Default
shall have  occurred and be  continuing,  (ii) the  aggregate  book value of all
assets that were the subject of a  Disposition  during the period  commencing on
the first day of the then current fiscal year of the Guarantor and ending on the
date of such

                                       35

<PAGE>

proposed   Disposition  (the   "DISPOSITION   DATE")  does  not  exceed  10%  of
Consolidated  Total  Assets as at the end of the  fiscal  year of the  Guarantor
ended  immediately  prior to the  Disposition  Date and (iii) the aggregate book
value of all assets  that were the  subject of a  Disposition  during the period
commencing  on the date of the Closing and ending on the  Disposition  Date does
not exceed 25% of  Consolidated  Total Assets as of the end of such  immediately
preceding  fiscal year.  Any  Disposition  of shares of stock of any  Subsidiary
shall, for purposes of this Section,  be valued at an amount that bears the same
proportion  to the total assets of such  Subsidiary as the number of such shares
bears to the total number of shares of stock of such Subsidiary. Notwithstanding
the foregoing,  the following Dispositions shall not be taken into account under
this Section 10.8:

                  (a)      any Disposition pursuant to a transaction consummated
         in accordance with Section 10.2;

                  (b)  any  Disposition  of  inventory,   equipment,   fixtures,
         supplies or materials  made in the ordinary  course of business at fair
         value;

                  (c)  any   Disposition  by  a  Subsidiary   Guarantor  to  the
         Guarantor, the Company or another Subsidiary Guarantor, or by any other
         Subsidiary to the Guarantor, the Company or another Subsidiary; and

                  (d) any  Disposition  by the Guarantor or a Subsidiary the net
         proceeds  of  which  are  applied   within  365  days  of  the  related
         Disposition   Date  to  the   acquisition  by  the  Guarantor  or  such
         Subsidiary, as the case may be, of assets of a similar nature and of at
         least  equivalent  value to the  assets  which are the  subject of such
         Disposition.

10.9. CALL OPTIONS.

                  The  Guarantor  will not make,  or permit  the  making of, any
change  or  modification  to the call  option  provisions  in the  Shareholders'
Agreements without the prior written consent of the Required Holders.

11. EVENTS OF DEFAULT.

                  An  "EVENT OF  DEFAULT"  shall  exist if any of the  following
conditions or events shall occur and be continuing:

                  (a) default  shall be made in the payment of any  principal or
         Make-Whole  Amount,  if any, on any Note when the same  becomes due and
         payable,

                                       36

<PAGE>

         whether at maturity or at a date fixed for prepayment or by declaration
         or otherwise; or

                  (b) default  shall be made in the  payment of any  interest on
         any Note,  any amounts due  pursuant to Section 13 or any other  amount
         due under any other Financing Document for more than five Business Days
         after the same becomes due and payable; or

                  (c) default shall be made by either Obligor in the performance
         of or  compliance  with  (i) any  term  contained  in  Section  10.2 or
         Sections  10.4 to 10.8,  inclusive  or (ii) any  other  term  contained
         herein or in any other Financing Document (other than those referred to
         in paragraphs  (a) and (b) of this Section 11) and (in the case of this
         clause  (ii) only and to the  extent  that such  default  is capable of
         being remedied and during the 10 Business Day period  referred to below
         such Obligor is  proceeding  actively and  diligently  in good faith to
         remedy such default to the  satisfaction of the Required  Holders) such
         default is not  remedied  within 10 Business  Days after the earlier of
         (x) a Responsible  Officer  obtaining  actual knowledge of such default
         and (y) an Obligor  receiving  written  notice of such default from any
         holder of a Note (any such written notice to be identified as a "notice
         of default"  and to refer  specifically  to this  paragraph  (c)(ii) of
         Section 11); or

                  (d) any  representation  or warranty  made in writing by or on
         behalf of either Obligor or any Subsidiary  Guarantor or by any officer
         of the Guarantor or the General Partner or any Subsidiary  Guarantor in
         this  Agreement,  any  Subsidiary  Guarantee  or  any  other  Financing
         Document in any writing  furnished in connection with the  transactions
         contemplated  hereby  proves to have  been  false or  incorrect  in any
         material respect on the date as of which made; or

                  (e) (i) any  Event of  Default  under  and as  defined  in the
         Credit Agreement shall have occurred and be continuing,  or (ii) either
         Obligor or any  Subsidiary  is in default (as principal or as guarantor
         or other  surety)  in the  payment  of any  principal  of or premium or
         make-whole  amount or interest on any Indebtedness  that is outstanding
         in an aggregate  principal  amount of at least  U.S.$5,000,000  (or the
         equivalent  thereof,  as of any  date of  determination,  in any  other
         currency) beyond any period of grace provided with respect thereto,  or
         (iii) either Obligor or any Subsidiary is in default in the performance
         of or compliance  with any term of any evidence of any  Indebtedness in
         an aggregate  outstanding  principal amount of at least  U.S.$5,000,000
         (or the equivalent  thereof,  as of any date of  determination,  in any
         other  currency)  or of any  mortgage,  indenture  or  other  agreement
         relating thereto or any other condition exists, and as a consequence of
         such default or condition  such  Indebtedness  has become,  or has been
         declared,  due and  payable  before its stated  maturity  or before its
         regularly  scheduled dates of payment,  or (iv) as a

                                       37

<PAGE>

         consequence of the occurrence or continuation of any event or condition
         (other  than  the  passage  of  time  or the  right  of the  holder  of
         Indebtedness  to convert  such  Indebtedness  into  equity  interests),
         either Obligor or any  Subsidiary  has become  obligated to purchase or
         repay Indebtedness  before its regular maturity or before its regularly
         scheduled dates of payment in an aggregate outstanding principal amount
         of at least  U.S.$5,000,000 (or the equivalent  thereof, as of any date
         of determination, in any other currency); or

                  (f) either Obligor,  any Subsidiary or the General Partner (i)
         is generally not paying, or admits in writing its inability to pay, its
         debts as they  become  due,  (ii)  files,  or  consents  by  answer  or
         otherwise  to the  filing  against  it of, a  petition  for  relief  or
         reorganization or arrangement or any other petition in bankruptcy,  for
         liquidation  or  to  take  advantage  of  any  bankruptcy,  insolvency,
         reorganization,  moratorium or other  similar law of any  jurisdiction,
         (iii)  makes an  assignment  for the  benefit  of its  creditors,  (iv)
         consents to the appointment of a custodian,  receiver, trustee or other
         officer with  similar  powers with respect to it or with respect to any
         substantial part of its property, (v) is adjudicated as insolvent or to
         be liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or

                  (g)  a  court   or   governmental   authority   of   competent
         jurisdiction  enters an order  appointing,  without  consent  by either
         Obligor, any Subsidiary or the General Partner, a custodian,  receiver,
         trustee or other officer with similar powers with respect to it or with
         respect to any  substantial  part of its property,  or  constituting an
         order for relief or approving a petition  for relief or  reorganization
         or any other  petition  in  bankruptcy  or for  liquidation  or to take
         advantage of any bankruptcy or insolvency law of any  jurisdiction,  or
         ordering the dissolution,  winding-up or liquidation of either Obligor,
         any  Subsidiary or the General  Partner,  or any such petition shall be
         filed against either Obligor, any Subsidiary or the General Partner and
         such petition shall not be dismissed within 60 days; or

                  (h) an  application  or an  order  is  made,  proceedings  are
         commenced,  or an  application  to a court or other steps are taken for
         the winding up,  liquidation,  dissolution or  administration of either
         Obligor  or  any  Subsidiary,  or a  receiver,  receiver  and  manager,
         administrative  receiver or similar  officer is appointed to all or any
         of the assets and undertakings of either Obligor or any Subsidiary, and
         such appointment continues undischarged for 30 days; or

                  (i) a final  judgment  or  judgments  for the payment of money
         aggregating in excess of U.S.$5,000,000 (or the equivalent  thereof, as
         of any date of  determination,  in any  other  currency)  are  rendered
         against one or more of the  Obligors and their  Subsidiaries  and which
         judgments  are  not,  within  60  days  after

                                       38

<PAGE>

         entry thereof, bonded,  discharged or stayed pending appeal, or are not
         discharged within 60 days after the expiration of such stay; or

                  (j) if (i) any Plan shall fail to satisfy the minimum  funding
         standards  of ERISA or the Code for any plan year or part  thereof or a
         waiver of such  standards or extension  of any  amortization  period is
         sought or  granted  under  section  412 of the  Code,  (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably  expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under  ERISA  section  4042  to  terminate  or  appoint  a  trustee  to
         administer  any Plan or the PBGC shall have notified  either Obligor or
         any  ERISA  Affiliate  that a Plan  may  become a  subject  of any such
         proceedings,   (iii)  the   aggregate   "amount  of  unfunded   benefit
         liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
         all Plans,  determined  in  accordance  with  Title IV of ERISA,  shall
         exceed U.S.$5,000,000, (iv) either Obligor or any ERISA Affiliate shall
         have incurred or is reasonably expected to incur any liability pursuant
         to Title I or IV of ERISA or the  penalty or excise tax  provisions  of
         the Code relating to employee  benefit plans, (v) either Obligor or any
         ERISA Affiliate  withdraws from any Multiemployer  Plan, or (vi) either
         Obligor or any Subsidiary  establishes  or amends any employee  welfare
         benefit plan that provides post-employment welfare benefits in a manner
         that would  increase the liability of either  Obligor or any Subsidiary
         thereunder;  and any such  event or events  described  in  clauses  (i)
         through (vi) above, either individually or together with any other such
         event or  events,  could  reasonably  be  expected  to have a  Material
         Adverse Effect; or

                  (k) any Subsidiary  Guarantee  shall cease to be in full force
         and effect or any  Subsidiary  Guarantor or any Person acting on behalf
         of any Subsidiary  Guarantor  shall contest in any manner the validity,
         binding nature or enforceability of any Subsidiary Guarantee; or

                  (l) any  Guarantee  shall cease to be in full force and effect
         or the Guarantor or any Person acting on behalf of the Guarantor  shall
         contest in any manner the validity, binding nature or enforceability of
         any Guarantee; or

                  (m) either  Obligor  shall have  failed  within 30 days of the
         giving of a Call  Option  Triggering  Event  Notice to have  caused the
         Subsidiary to which such Call Option Triggering Event Notice relates to
         become a Subsidiary Guarantor.

As used in  Section  11(j),  the terms  "EMPLOYEE  BENEFIT  PLAN" and  "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective  meanings assigned to such terms
in Section 3 of ERISA.

12.      REMEDIES ON DEFAULT, ETC.

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<PAGE>

12.1. ACCELERATION.

                  (a)  If an  Event  of  Default  with  respect  to  an  Obligor
described  in  paragraph  (f),  (g) or (h) of Section 11 (other than an Event of
Default  described in clause (i) of paragraph (f) or described in clause (vi) of
paragraph (f) by virtue of the fact that such clause  encompasses  clause (i) of
paragraph (f)) has occurred,  all the Notes then outstanding shall automatically
become immediately due and payable.

                  (b)  If  any  other  Event  of  Default  has  occurred  and is
continuing,  the Required Holders may at any time at their option,  by notice or
notices to the Company, declare all the Notes then outstanding to be immediately
due and payable.

                  (c) If any Event of Default  described in paragraph (a) or (b)
of Section 11 has occurred and is continuing,  any holder or holders of Notes at
the time  outstanding  affected by such Event of Default may at any time, at its
or their option, by notice or notices to the Company, declare all the Notes held
by it or them to be immediately due and payable.

                  Upon any Notes  becoming  due and payable  under this  Section
12.1, whether automatically or by declaration,  such Notes will forthwith mature
and the entire unpaid principal  amount of such Notes,  plus (x) all accrued and
unpaid interest thereon and (y) the applicable  Make-Whole  Amount determined in
respect of such  principal  amount (to the full extent  permitted by  applicable
law),  shall all be immediately due and payable,  in each and every case without
presentment,  demand, protest or further notice, all of which are hereby waived.
The Obligors  acknowledge,  and the parties hereto agree,  that each holder of a
Note has the right to maintain its  investment in the Notes free from  repayment
by the  Obligors  (except  as  herein  specifically  provided  for) and that the
provision  for payment of a  Make-Whole  Amount by the Company in the event that
the Notes are prepaid or are accelerated as a result of an Event of Default,  is
intended to provide  compensation  for the  deprivation of such right under such
circumstances.

12.2. OTHER REMEDIES.

                  If any  Default  or  Event  of  Default  has  occurred  and is
continuing,  and  irrespective  of whether  any Notes  have  become or have been
declared  immediately due and payable under Section 12.1, the holder of any Note
at the time  outstanding  may  proceed to protect and enforce the rights of such
holder  by an action at law,  suit in  equity or other  appropriate  proceeding,
whether for the specific performance of any agreement contained herein or in any
Note  or in  any  other  Financing  Document,  or for an  injunction  against  a
violation  of any of the terms  hereof or thereof,  or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.

12.3. RESCISSION.

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<PAGE>

                  At any time prior to the date which is 90 days after any Notes
have been  declared due and payable  pursuant to paragraph (b) or (c) of Section
12.1, the Required  Holders,  by written notice to the Company,  may rescind and
annul any such  declaration  and its  consequences if (a) the Obligors have paid
all overdue  interest on the Notes, all principal of and Make-Whole  Amount,  if
any, on any Notes that are due and  payable and are unpaid  other than by reason
of such  declaration,  and all interest on such overdue principal and Make-Whole
Amount,  if any,  and (to the extent  permitted by  applicable  law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of Default
and Defaults,  other than  non-payment of amounts that have become due solely by
reason of such  declaration,  have been cured or have been  waived  pursuant  to
Section 19, and (c) no  judgment  or decree has been  entered for the payment of
any monies due pursuant  hereto or to the Notes.  No  rescission  and  annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.

12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

                  No course of dealing and no delay on the part of any holder of
any Note in  exercising  any right,  power or remedy  shall  operate as a waiver
thereof or otherwise  prejudice  such holder's  rights,  powers or remedies.  No
right, power or remedy conferred on any holder of a Note by this Agreement,  any
Note or any other  Financing  Document  shall be  exclusive  of any other right,
power or remedy  referred to herein or therein or now or hereafter  available at
law, in equity, by statute or otherwise. Without limiting the obligations of the
Obligors  under  Section 17, the Obligors will pay to the holder of each Note on
demand  such  further  amount  as shall be  sufficient  to cover  all  costs and
expenses of such holder  incurred in any  enforcement  or collection  under this
Section 12, including, without limitation,  reasonable attorneys' fees, expenses
and disbursements.

13. TAX INDEMNIFICATION.

                  (a) Any and all payments  under this  Agreement,  the Notes or
the  Guarantees to or for the account of any holder of a Note shall be made free
and clear of, and without  deduction  or  withholding  for or on account of, any
Tax,  except to the extent such  deduction or withholding is required by law. If
any Tax is required by law to be deducted or withheld  from any such payments by
the Guarantor or the Company,  the Guarantor or the Company, as the case may be,
will  make  such  deductions  or  withholding  and  pay to the  relevant  taxing
authority the full amount deducted or withheld before  penalties  attach thereto
or  interest  accrues  thereon.  In the  event of the  imposition  by or for the
account of any Applicable  Taxing Authority or of any Governmental  Authority of
any  jurisdiction  in which  either  Obligor  resides  for tax  purposes  or any
jurisdiction  from or through  which  either  Obligor  is making any  payment in
respect of any Note or any Guarantee,  other than any Governmental  Authority of
or in the  United  States of  America or any  political  subdivision  thereof or
therein,  of any Tax upon or with respect to any

                                       41

<PAGE>

payments  in respect of any Note or any  Guarantee,  whether by  withholding  or
otherwise,  the Obligor  making such payment hereby agrees to pay forthwith from
time to time in connection with each payment on the Notes or the Guarantees,  as
the case may be, to each  holder of a Note such  amounts as shall be required so
that  every  payment  received  by such  holder in  respect of the Notes and the
Guarantees  and every payment  received by such holder under this Agreement will
not,  after such  withholding or deduction or other payment for or on account of
such Tax and any interest or penalties relating thereto, be less than the amount
due and  payable to such  holder in respect of such Note or  Guarantee  or under
this  Agreement  before the  assessment  of such Tax;  PROVIDED,  however,  that
neither  Obligor shall be obliged to pay such amounts to any holder of a Note in
respect of Taxes to the extent such Taxes  exceed the Taxes that would have been
payable:

                           (i) had such  holder  not been a  resident  of Canada
                  within the meaning of the INCOME TAX ACT  (Canada) or not used
                  or held such Note in the course of  carrying  on a business in
                  Canada within the meaning of the INCOME TAX ACT (Canada); or

                           (ii)  had such  holder  not had any  connection  with
                  Canada or any territory or political subdivision thereof other
                  than  the  mere  holding  of a  Note  with  the  benefit  of a
                  Guarantee and the Subsidiary  Guarantee (or the receipt of any
                  payments in respect thereof) or activities  incidental thereto
                  (including enforcement thereof); or

                           (iii) had such holder not dealt with the Company on a
                  non-arm's  length basis  (within the meaning of the INCOME TAX
                  ACT (Canada)) in connection with any such payment; or

                           (iv) but for the  delay  or  failure  by such  holder
                  (following a written request by an Obligor) in the filing with
                  an appropriate  Governmental  Authority or otherwise of forms,
                  certificates,  documents,  applications  or  other  reasonably
                  required evidence (collectively "FORMS"), that are required to
                  be filed by such holder to avoid or reduce such Taxes and that
                  in the case of any of the  foregoing  would not  result in any
                  confidential  or  proprietary  income tax  return  information
                  being revealed,  either directly or indirectly,  to any Person
                  and such delay or failure could have been lawfully  avoided by
                  such holder, PROVIDED that such holder shall be deemed to have
                  satisfied the  requirements  of this clause (iv) upon the good
                  faith  completion  and  submission  of  such  Forms  as may be
                  specified in a written  request of an Obligor no later than 45
                  days after  receipt  by such  holder of such  written  request
                  (PROVIDED,  that if such Forms are Forms required  pursuant to
                  the laws of any  jurisdiction  other than the United States of
                  America or any  political  subdivision  thereof,  such written
                  request shall be

                                       42

<PAGE>

                  accompanied  by such  Forms  in  English  or  with an  English
                  translation thereof).

                  (b)  Within 60 days  after the date of any  payment  by either
Obligor of any Tax in respect of any payment under the Notes,  the Guarantees or
this  Section  13,  such  Obligor  shall  furnish  to each  holder of a Note the
original  tax  receipt  for the  payment  of such Tax (or if such  original  tax
receipt is not  available,  a duly  certified copy of the original tax receipt),
together with such other  documentary  evidence with respect to such payments as
may be reasonably requested from time to time by any holder of a Note.

                  (c)  The obligations of the Obligors under this Section 13
shall survive the transfer or payment of any Note.

                  (d) If an  Obligor  has made a payment to or on account of any
holder of a Note pursuant to Subsection (a) above and such holder is entitled to
a refund of the Tax to which such payment is attributable  from the Governmental
Authority  to which  the  payment  of the Tax was made  and such  refund  can be
obtained by filing one or more Forms,  then (i) such  holder  shall,  as soon as
practicable  after receiving a written  request  therefor from an Obligor (which
request  shall specify in  reasonable  detail the Forms to be filed),  file such
Forms and (ii) upon  receipt  of such  refund,  if any,  promptly  pay over such
refund to such Obligor.

14. GUARANTEE, ETC.

14.1. GUARANTEE.

                  The Guarantor hereby  guarantees to each holder of any Note or
Notes at any time outstanding and to the Collateral Agent (a) the prompt payment
in full, in Dollars, when due (whether at stated maturity,  by acceleration,  by
mandatory  or  optional  prepayment  or  otherwise)  of  the  principal  of  and
Make-Whole  Amount  (if any)  and  interest  on the  Notes  (including,  without
limitation,  interest on any overdue  principal,  Make-Whole  Amount and, to the
extent  permitted by applicable  law, on any overdue  interest and on payment of
additional  amounts  described in Section 13) and all other amounts from time to
time owing by the Company under this  Agreement and under the Notes  (including,
without limitation,  costs,  expenses and taxes), and (b) the prompt performance
and observance by the Company of all covenants, agreements and conditions on its
part to be performed and observed hereunder, in each case strictly in accordance
with the terms  thereof  (such  payments  and  other  obligations  being  herein
collectively called the "GUARANTEED OBLIGATIONS").  The Guarantor hereby further
agrees that if the Company shall default in the payment or performance of any of
the Guaranteed  Obligations,  the Guarantor will (x) promptly pay or perform the
same,  without  any  demand  or notice  whatsoever,  and that in the case of any
extension  of time of payment or renewal of any of the  Guaranteed

                                       43

<PAGE>

Obligations,  the  same  will be  promptly  paid in full  when due  (whether  at
extended  maturity,  by  acceleration,  by mandatory or optional  prepayment  or
otherwise) in accordance with the terms of such extension or renewal and (y) pay
to the  holder of any Note  such  amounts,  to the  extent  lawful,  as shall be
sufficient to pay the costs and expenses of collection or of otherwise enforcing
any of such holder's rights under this Agreement, including, without limitation,
reasonable counsel fees.

                  All  obligations of the Guarantor  under this Section 14 shall
survive the transfer of any Note,  and any  obligations  of the Guarantor  under
this Section 14 with respect to which the  underlying  obligation of the Company
is expressly stated to survive payment of any Note shall also survive payment of
such Note.

14.2. OBLIGATIONS UNCONDITIONAL.

                  (a)  The  obligations  of the  Guarantor  under  Section  14.1
constitute a present and continuing  guaranty of payment and not  collectibility
and are  absolute and  unconditional,  irrespective  of the value,  genuineness,
validity,  regularity or  enforceability of the obligations of the Company under
this  Agreement,  the Notes or any other  agreement  or  instrument  referred to
herein  or  therein,  or any  substitution,  release  or  exchange  of any other
guarantee  of or security  for any of the  Guaranteed  Obligations,  and, to the
fullest  extent   permitted  by  applicable  law,   irrespective  of  any  other
circumstance  whatsoever  which might otherwise  constitute a legal or equitable
discharge  or  defense  of a surety or  guarantor,  it being the  intent of this
Section 14.2 that the  obligations of the Guarantor  hereunder shall be absolute
and  unconditional,  under  any  and all  circumstances.  Without  limiting  the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the  following  shall not  alter or impair  the  liability  of the  Guarantor
hereunder which shall remain absolute and unconditional as described above:

                  (1) any  amendment or  modification  of any  provision of this
         Agreement or any of the Notes or any  assignment  or transfer  thereof,
         including  without  limitation  the renewal or extension of the time of
         payment of any of the Notes or the  granting of time in respect of such
         payment thereof,  or of any furnishing or acceptance of security or any
         additional  guarantee  or any release of any  security or  guarantee so
         furnished  or accepted for any of the Notes  (including  any release of
         Collateral pursuant to Section 9.9(b));

                  (2)  any  waiver,  consent,   extension,   granting  of  time,
         forbearance, indulgence or other action or inaction under or in respect
         of this Agreement or the Notes,  or any exercise or non-exercise of any
         right, remedy or power in respect hereof or thereof;

                                       44

<PAGE>

                  (3) any bankruptcy, receivership,  insolvency, reorganization,
         arrangement,   readjustment,   composition,   liquidation   or  similar
         proceedings  with  respect to the  Company  or any other  Person or the
         properties or creditors of any of them;

                  (4) the  occurrence of any Default or Event of Default  under,
         or any invalidity or any unenforceability of, or any misrepresentation,
         irregularity or other defect in, this Agreement, the Notes or any other
         agreement;

                  (5)  any  transfer  of any  assets  to or  from  the  Company,
         including without  limitation any transfer or purported transfer to the
         Company from any Person, any invalidity, illegality of, or inability to
         enforce, any such transfer or purported transfer,  any consolidation or
         merger  of the  Company  with or into any  Person,  any  change  in the
         ownership of any shares of capital stock of the Company,  or any change
         whatsoever in the objects, capital structure,  constitution or business
         of the Company;

                  (6) any default,  failure or delay,  willful or otherwise,  on
         the part of the Company or any other  Person to perform or comply with,
         or the impossibility or illegality of performance by the Company or any
         other  Person  of, any term of this  Agreement,  the Notes or any other
         agreement;

                  (7) any suit or other  action  brought by, or any  judgment in
         favor of, any  beneficiaries  or creditors of, the Company or any other
         Person for any reason whatsoever, including without limitation any suit
         or action in any way attacking or involving any issue,  matter or thing
         in respect of this Agreement, the Notes or any other agreement;

                  (8) any lack or limitation  of status or of power,  incapacity
         or disability of the Company or any trustee or agent thereof; or

                  (9) any other thing, event, happening, matter, circumstance or
         condition whatsoever, not in any way limited to the foregoing.

                  (b) The Guarantor  hereby  unconditionally  waives  diligence,
presentment,  demand of  payment,  protest and all  notices  whatsoever  and any
requirement that any holder of a Note exhaust any right, power or remedy against
the  Company  under  this  Agreement  or the  Notes or any  other  agreement  or
instrument  referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.

                                       45

<PAGE>

                  (c) In the event that the Guarantor  shall at any time pay any
amount on  account of the  Guaranteed  Obligations  or take any other  action in
performance of its obligations  hereunder,  the Guarantor shall not exercise any
subrogation  or other  rights  hereunder or the Notes and the  Guarantor  hereby
waives all rights it may have to exercise any such  subrogation or other rights,
and all other  remedies that it may have against the Company,  in respect of any
payment made hereunder  unless and until the Guaranteed  Obligations  shall have
been  indefeasibly paid in full. If any amount shall be paid to the Guarantor on
account of any such  subrogation  rights or other  remedy,  notwithstanding  the
waiver  thereof,  such amount  shall be received in trust for the benefit of the
holders of the Notes and shall  forthwith be paid to such holders to be credited
and applied upon the Guaranteed  Obligations,  whether matured or unmatured,  in
accordance  with the terms  hereof.  The Guarantor  agrees that its  obligations
under this  Section 14 shall be  automatically  reinstated  if and to the extent
that for any reason any payment  (including  payment in full) by or on behalf of
the Company is rescinded or must be otherwise  restored by any holder of a Note,
whether  as a result of any  proceedings  in  bankruptcy  or  reorganization  or
otherwise, all as though such amount had not been paid.

                  The guarantee in this Section 14 is a continuing guarantee and
shall apply to the Guaranteed  Obligations whenever arising. Each default in the
payment or performance of any of the Guaranteed Obligations shall give rise to a
separate claim and cause of action  hereunder,  and separate claims or suits may
be made and brought, as the case may be, hereunder as each such default occurs.

                  If an event permitting the acceleration of the maturity of the
principal amount of the Notes shall at any time have occurred and be continuing,
and such  acceleration  (and the effect thereof on the  Guaranteed  Obligations)
shall at such time be prevented by reason of the pendency against the Company or
any other Person of a case or proceeding  under a bankruptcy or insolvency  law,
the Guarantor  agrees that, for purposes of its  obligations  under this Section
14, the  maturity of the  principal  amount of the Notes shall be deemed to have
been  accelerated  (with a corresponding  effect on the Guaranteed  Obligations)
with the same effect as if the holders had  accelerated  the same in  accordance
with the terms of this  Agreement,  and the Guarantor  shall  forthwith pay such
principal amount,  any interest thereon,  any Make-Whole  Amount,  and any other
amounts guaranteed hereunder without further notice or demand.

14.3. GUARANTEES ENDORSED ON THE NOTES.

                  Each Note  shall  have  endorsed  thereon a  Guarantee  of the
Guarantor in the form of Exhibit 1-A.

15. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

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<PAGE>

15.1. REGISTRATION OF NOTES.

                  The Company  shall keep at its  principal  executive  office a
register for the  registration  and registration of transfers of Notes. The name
and address of each holder of one or more Notes,  each transfer  thereof and the
name and address of each  transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be  registered  shall be deemed and  treated as the
owner and holder thereof for all purposes  hereof,  and neither Obligor shall be
affected by any notice or knowledge to the  contrary.  The Company shall give to
any holder of a Note that is an  Institutional  Investor  promptly  upon request
therefor,  a  complete  and  correct  copy of the  names  and  addresses  of all
registered holders of Notes.

15.2. TRANSFER AND EXCHANGE OF NOTES.

                  Upon surrender of any Note at the principal  executive  office
of the Company for  registration  of transfer or exchange  (and in the case of a
surrender  for  registration  of transfer,  duly  endorsed or  accompanied  by a
written  instrument of transfer duly executed by the  registered  holder of such
Note or his attorney duly  authorized in writing and  accompanied by the address
for notices of each transferee of such Note or part thereof),  the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of  the
surrendered  Note.  Each such new Note shall be  payable to such  Person as such
holder may request and shall be substantially in the form of Exhibit 1 and shall
have the Guarantee of the Guarantor  endorsed thereon.  Each such new Note shall
be dated and bear interest from the date to which  interest shall have been paid
on the surrendered Note or dated the date of the surrendered Note if no interest
shall  have  been  paid  thereon.  The  Company  may  require  payment  of a sum
sufficient to cover any stamp tax or  governmental  charge imposed in respect of
any such transfer of Notes.  Notes shall not be transferred in  denominations of
less than U.S.$100,000, PROVIDED that if necessary to enable the registration of
transfer  by a holder  of its  entire  holding  of  Notes,  one Note may be in a
denomination of less than U.S.$100,000.  Any transferee,  by its acceptance of a
Note  registered  in its name (or the name of its  nominee),  shall be deemed to
have made the representation set forth in Section 6.2.

15.3. REPLACEMENT OF NOTES.

                  Upon   receipt   by  the   Company  of   evidence   reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor,  notice from such  Institutional  Investor of such  ownership and such
loss, theft, destruction or mutilation), and

                                       47
<PAGE>

                  (a) in the case of loss,  theft or  destruction,  of indemnity
         reasonably satisfactory to it (PROVIDED that if the holder of such Note
         is, or is a nominee for, an original  Purchaser or another  holder of a
         Note with a minimum net worth of at least  U.S.$10,000,000 in excess of
         the  outstanding  principal  amount of such  Note,  such  Person's  own
         unsecured  agreement of indemnity shall be deemed to be  satisfactory),
         or

                  (b)      in the case of mutilation, upon surrender and
         cancellation thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost,  stolen,  destroyed or mutilated  Note if no interest shall have been paid
thereon, and having the Guarantee of the Guarantor endorsed thereon.

16. PAYMENTS ON NOTES.

16.1. PLACE OF PAYMENT.

                  Subject to Section  16.2,  payments of  principal,  Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
in New  York,  New  York  at the  principal  office  of  Bank  One,  NA in  such
jurisdiction.  The Company may at any time,  by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment  shall
be either  the  principal  office of the  Company  in such  jurisdiction  or the
principal office of a bank or trust company in New York, New York.

16.2. HOME OFFICE PAYMENT.

                  So long as any  Purchaser  or any  nominee  of such  Purchaser
shall be the  holder of any Note,  and  notwithstanding  anything  contained  in
Section  16.1 or in such Note to the  contrary,  the  Company  will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the  method  and  at the  address  specified  for  such  purpose  below  such
Purchaser's name in Schedule A, or by such other method or at such other address
as such  Purchaser  shall  have from time to time  specified  to the  Company in
writing for such purpose,  without the presentation or surrender of such Note or
the making of any  notation  thereon,  except that upon  written  request of the
Company  made  concurrently  with  or  reasonably   promptly  after  payment  or
prepayment in full of any Note,  such  Purchaser  shall  surrender such Note for
cancellation,  reasonably promptly after any such request, to the Company at its
principal  executive office or at the place of payment most recently  designated
by the Company pursuant to Section 16.1. Prior to any sale or other  disposition
of any  Note  held by any  Purchaser  or any  nominee  of such  Purchaser,  such
Purchaser will, at its election,  either endorse thereon the amount of principal
paid  thereon

                                       48

<PAGE>

and the last date to which interest has been paid thereon or surrender such Note
to the Company in exchange for a new Note or Notes pursuant to Section 15.2. The
Company  will afford the  benefits  of this  Section  16.2 to any  Institutional
Investor that is the direct or indirect  transferee of any Note purchased by any
Purchaser under this Agreement and that has made the same agreement  relating to
such Note as the Purchasers have made in this Section 16.2.

17.  EXPENSES,  ETC.

17.1. TRANSACTION EXPENSES.

                  Whether  or  not  the  transactions  contemplated  hereby  are
consummated,  the Obligors will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel)  incurred  by the  Purchasers,  each  other  holder  of a Note  and the
Collateral  Agent in connection with such  transactions,  with the perfection of
the Liens in and on the Collateral  contemplated  by the Security  Documents and
with any amendments,  waivers or consents under or in respect of this Agreement,
the Notes or the  other  Financing  Documents  (whether  or not such  amendment,
waiver or consent becomes effective),  including,  without  limitation:  (a) the
costs and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend)  any  rights  under this  Agreement,  the Notes or the
other  Financing  Documents  or in  responding  to any  subpoena  or other legal
process  or  informal  investigative  demand  issued  in  connection  with  this
Agreement,  the Notes or the other Financing Documents,  or by reason of being a
holder of any Note,  and all  reasonable  expenses  incurred by each holder of a
Note and the Collateral  Agent incurred in connection  with the  preservation of
any Lien or realization on or pursuit of remedies with respect to any Collateral
following the occurrence  and during the  continuance of any Default or Event of
Default,  and  (b)  the  costs  and  expenses,  including  reasonable  financial
advisors' fees,  incurred in connection with the insolvency or bankruptcy of the
Guarantor,  the Company or any Subsidiary or in connection  with any work-out or
restructuring  of the  transactions  contemplated  hereby and by the Notes.  The
Obligors will pay, and will save each  Purchaser and each other holder of a Note
harmless from,  all claims in respect of any fees,  costs or expenses if any, of
brokers  and  finders  (other than those  retained  by such  Purchaser  or other
holder).

17.2. TAXES.

                  The Obligors will pay all stamp,  documentary or similar taxes
which may be payable in respect of the execution and delivery of this Agreement,
any of the Notes or any other  Financing  Documents or of any  amendment  of, or
waiver or consent under or with respect to, this Agreement,  any of the Notes or
any other  Financing  Documents  and will save  each  holder of a Note  harmless
against any loss or liability  resulting from  nonpayment

                                       49

<PAGE>

or delay in payment of any such tax  required  to be paid by the  Company or the
Guarantor hereunder.

17.3. SURVIVAL.

                  The  obligations  of the  Obligors  under this Section 17 will
survive  the  payment or transfer of any Note,  the  enforcement,  amendment  or
waiver of any  provision  of this  Agreement,  the Notes or the other  Financing
Documents,   and  the   termination   of  this   Agreement.

18.   SURVIVAL  OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

                  All representations and warranties contained herein and in the
other  Financing  Documents  shall  survive the  execution  and delivery of this
Agreement,  the Notes and the other  Financing  Documents,  and the  purchase or
transfer by each Purchaser of any Note or portion  thereof or interest  therein,
and may be relied upon by any  subsequent  holder of a Note,  regardless  of any
investigation  made at any time by or on  behalf of any  Purchaser  or any other
holder  of a  Note.  All  statements  contained  in  any  certificate  or  other
instrument  delivered  by or on  behalf  of  either  Obligor  pursuant  to  this
Agreement or any other Financing  Document shall be deemed  representations  and
warranties  of such  Obligor  under this  Agreement.  Subject  to the  preceding
sentence, this Agreement,  the Notes or any other Financing Documents embody the
entire agreement and  understanding  between the Purchasers and the Obligors and
supersede all prior agreements and understandings relating to the subject matter
hereof.

19. AMENDMENT AND WAIVER.

19.1. REQUIREMENTS.

                  This  Agreement  and  the  Notes  may  be  amended,   and  the
observance  of  any  term  hereof  or  of  the  Notes  may  be  waived   (either
retroactively or prospectively), with (and only with) the written consent of the
Obligors and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 23 hereof,  or any defined term
(as it is used therein),  will be effective as to any Purchaser unless consented
to by such  Purchaser  in  writing,  and (b) no such  amendment  or waiver  may,
without the written  consent of the holder of each Note at the time  outstanding
affected  thereby,  (i)  subject to the  provisions  of Section 12  relating  to
acceleration  or  rescission,  change  the amount or time of any  prepayment  or
payment  of  principal  of, or reduce  the rate or change the time of payment or
method of  computation  of interest or of the  Make-Whole  Amount on, the Notes,
(ii) change the  percentage of the principal  amount of the Notes the holders of
which are required to consent to any such  amendment  or waiver,  or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 13, 14, 19, 22 or 25.

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<PAGE>

19.2. SOLICITATION OF HOLDERS OF NOTES.

                  (a) SOLICITATION. The Obligors will provide each holder of the
Notes  (irrespective  of the amount of Notes  then owned by it) with  sufficient
information,  sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and  considered  decision with respect to
any proposed  amendment,  waiver or consent in respect of any of the  provisions
hereof or of the Notes or of any other  Financing  Document.  The Obligors  will
deliver executed or true and correct copies of each amendment, waiver or consent
effected  pursuant  to the  provisions  of this  Section  19 to each  holder  of
outstanding  Notes  promptly  following  the date on which  it is  executed  and
delivered by, or receives the consent or approval of, the  requisite  holders of
Notes.

                  (b) PAYMENT.  Neither  Obligor will directly or indirectly pay
or  cause  to be  paid  any  remuneration,  whether  by way of  supplemental  or
additional interest,  fee or otherwise,  or grant any security, to any holder of
Notes as  consideration  for or as an  inducement  to the  entering  into by any
holder of Notes of any waiver or  amendment  of any of the terms and  provisions
hereof or any other Financing  Document unless such remuneration is concurrently
paid, or security is concurrently  granted,  on the same terms,  ratably to each
holder of Notes then  outstanding  even if such  holder did not  consent to such
waiver or amendment.

19.3. BINDING EFFECT, ETC.

                  Any  amendment  or waiver  consented  to as  provided  in this
Section 19 applies  equally to all holders of Notes and is binding upon them and
upon each  future  holder of any Note and upon the  Obligors  without  regard to
whether such Note has been marked to indicate such amendment or waiver.  No such
amendment  or  waiver  will  extend  to  or  affect  any  obligation,  covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right  consequent  thereon.  No course of dealing between either Obligor and
the holder of any Note or the  Collateral  Agent nor any delay in exercising any
rights  hereunder or under any Note or under any other Financing  Document shall
operate as a waiver of any  rights of any holder of such Note or the  Collateral
Agent. As used herein,  the term "THIS  AGREEMENT" and references  thereto shall
mean this  Agreement  as it may from time to time be  amended  or  supplemented.

19.4. NOTES HELD BY OBLIGORS, ETC.

                  Solely for the purpose of  determining  whether the holders of
the  requisite  percentage  of the  aggregate  principal  amount  of Notes  then
outstanding  approved or  consented  to any  amendment,  waiver or consent to be
given under this Agreement or the Notes or any other Financing Document, or have
directed  the taking of any action  provided  herein or in the Notes to be taken
upon the  direction of the holders of a specified  percentage

                                       51

<PAGE>

of the aggregate  principal amount of Notes then outstanding,  Notes directly or
indirectly  owned by either  Obligor or any Affiliate of either Obligor shall be
deemed not to be outstanding.

20. NOTICES.

                  All notices and communications provided for hereunder shall be
in  writing  and sent (a) by  telecopy  if the  sender  on the same day  sends a
confirming  copy of such  notice  by a  recognized  overnight  delivery  service
(charges  prepaid),  or (b) by a recognized  overnight  delivery  service  (with
charges prepaid). Any such notice must be sent:

                  (i) if to any Purchaser or its nominee,  to such  Purchaser or
         nominee at the address specified for such communications in Schedule A,
         or at such  other  address  as such  Purchaser  or  nominee  shall have
         specified to the Company in writing,

                  (ii) if to any other  holder of any  Note,  to such  holder at
         such address as such other  holder shall have  specified to the Company
         in writing,

                  (iii) if to the Collateral  Agent,  to its address as provided
         in the Intercreditor Agreement,

                  (iv) if to the  Company,  to the  Company at its  address  set
         forth at the  beginning  hereof to the  attention of Doug Cooke,  or at
         such other address as the Company shall have specified to the holder of
         each Note in writing, or

                  (iv) if to the Guarantor,  to the Guarantor at its address set
         forth at the  beginning  hereof to the  attention of Doug Cooke,  or at
         such other address as the Guarantor  shall have specified to the holder
         of each Note in writing.

Notices under this Section 20 will be deemed given only when actually received.

21. REPRODUCTION OF DOCUMENTS.

                  This  Agreement,   the  other  Financing   Documents  and  all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications that may hereafter be executed,  (b) documents received by any
Purchaser and the Collateral Agent at the Closing (except the Notes themselves),
and (c) financial statements,  certificates and other information  previously or
hereafter furnished to any Purchaser and the Collateral Agent, may be reproduced
by such Purchaser and the  Collateral  Agent by any  photographic,  photostatic,
microfilm,  microcard,  miniature photographic or other similar process and such
Purchaser  and the  Collateral  Agent  may  destroy  any  original  document  so
reproduced.  The

                                       52

<PAGE>

Obligors agree and stipulate  that, to the extent  permitted by applicable  law,
any such reproduction  shall be admissible in evidence as the original itself in
any  judicial or  administrative  proceeding  (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser or the
Collateral  Agent  in the  regular  course  of  business)  and any  enlargement,
facsimile  or  further  reproduction  of such  reproduction  shall  likewise  be
admissible  in  evidence.  This  Section 21 shall not prohibit an Obligor or any
other holder of Notes from  contesting any such  reproduction to the same extent
that it could contest the  original,  or from  contesting  the admission of such
reproductions based on the inaccuracy of any such reproduction.

22. CONFIDENTIAL INFORMATION.

                  For  the   purposes   of  this   Section   22,   "CONFIDENTIAL
INFORMATION"  means  information  delivered to any  Purchaser by or on behalf of
either   Obligor  or  any  Subsidiary  in  connection   with  the   transactions
contemplated  by or otherwise  pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately identified
when  received  by such  Purchaser  as being  confidential  information  of such
Obligor or such Subsidiary, PROVIDED that such term does not include information
that (a) was publicly known or otherwise  known to such  Purchaser  prior to the
time of such disclosure,  (b) subsequently becomes publicly known through no act
or omission by such Purchaser or any person acting on such  Purchaser's  behalf,
(c) otherwise  becomes known to such Purchaser other than through  disclosure by
an Obligor or any Subsidiary or (d) constitutes  financial  statements delivered
to such Purchaser under Section 7.1 that are otherwise publicly available.  Each
Purchaser will maintain the confidentiality of such Confidential  Information in
accordance  with  procedures  adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser,  PROVIDED
that such Purchaser may deliver or disclose Confidential Information to (i) such
Purchaser's directors, officers, employees, agents, attorneys and affiliates (to
the extent  such  disclosure  reasonably  relates to the  administration  of the
investment  represented  by  such  Purchaser's  Notes),  (ii)  such  Purchaser's
financial advisors and other professional advisors who agree (for the benefit of
the Company) to hold confidential the Confidential Information  substantially in
accordance  with the terms of this  Section  22,  (iii) any other  holder of any
Note, (iv) any Institutional Investor to which such Purchaser sells or offers to
sell such Note or any part thereof or any participation  therein (if such Person
has agreed in writing prior to its receipt of such  Confidential  Information to
be bound by the  provisions  of this Section 22), (v) any Person from which such
Purchaser  offers to  purchase  any  security  of an Obligor (if such Person has
agreed in writing prior to its receipt of such  Confidential  Information  to be
bound  by the  provisions  of this  Section  22),  (vi)  any  federal  or  state
regulatory authority having jurisdiction over such Purchaser, (vii) the National
Association  of  Insurance  Commissioners  or any similar  organization,  or any
nationally  recognized  rating agency that requires access to information  about
such Purchaser's  investment  portfolio or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate

                                       53

<PAGE>

(w) to effect  compliance with any law, rule,  regulation or order applicable to
such Purchaser,  (x) in response to any subpoena or other legal process,  (y) to
the  extent  reasonably  required  of such  Purchaser,  in  connection  with any
litigation to which such  Purchaser is a party or (z) if an Event of Default has
occurred  and is  continuing,  to  the  extent  such  Purchaser  may  reasonably
determine  such delivery and  disclosure to be necessary or  appropriate  in the
enforcement  or for  the  protection  of the  rights  and  remedies  under  such
Purchaser's Notes or this Agreement. Each holder of a Note, by its acceptance of
a Note,  will be deemed to have  agreed to be bound by and to be entitled to the
benefits  of this  Section  22 as though it were a party to this  Agreement.  On
reasonable  request by an Obligor in connection  with the delivery to any holder
of a Note of  information  required to be  delivered  to such holder  under this
Agreement or  requested  by such holder  (other than a holder that is a party to
this  Agreement or its nominee),  such holder will enter into an agreement  with
the Obligors  embodying the provisions of this Section 22.

23.  SUBSTITUTION  OF PURCHASER.

                  Each  Purchaser  shall have the right to substitute any one of
such  Purchaser's  Affiliates  (provided  such Affiliate is resident in the same
jurisdiction  as  such  Purchaser)  as the  purchaser  of the  Notes  that  such
Purchaser has agreed to purchase  hereunder,  by written  notice to the Company,
which notice shall be signed by both such  Purchaser and such  Affiliate,  shall
contain  such  Affiliate's  agreement  to be bound by this  Agreement  and shall
contain a  confirmation  by such Affiliate of the accuracy with respect to it of
the  representations  set forth in Section 6. Upon receipt of such  notice,  any
reference to such  Purchaser in this  Agreement  (other than in this Section 23)
shall be deemed to refer to such  Affiliate in lieu of such original  Purchaser.
In the event that such Affiliate is so substituted as a purchaser  hereunder and
such Affiliate  thereafter transfers to such original Purchaser all of the Notes
then held by such  Affiliate,  upon  receipt  by the  Company  of notice of such
transfer,  any reference to such  Affiliate as a "Purchaser"  in this  Agreement
(other  than in this  Section  23)  shall no  longer  be deemed to refer to such
Affiliate,  but  shall  refer to such  original  Purchaser,  and  such  original
Purchaser  shall  again have all the rights of an  original  holder of the Notes
under this Agreement.

24. JURISDICTION AND PROCESS.

EACH OF THE GUARANTOR AND THE COMPANY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE GUARANTEES OR ANY
OTHER  DOCUMENT  EXECUTED  IN  CONNECTION  HEREWITH,  OR  ANY  LEGAL  ACTION  OR
PROCEEDING  TO EXECUTE OR OTHERWISE  ENFORCE ANY JUDGMENT  OBTAINED  AGAINST THE
COMPANY OR THE GUARANTOR,  AS THE CASE MAY BE, FOR BREACH HEREOF OR THEREOF,  OR
AGAINST ANY OF ITS PROPERTIES,  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW

                                       54

<PAGE>

YORK OR THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK
BY ANY PURCHASER OR ON ANY  PURCHASER'S  BEHALF OR BY OR ON BEHALF OF ANY HOLDER
OF A NOTE, AS ANY PURCHASER OR SUCH HOLDER MAY ELECT,  AND EACH OF THE GUARANTOR
AND  THE  COMPANY  HEREBY  IRREVOCABLY  AND   UNCONDITIONALLY   SUBMITS  TO  THE
NON-EXCLUSIVE  JURISDICTION OF SUCH COURTS FOR PURPOSES OF ANY SUCH LEGAL ACTION
OR PROCEEDING. EACH OF THE GUARANTOR AND THE COMPANY HEREBY IRREVOCABLY APPOINTS
AND DESIGNATES CT CORPORATION  SYSTEM,  WHOSE ADDRESS IS 111 EIGHTH AVENUE,  NEW
YORK, NY 10011,  OR ANY OTHER PERSON HAVING AND  MAINTAINING A PLACE OF BUSINESS
IN THE  STATE  OF NEW YORK  WHOM THE  COMPANY  MAY FROM  TIME TO TIME  HEREAFTER
DESIGNATE  (HAVING  GIVEN 30 DAYS' NOTICE  THEREOF TO EACH HOLDER OF A NOTE THEN
OUTSTANDING),  AS THE DULY  AUTHORIZED  AGENT FOR ACCEPTANCE OF SERVICE OF LEGAL
PROCESS OF THE GUARANTOR AND THE COMPANY.  EACH OF THE GUARANTOR AND THE COMPANY
HEREBY AGREES THAT SERVICE OF PROCESS IN ANY SUCH  PROCEEDING MAY BE EFFECTED BY
SERVING  NOTICE  UPON CT  CORPORATION  OR ANY SUCH  OTHER  PERSON AND BY MAILING
NOTICE OF SUCH SERVICE BY  REGISTERED  OR CERTIFIED  MAIL (OR ANY  SUBSTANTIALLY
SIMILAR  FORM OF MAIL),  POSTAGE  PREPAID,  TO IT AT ITS  ADDRESS  SPECIFIED  IN
SECTION  20 OR AT SUCH OTHER  ADDRESS OF WHICH EACH  HOLDER OF A NOTE SHALL HAVE
BEEN  NOTIFIED  PURSUANT  THERETO.  IN ADDITION,  EACH OF THE  GUARANTOR AND THE
COMPANY HEREBY  IRREVOCABLY  WAIVES TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT,  THE NOTES,
THE GUARANTEES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION  HEREWITH BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES  DISTRICT COURT FOR THE
SOUTHERN  DISTRICT  OF NEW YORK,  AND ANY CLAIM  THAT ANY SUCH  SUIT,  ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT  FORUM.

25. OBLIGATION TO MAKE PAYMENTS IN U.S. DOLLARS.

                  All payments made by the Obligors  under this  Agreement,  the
Notes or the  Guarantees,  as the case may be, shall be in U.S.  Dollars and the
obligations  of the  Obligors to make  payments in U.S.  Dollars of any of their
obligations  under  this  Agreement,  the Notes or the  Guarantees  shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted  into any currency  other than U.S.  Dollars,
except to the extent such tender or recovery  shall result in the actual receipt
by

                                       55

<PAGE>

the  holder  of any Note of the full  amount  of U.S.  Dollars  expressed  to be
payable in respect of any such  obligations.  The  obligation of the Obligors to
make  payments  in  U.S.  Dollars  as  aforesaid  shall  be  enforceable  as  an
alternative  or  additional  cause of action for the purpose of recovery in U.S.
Dollars of the amount,  if any, by which such actual receipt shall fall short of
the full amount of U.S.  Dollars  expressed to be payable in respect of any such
obligations,  and shall not be affected by judgment being obtained for any other
sums due under this Agreement,  the Notes or the Guarantees.

26. MISCELLANEOUS.

26.1. SUCCESSORS AND ASSIGNS.

                  All covenants and other agreements contained in this Agreement
by or on behalf of any of the  parties  hereto  bind and inure to the benefit of
their respective  successors and assigns  (including,  without  limitation,  any
subsequent holder of a Note) whether so expressed or not.

26.2.  PAYMENTS DUE ON NON-BUSINESS DAYS.

                  Anything in this Agreement or the Notes or any other Financing
Document  to the  contrary  notwithstanding,  any  payment  of  principal  of or
Make-whole  Amount or  interest  on any Note that is due on a date  other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the  computation of the interest  payable on such
next succeeding Business Day.

26.3. SEVERABILITY.

                  Any  provision  of  this   Agreement  that  is  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction  shall (to the full  extent  permitted  by law) not  invalidate  or
render   unenforceable   such  provision  in  any  other   jurisdiction.

26.4. CONSTRUCTION.

                  Each  covenant  contained  herein shall be  construed  (absent
express  provision to the contrary) as being  independent of each other covenant
contained  herein,  so that  compliance  with any one covenant shall not (absent
such an express  contrary  provision)  be deemed to excuse  compliance  with any
other covenant.  Where any provision  herein refers to action to be taken by any
Person, or which such Person is prohibited from taking,  such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

                                       56

<PAGE>

26.5.  STATEMENT OF INTEREST RATE.

                  For purposes of any  legislation  respecting  the statement of
interest rates,  the yearly rate for a 365- or 366-day year, as the case may be,
that can be stated to be equivalent to the rate  specified in the Notes as being
"computed on the basis of a 360-day year of twelve 30-day months" is the rate so
specified,  calculated  and payable on a semi-annual  basis;  and the use of the
term "360-day year of twelve 30-day months" is for matters of calculation of the
semi-annual  interest  payments  in  respect of the Notes and does not alter the
yearly rate described above.

26.6. COUNTERPARTS.

                  This Agreement may be executed in any number of  counterparts,
each of which shall be an original but all of which  together  shall  constitute
one instrument.  Each counterpart may consist of a number of copies hereof, each
signed by less than all,  but  together  signed by all, of the  parties  hereto.

26.7. GOVERNING LAW.

                  This  Agreement  shall be construed and enforced in accordance
with,  and the rights of the parties  shall be governed by, the law of the State
of New York  excluding  choice-of-law  principles  of the law of such State that
would  require the  application  of the laws of a  jurisdiction  other than such
State.

                                    * * * * *

                                       57

<PAGE>

                  If you are in agreement  with the  foregoing,  please sign the
form of agreement on the  accompanying  counterpart of this Agreement and return
it to the Company,  whereupon  the  foregoing  shall become a binding  agreement
between you and the Company and the Guarantor.

                            Very truly yours,

                            FIRSTSERVICE CORPORATION

                            By ______________________________________________
                               Title:

                            FIRSTSERVICE DELAWARE, LP

                            By:      FirstService GP Inc.
                                     its General Partner

                            By ______________________________________________
                               Title:

                                       58

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

HARTFORD LIFE INSURANCE COMPANY

By: _________________________________
      Name:
      Title:

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

MEDICA HEALTH PLAN

By: _________________________________
      Name:
      Title:

                                       2

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By: _________________________________
      Name:
      Title:

                                       3

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

By:  PPM America, Inc. as attorney in fact, on behalf of
JACKSON NATIONAL LIFE INSURANCE COMPANY OF NEW YORK

By: _________________________________
      Name:
      Title:

                                       4

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

By:  PPM America, Inc. as attorney in fact, on behalf of
JACKSON NATIONAL LIFE INSURANCE COMPANY

By: _________________________________
      Name:
      Title:

                                       5

<PAGE>

The foregoing is hereby
agreed to as of the
date thereof.

PACIFIC LIFE INSURANCE COMPANY

By: _________________________________
      Name:
      Title:

By: _________________________________
      Name:
      Title:

                                       6

<PAGE>

                                                          SCHEDULE A

                       INFORMATION RELATING TO PURCHASERS

                                                          Principal Amount of
Name and Address of Purchaser                             Notes to be Purchased
-----------------------------                             ----------------------

PACIFIC LIFE INSURANCE COMPANY                            $5,000,000
                                                          $5,000,000
                                                          $5,000,000

(All securities to be registered in the name of MAC & CO.)

  (1)    All payments by wire transfer
         of immediately available funds to:

         Federal Reserve Bank of Boston
         ABA #0110-012304/BOS SAFE DEP
         DDA 125261
         Attn:  MBS Income CC: 1253
         A/C Name:  Pacific Life General Account/PLCF1810132
         Re:  [Security Description & PPN]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

<PAGE>

         Mellon Trust
         Attn:  Pacific Life Accounting Team
         One Mellon Bank Center -- Room 0930
         Pittsburgh, PA 15258-0001
         Fax:  (412)236-7529

         With a copy to:

         Pacific Life Insurance Company
         Attn:  Securities Administration -- Cash Team
         700 Newport Center Drive
         Newport Beach, CA 92660-6397
         Fax:  949-640-4013

  (3)    Original notes delivered to:

         Mellon Securities Trust Company
         120 Broadway, 13th Floor
         New York, NY 10271
         Attn: Robert Ferraro  (212-374-1918)
         A/C Name:  Pacific Life General Acct
         A/C #: PLC F1810132

  (4)    All other communications:

         Pacific Life Insurance Company
         Attn:  Securities Department
         700 Newport Center Drive
         Newport Beach, CA 92660-6397
         Fax:  949-219-5406

  (5)    Tax Identification Number:  97-1079000

<PAGE>

                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
-----------------------------                           ------------------------
JACKSON NATIONAL LIFE INSURANCE                         $32,500,000
COMPANY

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         ABA #021-000-018
         BNF Account #: IOC566
         FBO: Jackson National Life
         Ref: [CUSIP/PPN, Description and P&I Breakdown]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Jackson National Life Insurance Company
         c/o The Bank of New York
         Attn: P& I Department
         P.O. Box 19266
         Newark, NJ 07195
         Tel:  (212) 437-3054
         Fax:  (212) 437-6466

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (3)    Original notes delivered to:

         The Bank of New York
         Special Processing -- Window A
         One Wall Street, 3rd Floor
         New York, NY 10286
         Ref:  JNL -- JNL 241 / Non-Insul., A/C 187241

  (4)    All other communications:

<PAGE>

         PPM America
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Private Placements -- Nicole Kidder
         Tel:  (312) 634-2516
         Fax:  (312) 634-0054

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (5)    Tax Identification Number:  38-1659835

<PAGE>

                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
-----------------------------                           -----------------------

JACKSON NATIONAL LIFE INSURANCE                         $2,500,000
COMPANY OF NEW YORK

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         ABA #021-000-018
         BNF Account #: IOC566
         FBO: Jackson National Life
         Ref: [CUSIP/PPN, Description and P&I Breakdown]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Jackson National Life Insurance Company
         c/o The Bank of New York
         Attn: P& I Department
         P.O. Box 19266
         Newark, NJ 07195
         Tel:  (212) 437-3054
         Fax:  (212) 437-6466

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (3)    Original notes delivered to:

         The Bank of New York
         Special Processing -- Window A
         One Wall Street, 3rd Floor
         New York, NY 10286
         Ref:  JNL - JNLNY Gen. Account., A/C 187271

  (4)    All other communications:

<PAGE>

         PPM America
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Private Placements -- Nicole Kidder
         Tel:  (312) 634-2516
         Fax:  (312) 634-0054

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (5)    Tax Identification Number:  13-3873709

<PAGE>

                                                       Principal Amount of
Name and Address of Purchaser                          Notes to be Purchased
-----------------------------                          ------------------------

HARTFORD LIFE INSURANCE COMPANY                        $3,100,000

  (1)    All payments by wire transfer
         of immediately available funds to:

         Chase Manhattan Bank
         4 New York Plaza
         New York, NY 10004
         Bank ABA No. 021000021
         Chase NYC/Cust
         A/C #900-9-000200 for F/C/T G 08965 CRD (domestic issues)
         Attn:  Prin $[_____]  Int $[_____]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Hartford Investment Management Company
         c/o Portfolio Support
         P.O. Box 1744
         Hartford, CT 06144-1744
         Fax:  (860) 297-8875/8876

  (3)    All other communications:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

  (4)    Tax Identification Number:  06-0974148

<PAGE>

                                                       Principal Amount of
Name and Address of Purchaser                          Notes to be Purchased
-----------------------------                          ------------------------

MEDICA HEALTH PLAN                                     $1,500,000

  (1)    All payments by wire transfer
         of immediately available funds to:

         Federal Reserve Bank of Boston
         Boston, MA
         ABA #011001234
         DDA #125261
         For: Allina Medica Health Plan / AHHF5002082
         Attn:  MSB Income-Cost Center 1253

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

  (3)    All other communications:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

(4)      Tax Identification Number:  41-1242261

<PAGE>

                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
-----------------------------                           -----------------------

THE PRUDENTIAL LIFE INSURANCE                           $40,400,000
COMPANY OF AMERICA                                      $5,000,000

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         New York, NY
         ABA No. 021-000-018
         A/C #:   890-0304-391 (for $40,400,000 Note)
                  890-0304-944 (for $5,000,000 Note)

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         The Prudential Insurance Company of America
         c/o Investment Operations Group
         Gateway Center Two, 10th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Manager, Billings and Collections
         Fax:  (973) 802-8764

  (3)    All other communications:

         The Prudential Insurance Company of America
         c/o Prudential Capital Group
         1114 Avenue of the Americas, 30th Floor
         New York, NY 10036
         Attn:  Managing Director
         Fax:  212-626-2077

  (4)    Recipient of telephonic pre-payment notices

         Manager, Trade Management Group
         Tel:  (973) 802-6009
         Fax:  (973) 802-9425

(5)      Tax Identification Number:  22-1211670

<PAGE>

                                                                      SCHEDULE B
                                                                      ----------

                                  DEFINED TERMS
                                  -------------

                  As used  herein,  the  following  terms  have  the  respective
meanings set forth below or set forth in the Section hereof following such term:

                  "AFFECTED NOTE"  is defined in Section 8.3.

                  "AFFILIATE"  means,  at any  time,  and  with  respect  to any
Person,  (a) any other Person that at such time directly or  indirectly  through
one or more  intermediaries  Controls,  or is Controlled  by, or is under common
Control with, such first Person, or (b) any other Person  beneficially owning or
holding,  directly or  indirectly,  10% or more of any class of voting or equity
interests  of such  Person or any  corporation  of which the  Guarantor  and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or  more  of any  class  of  voting  or  equity  interests.  As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the  direction  of the  management  and policies of a Person,
whether  through the ownership of voting  securities,  by contract or otherwise.
Unless the context otherwise  clearly requires,  any reference to an "Affiliate"
is a reference to an Affiliate of the Guarantor.

                  "APPLICABLE TAXING AUTHORITY" is defined in Section 5.9(b).

                  "BUSINESS DAY" means (a) for the purposes of Section 8.8 only,
any day other than a Saturday,  a Sunday or a day on which  commercial  banks in
New York City are required or authorized to be closed,  and (b) for the purposes
of any other  provision  of this  Agreement,  any day other than a  Saturday,  a
Sunday or a day on which commercial banks in New York City or Toronto,  Ontario,
Canada are required or authorized to be closed.

                  "CANADIAN DOLLAR" or "C$" means lawful money of Canada.

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

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

                  (b)      the 31st day following the receipt by such
         Subsidiary of any Violation  Notice which,  if the same were  enforced,
         may have a  material  adverse

                                       2

<PAGE>

         effect on the financial  condition or  operations  of such  Subsidiary,
         unless the Guarantor  shall have  satisfied  the Required  Holders that
         such Subsidiary shall not be materially and adversely  affected by such
         Violation Notice or the consequences arising therefrom; or

                  (c)      the earnings before  interest,  taxes,  depreciation
         and  amortization  (calculated  in a  manner  consistent  with  EBITDA,
         including  as  regards  the  addition  of  minority  interest  share of
         earnings) of such Subsidiary for any period of four consecutive  fiscal
         quarters (the "Relevant Four Quarter Period") is at least 50% less than
         such  Subsidiary's  earnings before interest,  taxes,  depreciation and
         amortization  (calculated in a manner  consistent  with EBITDA) for the
         period of four consecutive  fiscal quarters ending immediately prior to
         the commencement of the Relevant Four Quarter Period (an "EARNINGS CALL
         OPTION TRIGGERING EVENT").

                  "CALL OPTION  TRIGGERING  EVENT NOTICE" means a written notice
from the Collateral  Agent (acting at the direction of the Required  Holders) or
the  Required  Holders  to either  Obligor  requiring  such  Obligor  to cause a
Subsidiary  in  respect  of which a Call  Option  Triggering  Event  shall  have
occurred to become a Subsidiary  Guarantor,  PROVIDED that the Required  Holders
will not be  entitled to deliver  (or cause the  Collateral  Agent to deliver) a
Call Option Triggering Event Notice following the occurrence of an Earnings Call
Option Triggering Event unless the Total Debt/EBITDA Ratio at such time is equal
to or greater than 3.25 to 1.

                  "CAPITAL  LEASE" means,  at any time, a lease with respect to
which the lessee is required  concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with U.S. GAAP.

                  "CASH AMOUNTS" means that portion of the consideration payable
in cash in respect of any purchase of shares by the Guarantor or any  Subsidiary
in the capital  stock of any  Subsidiary  pursuant  to the  exercise of any call
option right in favor of the  Guarantor or any  Subsidiary,  as the case may be,
under the terms of any Shareholders Agreement in respect of such Subsidiary.

                  "CLOSING" is defined in Section 3.

                  "CODE"  means  the U.S.  Internal  Revenue  Code of  1986,  as
amended from time to time, and the rules and regulations  promulgated thereunder
from time to time.

                  "COLLATERAL"  means the all of the properties of the Guarantor
or any of its Subsidiaries  subject or required to be subject to the Lien of any
of the Security Documents.

                                       3

<PAGE>

                  "COLLATERAL  AGENT"  means CIBC  Mellon  Trust  Company or any
successor thereto under the Intercreditor Agreement.

                  "COMPANY"   means   FirstService   Delaware,   LP,  a  limited
parternship  formed under the laws of Delaware,  or any  successor  thereto that
shall have become such in the manner prescribed in Section 10.2.

                  "CONFIDENTIAL INFORMATION"  is defined in Section 22.

                  "CONSOLIDATED NET EARNINGS" means, with respect to any period,
the  net  earnings  of the  Guarantor  and  its  Subsidiaries  for  such  period
determined  in accordance  with U.S.  GAAP and  excluding (i) any  extraordinary
items and (ii) any equity  interest of the Guarantor in the unremitted  earnings
of any Person that is not a Subsidiary.

                  "CONSOLIDATED  NET  WORTH"  at  any  time  means  the  sum  of
shareholders' equity, preferred stock and minority interest as would be shown in
the consolidated  financial  statements of the Guarantor and its Subsidiaries as
of such time prepared in accordance with U.S. GAAP.

                  "CONSOLIDATED TOTAL ASSETS" at any time means the total assets
of the  Guarantor  and its  Subsidiaries  as would be shown in the  consolidated
financial  statements  of the  Guarantor  and its  Subsidiaries  as of such time
prepared in accordance with U.S. GAAP.

                  "CROWN" means the Crown in Right of Canada or of any Province
or Territory thereof.

                  "CREDIT AGREEMENT" means the Third Amended and Restated Credit
Agreement  dated as of June 21, 2001 between the Obligors,  FirstService  (USA),
Inc., the Subsidiaries of the Guarantor named as Unlimited  Guarantors  therein,
the Banks named on the execution pages thereto and the various parties acting as
agents thereunder.

                  "CREDIT  FACILITY"  means the Credit  Agreement  and any other
indenture,  mortgage,  deed of trust, loan,  purchase or credit agreement or any
other  agreement  pursuant to which debt for borrowed money shall be incurred or
any note, bond, debenture or other instrument evidencing any such debt.

                  "DEFAULT"  means an  event  or  condition  the  occurrence  or
existence  of which  would,  with the  lapse of time or the  giving of notice or
both, become an Event of Default.

                  "DEFAULT RATE" means that rate of interest that is the greater
of (i) 2.00% per annum  above the rate of  interest  stated in clause (a) of the
first  paragraph  of the Notes or

                                       4

<PAGE>

(ii) 2.00% over the rate of interest  publicly  announced by Bank One, NA in New
York, New York as its "base" or "prime" rate.

                  "DIRECT  SECURITY"  means each of (x) a Subsidiary  Guarantee,
(y) a General Security  Agreement or Security  Agreement,  a Pledge Agreement or
Stock Pledge  Agreement,  an  Assignment  of Material  Contracts,  an Assignment
Agreement  (Call  Option  Rights) and a Minority  Shareholders'  Acknowledgement
Agreement  (Call Option  Rights),  in the case of each of the  documents in this
clause (y) in substantially  the form of the equivalent  Security  Documents set
forth in  Schedule  5.21 and  delivered  on the date of the Closing and (z) each
other document  constituting Direct Security delivered to the Banks from time to
time after the Closing pursuant to the Credit Agreement.

                  "DOLLAR" or "U.S.$" means lawful money of the United States
of America.

                  "EBITDA" means, for any period,  Consolidated Net Earnings for
such  period  plus  the  following  to  the  extent   deducted  in   determining
Consolidated Net Earnings: depreciation,  amortization, interest expense, income
taxes, loss from discontinued operations,  any non-cash and non-recurring gains,
losses,  or charges  of the  Guarantor  and its  Subsidiaries  and the  minority
interest share of earnings as stated on the consolidated financial statements of
the Guarantor and its Subsidiaries,  but excluding any net income, gain, or loss
during such period from any change in accounting  principles,  any extraordinary
items, any prior period adjustments, or gains (or losses) on asset dispositions.

                  "EARNINGS CALL OPTION  TRIGGERING  EVENT" is defined in clause
(c) of the definition of "Call Option Triggering Event".

                  "ENVIRONMENTAL LAWS" means any and all Federal,  state, local,
and foreign statutes, laws, regulations,  ordinances,  rules, judgments, orders,
decrees,  permits,  concessions,  grants,  franchises,  licenses,  agreements or
governmental  restrictions  relating  to  pollution  and the  protection  of the
environment or the release of any materials into the environment,  including but
not limited to those related to hazardous  substances  or wastes,  air emissions
and discharges to waste or public systems.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended from time to time,  and the rules and  regulations  promulgated
thereunder from time to time in effect.

                  "ERISA  AFFILIATE" means any trade or business (whether or not
incorporated)  that is treated as a single employer together with either Obligor
under section 414 of the Code.

                  "EVENT OF DEFAULT" is defined in Section 11.

                                       5

<PAGE>

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

                  (i) a currency or interest rate swap agreement;

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

                  (iii) a forward rate  agreement;

                  (iv) any derivative,  combination  or option in respect of, or
                       agreement  similar to, an agreement or contract referred
                       to in the foregoing clause (i), (ii) or (iii);

                  (v) any master agreement in respect of any agreement or
                      contract  referred to in the foregoing  clause (i), (ii)
                      or (iii);  or (vi) a Guaranty of the liabilities under an
                      agreement or contract  referred to in the foregoing clause
                      (i), (ii) or (iii).

                  "FINANCING  DOCUMENTS"  means this Agreement,  the Notes,  the
Guarantees, each Subsidiary Guarantee and each Security Document.

                  "FIXED CHARGE COVERAGE RATIO" means, in respect of any period,
the  quotient  obtained by dividing  (a) the amount (as  numerator)  obtained by
subtracting (i) capital  expenditures  (other than acquisition  expenditures) of
the  Guarantor and its  Subsidiaries  for such period and (ii) cash income taxes
paid by the Guarantor and its Subsidiaries  during such period from (iii) EBITDA
for such period,  by (b) the sum (as  denominator)  of (i)  interest  expense on
Total Debt for such period,  (ii)  scheduled  principal  repayments  and capital
lease principal  payments of the Guarantor and its  Subsidiaries for such period
and (iii)  dividends  paid by the Guarantor  during such period.  In calculating
such interest  expense,  there shall be included the total of all items properly
classified as interest  expense for the Guarantor and its  Subsidiaries for such
period determined in accordance with U.S. GAAP on a consolidated basis.

                  "GENERAL  PARTNER"  means  FirstService  GP Inc.,  as  general
partner of the Company, and its successors and assigns.

                  "GOVERNMENTAL AUTHORITY"  means

                  (a)      the government of

                                       6

<PAGE>

                           (i)      Canada,  the United  States of America or
                 any Province,  State or other  political  subdivision  of
                 either thereof, or

                           (ii) any other  jurisdiction  in which either Obligor
                 or any Subsidiary conducts all or any part of its business,  or
                 which  asserts  jurisdiction  over  any  properties  of  either
                 Obligor or any Subsidiary, or

                 (b) any entity exercising  executive,  legislative,  judicial,
                 regulatory or  administrative  functions of, or pertaining to,
                 any such government.

                  "GUARANTEE" is defined in Section 1.1.

                  "GUARANTOR"   means   FirstService   Corporation,   a  company
incorporated  under the laws of Ontario,  Canada,  or any successor thereto that
shall have become such in the manner prescribed in Section 10.2.

                  "GUARANTY" means,  with respect to any Person,  any obligation
(except  the  endorsement  in the  ordinary  course of  business  of  negotiable
instruments for deposit or collection) of such Person  guaranteeing or in effect
guaranteeing any indebtedness,  dividend or other obligation of any other Person
in any manner,  whether directly or indirectly,  including (without  limitation)
obligations  incurred  through an agreement,  contingent  or otherwise,  by such
Person:

                  (a)      to purchase such indebtedness or obligation or any
property constituting security therefor;

                  (b) to advance or supply funds (i) for the purchase or payment
of such  indebtedness or obligation,  or (ii) to maintain any working capital or
other balance  sheet  condition or any income  statement  condition of any other
Person or  otherwise  to advance or make  available  funds for the  purchase  or
payment of such indebtedness or obligation;

                  (c) to lease properties or to purchase  properties or services
primarily  for the  purpose  of  assuring  the  owner  of such  indebtedness  or
obligation  of  the  ability  of  any  other  Person  to  make  payment  of  the
indebtedness or obligation; or

                  (d)  otherwise  to assure  the owner of such  indebtedness  or
obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

                  "HAZARDOUS  MATERIAL" means any and all  pollutants,  toxic or
hazardous  wastes or any other  substances that might pose a hazard to health or
safety,  the removal of

                                       7

<PAGE>

which may be  required or the  generation,  manufacture,  refining,  production,
processing,  treatment,  storage,  handling,   transportation,   transfer,  use,
disposal,  release,  discharge,  spillage, seepage, or filtration of which is or
shall be restricted,  prohibited or penalized by any applicable law  (including,
without   limitation,   asbestos,   urea   formaldehyde   foam   insulation  and
polychlorinated biphenyls).

                  "HOLDER" means,  with respect to any Note, the Person in whose
name such Note is registered in the register  maintained by the Company pursuant
to Section 15.1.

                  "INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,

                  (a)      its liabilities for borrowed money;

                  (b)  its  liabilities  for  the  deferred  purchase  price  of
                  property acquired by such Person  (excluding  accounts payable
                  arising in the ordinary  course of business but  including all
                  liabilities  created or arising under any conditional  sale or
                  other  title  retention  agreement  with  respect  to any such
                  property);

                  (c)  all  liabilities   appearing  on  its  balance  sheet  in
                  accordance with U.S. GAAP in respect of Capital Leases;

                  (d) all  liabilities  for borrowed  money  secured by any Lien
                  with respect to any property owned by such Person  (whether or
                  not it  has  assumed  or  otherwise  become  liable  for  such
                  liabilities);

                  (e) Financial Contract Obligations of such Person;

                  (f) all liabilities of such Person with respect to vendor-
                  take-back financing arrangements; and

                  (g) any Guaranty of such Person with respect to liabilities of
         another  Person a type  described  in any of clauses  (a)  through  (f)
         hereof.

Indebtedness  of any Person shall include all  obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect  thereof  notwithstanding  that any such obligation is
deemed to be extinguished under U.S. GAAP.

                  "INSTITUTIONAL  ACCREDITED INVESTOR" means an "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.

                  "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note,  (b) any holder of a Note holding more than 5% of the aggregate  principal
amount of the

                                       8

<PAGE>

Notes  then  outstanding,  and (c) any bank,  trust  company,  savings  and loan
association  or other  financial  institution,  any pension plan, any investment
company,  any  insurance  company,  any broker or dealer,  or any other  similar
financial institution or entity, regardless of legal form.

                  "INTERCREDITOR  AGREEMENT" means the  Intercreditor  Agreement
dated as of the date hereof among the Obligors,  FirstService  (USA),  Inc., the
Subsidiaries  of the  Guarantor  named  as  Unlimited  Guarantors  therein,  the
Purchasers, the Collateral Agent, the Banks named on the execution pages thereto
and The Toronto-Dominion Bank, as Bank Collateral Agent.

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

                  "MAKE-WHOLE AMOUNT" is defined in Section 8.8.

                  "MATERIAL"   means  material  in  relation  to  the  business,
operations,  affairs, financial condition, assets or properties of the Guarantor
and its Subsidiaries taken as a whole.

                  "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on
(a) the business, operations, affairs, financial condition, assets or properties
of the Guarantor and its  Subsidiaries  taken as a whole,  or (b) the ability of
the Company or the Guarantor to perform its  obligations  under this  Agreement,
the Notes or any other  Financing  Document  to which the Company is a party (in
the  case of the  Company)  or  this  Agreement,  the  Guarantees  or any  other
Financing  Document  to  which  the  Guarantor  is a party  (in the  case of the
Guarantor),  or (c) the validity or enforceability of this Agreement, the Notes,
the Guarantees or any other Financing Documents.

                  "MEMORANDUM" is defined in Section 5.3.

                  "MULTIEMPLOYER  PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).

                  "NON  WHOLLY-OWNED   SUBSIDIARY"   means,  at  any  time,  any
Subsidiary of the Guarantor which is not a Wholly-Owned Subsidiary.

                  "NORMALIZING ADJUSTMENTS" is defined in the definition of
"Total Debt/EBITDA Ratio.

                                       9

<PAGE>

                  "NOTES" is defined in Section 1.

                  "OFFICER'S  CERTIFICATE"  means  a  certificate  of  a  Senior
Financial  Officer or of any other officer of the  Guarantor,  or of the General
Partner, as applicable,  whose responsibilities  extend to the subject matter of
such certificate.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.

                  "PERMITTED LIENS" is defined in Section 10.3.

                  "PERMITTED  LOANS" means advances and accounts  between one or
more  of  the  Guarantor  and  any  of  its  Subsidiaries,  which  shall  be  on
commercially  reasonable  terms,  PROVIDED  that any such  advance or account is
secured by means of a security  agreement in form and substance  satisfactory to
the Collateral  Agent, is assigned to the Collateral Agent and forms part of the
Collateral.

                  "PERSON"  means  an  individual,   partnership,   corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

                  "PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA)  subject to Section  412 of the Code or Title IV of ERISA that is
or, within the preceding five years, has been  established or maintained,  or to
which  contributions  are or, within the preceding five years, have been made or
required to be made, by either Obligor or any ERISA Affiliate or with respect to
which either Obligor or any ERISA Affiliate may have any liability.

                  "PROPERTY"   or   "PROPERTIES"    means,    unless   otherwise
specifically  limited,  real or  personal  property  of any  kind,  tangible  or
intangible, choate or inchoate.

                  "PTE" means a Prohibited Transaction Exemption issued by the
Department of Labor.

                  "PURCHASER" is defined in the first paragraph of this
Agreement.

                  "QPAM EXEMPTION" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.

                  "REQUIRED  HOLDERS"  means,  at any  time,  the  holders  of a
majority in principal amount of the Notes at the time outstanding  (exclusive of
Notes then owned by either Obligor or any of their respective Affiliates).

                                       10
<PAGE>

                  "RESPONSIBLE  OFFICER" means any Senior Financial  Officer and
any other officer of the Guarantor or of the General Partner with responsibility
for the administration of the relevant portion of this agreement.

                  "SECURED PARTIES" means the holders from time to time of Notes
and the Collateral Agent, as agent for such holders.

                  "SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended from time to time.

                  "SECURITY  DOCUMENTS"  means the Security  Documents listed in
Schedule 5.21, and the applicable  Direct  Security  delivered or required to be
delivered after the date of the Closing.

                  "SENIOR FINANCIAL OFFICER" means the Secretary or Treasurer of
the General Partner or the Senior  Vice-President and Chief Financial Officer of
the Guarantor,  or any other person holding an equivalent  position from time to
time.

                  "SHAREHOLDERS  AGREEMENTS" means all agreements that create in
favor of the Guarantor or any Subsidiary  call option rights with respect to any
minority interest in any Subsidiary.

                  "SUBSIDIARY"   means,  as  to  any  Person,  any  corporation,
association or other business  entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries  owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily,  in the
absence of  contingencies,  to elect a majority  of the  directors  (or  Persons
performing  similar  functions)  of such entity,  and any  partnership  or joint
venture if more than a 50%  interest in the profits or capital  thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its  Subsidiaries  (unless  such  partnership  or joint  venture can and does
ordinarily take major business actions without the prior approval of such Person
or one or  more of its  Subsidiaries).  Unless  the  context  otherwise  clearly
requires,  any reference to a "Subsidiary" is a reference to a Subsidiary of the
Guarantor.

                  "SUBSIDIARY  GUARANTEE"  means  a  guarantee  of a  Subsidiary
Guarantor of the  obligations of the Company under this Agreement and the Notes,
substantially in the form of Exhibit 4.10.

                  "SUBSIDIARY  GUARANTOR"  means (a) as of the Closing Date, all
Wholly-Owned   Subsidiaries   identified  as  such  on  Schedule  5.4,  and  (b)
thereafter,  the Persons  referred to in clause (a) and each other  Person which
from time to time (i)  executes  and delivers a  counterpart  of the  Subsidiary
Guarantee  (or  otherwise  enters  into a  Subsidiary

                                       11

<PAGE>

Guarantee) and the other applicable Direct Security and (ii) delivers an opinion
of internationally  recognized independent counsel, or other independent counsel
reasonably  satisfactory  to the Required  Holders,  covering the  execution and
enforceability  of such  Subsidiary  Guarantee and such other  matters  incident
thereto in relation to such Subsidiary  Guarantee and such Subsidiary  Guarantor
as are covered in the opinion  required to be  delivered  on the date of Closing
under Section 4.4(a) of this Agreement.

                  "TAX" is defined in Section 5.9(b).

                  "TAX EVENT"  means any  amendment  to, or change in, after the
date of the Closing,  the laws,  regulations or published tax rulings (including
tax treaties and  regulations  with respect to such  treaties) of any Applicable
Taxing Authority, or any amendment to or change after the date of the Closing in
the  official  administration,  interpretation  or  application  of  such  laws,
regulations, or rulings.

                  "TOTAL  DEBT"  at  any  time  means  all  Indebtedness  of the
Guarantor and its  Subsidiaries at such time determined on a consolidated  basis
in accordance  with U.S.  GAAP after  deduction of  cash-on-hand,  plus the Cash
Amount at such time.

                  "TOTAL  DEBT/EBITDA  RATIO" at any time means the ratio of (x)
Total Debt as at the end of the fiscal quarter most recently ended to (y) EBITDA
for the period of the four  consecutive  fiscal  quarters of the Guarantor  most
recently  ended, so as to include all Persons which became  Subsidiaries  during
the  relevant  period,  with EBITDA from the  acquisition  of such Persons to be
included in the  calculations  by using the  trailing  12 month  EBITDA for such
Persons,  and so as to exclude the EBITDA of any former  Subsidiary  that ceased
being a Subsidiary  at any time during the  previous  four fiscal  quarters.  In
addition,  for purposes of this  definition,  EBITDA  shall  include a full year
impact of the cost  savings  in  respect  of any  Subsidiary  which has become a
Subsidiary during the period,  if such savings are readily  identifiable and can
be immediately  implemented  (such as the  elimination of salaries for redundant
employees and elimination of various administrative functions which will, in the
reasonable opinion of the Guarantor,  become unnecessary or otherwise  performed
more  cost-effectively)  (such  cost  savings  being  collectively  "Normalizing
Adjustments"); provided that adjustments shall only be made if the Guarantor has
provided to the Canadian Agent (under and as defined in the Credit Agreement) to
the extent the Credit  Agreement  remains in full force and effect,  and, to the
extent the Credit Agreement is no longer in full force and effect to the holders
of Notes details of such Normalizing Adjustments following the completion of the
acquisition of such Subsidiary,  and (ii) (x) to the extent the Credit Agreement
remains in full force and effect,  the  Canadian  Agent shall not have  provided
written  notice to the  Guarantor  within 15 Business Days of the receipt by the
Canadian  Agent  (pursuant to the Credit  Agreement)  of written  notice of such
Normalizing  Adjustments  that the Majority Lenders (under and as defined in the
Credit  Agreement) do not consent to the Normalizing  Adjustments and (y) to the
extent the Credit Agreement is no longer in full force and effect,  the Required
Holders  shall  not

                                       12

<PAGE>

have provided  written  notice to the  Guarantor  within 15 Business Days of the
receipt  by  the  holders  of  Notes  of  written  notice  of  such  Normalizing
Adjustments  that  the  Required  Holders  do not  consent  to  the  Normalizing
Adjustments.

                  "UNDERTAKING SUBSIDIARY" means (a) as of the Closing Date, all
Non  Wholly-Owned  Subsidiaries  identified  as such on  Schedule  5.4,  and (b)
thereafter,  the  Persons  referred  to in clause (a)  (except to the extent any
thereof has become a Subsidiary Guarantor) and each other Person which from time
to time (i) executes and delivers an Undertaking  to Secure or otherwise  enters
into an  Undertaking  to Secure and (ii) delivers an opinion of  internationally
recognized   independent   counsel,  or  other  independent  counsel  reasonably
satisfactory to the Required Holders,  covering the execution and enforceability
of such  Undertaking  to Secure  and such  other  matters  incident  thereto  in
relation to such Undertaking to Secure and such Non  Wholly-Owned  Subsidiary as
are covered in the opinion required to be delivered on the date of Closing under
Section 4.4(a) of this Agreement.

                  "UNDERTAKING  TO SECURE" means an  Undertaking to Secure to be
provided by each  Undertaking  Subsidiary,  substantially in the form of Exhibit
4.11.

                  "U.S.  GAAP" means generally  accepted  accounting
principles as in effect from time to time in the United States of America.

                  "VIOLATION NOTICE" means any notice received by the Guarantor,
the Company or any Subsidiary from any governmental or regulatory body or agency
under any Environmental  Law that the Guarantor,  the Company or such Subsidiary
is in non-compliance with the requirements of any Environmental Law.

                  "WHOLLY-OWNED  SUBSIDIARY"  means, at any time, any Subsidiary
one hundred  percent (100%) of all of the equity  interests  (except  directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Guarantor and the Guarantor's other Wholly-Owned Subsidiaries at such time.

                                       13

<PAGE>

                                                                       EXHIBIT 1

                                 [FORM OF NOTE]

                            FIRSTSERVICE DELAWARE, LP

                  8.06% GUARANTEED SENIOR SECURED NOTE DUE 2011

No. [_____]                                                               [Date]
U.S.$[_______]                                                   PPN 33763@ AA 4

                  FOR VALUE RECEIVED, the undersigned, FIRSTSERVICE DELAWARE, LP
(herein called the "Company"), a limited partnership organized under the laws of
Delaware, hereby promises to pay to [             ], or registered  assigns, the
principal sum of [         ] DOLLARS (or so much  thereof as shall not have been
prepaid) on June 29, 2011,  with  interest  (computed  on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance  thereof at the rate  of
8.06% per annum from the date hereof, payable semiannually, on  the 29th  day of
June and December in  each  year,  commencing  with  the June or  December  next
succeeding the date hereof, until the principal hereof shall have become due and
payable,  and  (b) to  the extent  permitted  by  law, on  any  overdue  payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any  Make-Whole  Amount  (as defined  in the Note and
Guarantee Agreement referred  to below),  payable semiannually as aforesaid (or,
at the option of the registered  holder hereof,  on demand), at a rate per annum
from time to time equal to the greater of (i) 10.06% or (ii) 2.00% over the rate
of  interest publicly  announced  by Bank One, NA from time to time in New York,
New York as its "base" or "prime" rate.

                  Payments  of  principal  of,  interest  on and any  Make-Whole
Amount  with  respect to this Note are to be made in lawful  money of the United
States of America at the principal  office of Bank One, NA in New York, New York
or at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note and Guarantee Agreement referred
to below.

                  This  Note is one of a series  of  Guaranteed  Senior  Secured
Notes  (herein  called the "Notes")  issued  pursuant to the Note and  Guarantee
Agreement dated as of June 21, 2001 (as from time to time amended, the "Note and
Guarantee  Agreement"),  between  the  Company,  FirstService  Corporation  (the
"Guarantor") and the respective  Purchasers named therein and is entitled to the
benefits  thereof.  Each holder of this Note will be deemed,  by its  acceptance
hereof, to have agreed to the confidentiality provisions set forth in Section 22
of the Note and  Guarantee  Agreement  and to have made the  representation  set
forth in Section 6.2 of the Note and Guarantee Agreement.

<PAGE>

                  Payment of the principal of, and  Make-Whole  Amount,  if any,
and interest on this Note has been  guaranteed  by the  Guarantor in  accordance
with the terms of the Note and Guarantee Agreement.

                  This Note is secured by, and  entitled to the benefits of, the
Security Documents referred to in the Note and Guarantee Agreement.

                  This Note is a  registered  Note and,  as provided in the Note
and  Guarantee  Agreement,  upon  surrender  of this  Note for  registration  of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed,  by the  registered  holder  hereof  or such  holder's  attorney  duly
authorized in writing, a new Note for a like principal amount will be issued to,
and  registered in the name of, the  transferee.  Prior to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving  payment and
for all other  purposes,  and the Company  will not be affected by any notice to
the contrary.

                  The Company will make required prepayments of principal on the
dates and in the amounts  specified in the Note and  Guarantee  Agreement.  This
Note is also  subject to optional  prepayment,  in whole or from time to time in
part,  at the  times  and on the  terms  specified  in the  Note  and  Guarantee
Agreement, but not otherwise.

                  If an Event of Default,  as defined in the Note and  Guarantee
Agreement,  occurs and is continuing, the principal of this Note may be declared
or otherwise  become due and payable in the manner,  at the price (including any
applicable  Make-Whole  Amount)  and with the  effect  provided  in the Note and
Guarantee Agreement.

                  This Note shall be construed and enforced in  accordance  with
the laws of the State of New York.

                            FIRSTSERVICE DELAWARE, LP

                            By:      FirstService GP Inc.
                                     its General Partner

                            By  _______________________________________
                                Title:

                                       2

<PAGE>

                                                                    EXHIBIT 1-A

                                FORM OF GUARANTEE

                  For value received, the undersigned hereby unconditionally and
irrevocably  guarantees to the holder of the foregoing Note the due and punctual
payment of the principal  of,  Make-Whole  Amount,  if any, and interest on said
Note, as more fully provided in the Note and Guarantee  Agreement referred to in
said Note.

                                      FIRSTSERVICE CORPORATION

                                      By___________________________
                                        Title:

<PAGE>

                                                                 EXHIBIT 4.4(a)

                            Matters To Be Covered In
                       OPINIONS OF COUNSEL TO THE OBLIGORS

<PAGE>

                                                                  EXHIBIT 4.4(b)

                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS

<PAGE>

                                                                   EXHIBIT 4.10

                         [FORM OF SUBSIDIARY GUARANTEE]

                  GUARANTEE dated as of [ ], in favor of each person who is from
time to time a  holder  of one or more  of any of the  8.06%  Guaranteed  Senior
Secured Notes due 2011 (together  with all notes  delivered in  substitution  or
exchange  thereof,  the  "NOTES"),  issued  by  FirstService  Delaware,  LP (the
"ISSUER") in an aggregate principal amount of  U.S.$100,000,000  pursuant to the
Note and Guarantee Agreement dated as of June 21, 2001 (as amended,  modified or
supplemented  from time to time, the "NOTE AND GUARANTEE  AGREEMENT")  among the
Issuer,  FirstService  Corporation  (the  "PARENT  GUARANTOR")  and  each of the
Purchasers listed in Schedule A to the Note and Guarantee Agreement.

                  Section 1. DEFINITIONS.  Except as otherwise provided herein,
terms defined in the Note and Guarantee  Agreement are used herein as defined
therein.

                  Section 2.  THE GUARANTEE.

                  2.01 THE GUARANTEE.  The Issuer will use the proceeds from the
sale of the Notes to repay  indebtedness and for general  corporate  purposes of
the group of Persons comprised of the Parent Guarantor and its Subsidiaries, and
the undersigned (individually,  a "SUBSIDIARY GUARANTOR," and collectively,  the
"SUBSIDIARY  GUARANTORS")  are  Subsidiaries of the Parent  Guarantor.  For such
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  each Subsidiary Guarantor hereby jointly and severally guarantees
to each holder of a Note (each,  a "HOLDER") the prompt payment in full when due
(whether  at  stated  maturity,  by  acceleration,  by  optional  prepayment  or
otherwise) of the principal of, Make-Whole Amounts (if any), and interest on the
Notes  (including,  without  limitation,  interest  on  any  overdue  principal,
Make-Whole Amount and, to the extent permitted by applicable law, on any overdue
interest)  and all other amounts from time to time owing by the Issuer under the
Note and Guarantee  Agreement,  the Notes and the other  Financing  Documents to
which it is a party (including,  without limitation,  costs, expenses and taxes)
(such   obligations   being   herein   collectively   called   the   "GUARANTEED
OBLIGATIONS").  Each  Subsidiary  Guarantor  hereby  further  agrees that if the
Issuer  shall  default  in  the  payment   (whether  at  stated   maturity,   by
acceleration,  by optional  prepayment or  otherwise)  of any of the  Guaranteed
Obligations,  such Subsidiary  Guarantor will (x) promptly pay the same, without
any demand or notice  whatsoever,  and that in the case of any extension of time
of payment or renewal  of any of the  Guaranteed  Obligations,  the same will be
promptly paid in full when due (whether at extended  maturity,  by acceleration,
by  optional  prepayment  or  otherwise)  in  accordance  with the terms of such
extension  or renewal  and (y) pay to any  holder  such  amounts,  to the extent
lawful,  as shall be sufficient to pay the  reasonable  out-of-pocket  costs and
expenses of  collection or of otherwise  enforcing  any of such holder's  rights
under the Note and  Guarantee  Agreement,  the  Notes  and the  other  Financing
Documents, including, without limitation, reasonable counsel fees.

                  All  obligations  of  each  Subsidiary  Guarantor  under  this
Section 2.01 shall survive the transfer of any Note.

                  2.02  OBLIGATIONS  UNCONDITIONAL.  (a) The obligations of each
Subsidiary

                                       1

<PAGE>

Guarantor  under Section 2.01  constitute a present and  continuing  guaranty of
payment and not collectibility and are absolute and unconditional,  irrespective
of  the  value,  genuineness,  validity,  regularity  or  enforceability  of the
obligations of the Issuer under the Note and Guarantee Agreement, the Notes, any
other  Financing  Document  to  which it is a party or any  other  agreement  or
instrument  referred  to herein or  therein,  or any  substitution,  release  or
exchange  of any  other  guarantee  of or  security  for  any of the  Guaranteed
Obligations  (including the Lien granted  pursuant to the Security  Documents on
and over the  Collateral),  and, to the fullest  extent  permitted by applicable
law,  irrespective of any other  circumstance  whatsoever  which might otherwise
constitute a legal or equitable  discharge or defense of a surety or  guarantor,
it being the intent of this Section 2.02 that the obligations of each Subsidiary
Guarantor  hereunder  shall be  absolute  and  unconditional,  under any and all
circumstances.  Without  limiting the generality of the foregoing,  it is agreed
that the  occurrence  of any one or more of the  following  shall  not  alter or
impair the liability of any Subsidiary  Guarantor  hereunder  which shall remain
absolute and unconditional as described above:

                  (1) any amendment or modification of any provision of the Note
         and Guarantee Agreement, the Notes, any other Financing Document or any
         assignment  or  transfer  thereof,  including  without  limitation  the
         renewal  or  extension  of the  time of  payment  of the  Notes  or the
         granting  of  time  in  respect  of  such  payment  thereof,  or of any
         furnishing or acceptance of security or any additional guarantee or any
         release of any security or guarantee (including any addition or release
         of the  Parent  Guarantor  or any other  Subsidiary  Guarantor,  or the
         release of the Lien granted  pursuant to the Security  Documents on and
         over the Collateral) so furnished or accepted for the Notes;

                  (2)  any  waiver,  consent,   extension,   granting  of  time,
         forbearance, indulgence or other action or inaction under or in respect
         of the Note and Guarantee  Agreement,  the Notes or any other Financing
         Document, or any exercise or non-exercise of any right, remedy or power
         in respect hereof or thereof;

                  (3) any bankruptcy, receivership,  insolvency, reorganization,
         arrangement,   readjustment,   composition,   liquidation   or  similar
         proceedings  with  respect  to the  Issuer or any  other  Person or the
         properties or creditors of any of them;

                  (4) the  occurrence of any Default or Event of Default  under,
         or any invalidity or any unenforceability of, or any misrepresentation,
         irregularity or other defect in, the Note and Guarantee Agreement,  the
         Notes, any other Financing Document or any other agreement;

                  (5)  any  transfer  of  any  assets  to or  from  the  Issuer,
         including without  limitation any transfer or purported transfer to the
         Issuer from any Person, any invalidity,  illegality of, or inability to
         enforce, any such transfer or purported transfer,  any consolidation or
         merger  of the  Issuer  with or into  any  Person,  any  change  in the
         ownership of any shares of capital  stock of the Issuer,  or any change
         whatsoever in the objects, capital structure,  constitution or business
         of the Issuer;

                  (6) any default,  failure or delay,  willful or otherwise,  on
         the part of the Issuer or any other  Person to perform or comply  with,
         or the  impossibility or illegality of performance by the Issuer or any
         other  Person of,  any term of the Note and  Guarantee  Agreement,  the
         Notes,

                                       2

<PAGE>

         any other Financing Document or any other agreement;

                  (7) any suit or other  action  brought by, or any  judgment in
         favor of, any  beneficiaries  or creditors  of, the Issuer or any other
         Person for any reason whatsoever, including without limitation any suit
         or action in any way attacking or involving any issue,  matter or thing
         in respect of the Note and Guarantee  Agreement,  the Notes,  any other
         Financing Document or any other agreement;

                  (8) any lack or limitation  of status or of power,  incapacity
         or disability of the Issuer or any trustee or agent thereof; or

                  (9) any other thing, event, happening, matter, circumstance or
         condition whatsoever, not in any way limited to the foregoing.

                  (b) Each Subsidiary  Guarantor hereby  unconditionally  waives
diligence,  presentment,  demand of payment,  protest and all notices whatsoever
and any requirement that any holder proceed against or exhaust any right,  power
or remedy against the Issuer under the Note and Guarantee Agreement,  the Notes,
any other Financing  Document or any other  agreement or instrument  referred to
herein or therein,  or against any other  Subsidiary  Guarantor,  or against any
other  Person  under  any  other  guarantee  of,  or  security  for,  any of the
Guaranteed  Obligations  (including  the Lien  granted  pursuant to the Security
Documents on and over the Collateral).

                  (c) In the event that any  Subsidiary  Guarantor  shall at any
time pay any amount on account of the  Guaranteed  Obligations or take any other
action in performance of its obligations  hereunder,  such Subsidiary  Guarantor
shall not exercise any subrogation or other rights  hereunder,  under the Notes,
the Note and  Guarantee  Agreement  or any  other  Financing  Document  and such
Subsidiary  Guarantor  hereby waives all rights it may have to exercise any such
subrogation or other rights, and all other remedies that it may have against the
Issuer, in respect of any payment made hereunder unless and until the Guaranteed
Obligations  shall have been paid in full.  If any  amount  shall be paid to any
Subsidiary  Guarantor on account of any such subrogation rights or other remedy,
notwithstanding  the waiver thereof,  such amount shall be received in trust for
the  benefit of the  holders  and shall  forthwith  be paid to the holders to be
credited  and  applied  upon the  Guaranteed  Obligations,  whether  matured  or
unmatured, in accordance with the terms hereof. Each Subsidiary Guarantor agrees
that its obligations  under this Guarantee shall be automatically  reinstated if
and to the extent that for any reason any payment (including payment in full) by
or on  behalf of the  Issuer,  the  Parent  Guarantor  or any  other  Subsidiary
Guarantor is rescinded or must be otherwise restored by any holder, whether as a
result of any proceedings in bankruptcy or reorganization  or otherwise,  all as
though such amount had not been paid.

                  The guarantee in this Section 2 is a continuing  guarantee and
shall apply to the Guaranteed  Obligations whenever arising. Each default in the
payment or performance of any of the Guaranteed Obligations shall give rise to a
separate claim and cause of action  hereunder,  and separate claims or suits may
be made and brought, as the case may be, hereunder as each such default occurs.

                  If an event permitting the acceleration of the maturity of the
principal amount of the Notes shall at any time have occurred and be continuing,
and such  acceleration  (and the effect

                                       3

<PAGE>

thereof on the Guaranteed Obligations) shall at such time be prevented by reason
of the pendency  against the Issuer or any other Person of a case or  proceeding
under a bankruptcy or insolvency law, each Subsidiary Guarantor agrees that, for
purposes of this Guarantee and its  obligations  hereunder,  the maturity of the
principal amount of the Notes shall be deemed to have been  accelerated  (with a
corresponding  effect on the Guaranteed  Obligations) with the same effect as if
the holders had  accelerated  the same in accordance  with the terms of the Note
and Guarantee Agreement,  and such Subsidiary Guarantor shall forthwith pay such
principal amount,  any interest thereon,  any Make-Whole  Amount,  and any other
amounts guaranteed hereunder without further notice or demand.

                  The  obligations  of  the  Subsidiary  Guarantors  under  this
Subsidiary   Guarantee  are  secured  by  the  Collateral  of  such   Subsidiary
Guarantors.

                  Section 3.  REPRESENTATIONS AND WARRANTIES. Each Subsidiary
Guarantor represents and warrants to the holders that:

                  3.01  ORGANIZATION;   POWER  AND  AUTHORITY.  Such  Subsidiary
Guarantor is duly  organized,  validly  existing and in good standing  under the
laws of its jurisdiction of  organization,  and is duly qualified and is in good
standing in each  jurisdiction in which such  qualification  is required by law,
other than those  jurisdictions as to which the failure to be so qualified or in
good  standing  could  not,  individually  or in the  aggregate,  reasonably  be
expected to have a Material  Adverse Effect.  Such Subsidiary  Guarantor has the
corporate  or other  requisite  power and  authority to execute and deliver this
Guarantee and to perform the provisions hereof.

                  3.02   AUTHORIZATION,   ETC.  This  Guarantee  has  been  duly
authorized by all necessary action on the part of such Subsidiary Guarantor, and
this  Guarantee  constitutes  a legal,  valid  and  binding  obligation  of such
Subsidiary Guarantor enforceable against such Subsidiary Guarantor in accordance
with its terms,  except as such  enforceability may be limited by (i) applicable
bankruptcy,  insolvency,  reorganization,   moratorium  or  other  similar  laws
affecting  the  enforcement  of  creditors'  rights  generally  and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

                  3.03  COMPLIANCE  WITH  LAWS,  OTHER  INSTRUMENTS,   ETC.  The
execution,  delivery  and  performance  by  such  Subsidiary  Guarantor  of this
Guarantee  will not (i)  contravene,  result in any breach of, or  constitute  a
default under,  or result in the creation of any Lien in respect of any property
of such Subsidiary  Guarantor  under,  any indenture,  mortgage,  deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws or other
organizational  document,  or any other  agreement or  instrument  to which such
Subsidiary  Guarantor is bound or by which such  Subsidiary  Guarantor or any of
its  properties  may be bound or  affected,  (ii)  conflict  with or result in a
breach of any of the terms,  conditions or  provisions  of any order,  judgment,
decree,  or ruling of any court,  arbitrator or  Governmental  Authority  having
jurisdiction  over such  Subsidiary  Guarantor or (iii) violate any provision of
any statute or other rule or regulation of any Governmental Authority applicable
to such Subsidiary Guarantor.

                  3.04 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration,  filing or declaration with, any Governmental
Authority is required in connection with the execution,  delivery or performance
by such Subsidiary Guarantor of this Guarantee

                                       4

<PAGE>

1including,  without  limitation,  any thereof  required in connection  with the
obtaining of Dollars to make payments  under this  Subsidiary  Guarantee and the
payment of such Dollars to Persons resident in the United States of America.  It
is  not  necessary  to  ensure  the  legality,   validity,   enforceability   or
admissibility  into  evidence  in  [insert  jurisdictions  of  incorporation  of
Subsidiary  Guarantors]  of  this  Subsidiary  Guarantee  that  this  Subsidiary
Guarantee  or any  other  document  be  filed,  recorded  or  enrolled  with any
Governmental  Authority,  or that any such agreement or document be stamped with
any stamp, registration or similar transaction tax.

                  3.05.  SOLVENCY.  Upon the execution and delivery hereof, such
Subsidiary  Guarantor  will be  solvent,  will be able to pay its  debts as they
mature and will have capital sufficient to carry on its business.

                  3.06.  RANKING.  All liabilities of each Subsidiary  Guarantor
under this Subsidiary  Guarantee  constitute  direct,  unconditional and general
obligations  of such  Subsidiary  Guarantor and rank in right of payment  either
pari passu or senior to all other  Indebtedness  of such  Subsidiary  Guarantor,
except for such  Indebtedness  which is preferred  as a result of being  secured
(but then only to the extent of such security).

                  3.07  TAXES.2  No  liability  for  any  tax  (whether  income,
documentary,  sales, stamp,  registration,  issue, capital,  property, excise or
otherwise),  duty, levy,  impost,  fee, charge or withholding  (each a "TAX" and
collectively  "TAXES"),  directly or indirectly,  imposed,  assessed,  levied or
collected by or for the account of any  Governmental  Authority of or in [insert
jurisdictions  of  incorporation  of  Subsidiary  Guarantors]  or any  political
subdivision  thereof or  therein  (an  "APPLICABLE  TAXING  AUTHORITY")  will be
incurred by any Subsidiary  Guarantor or any holder of a Note as a result of the
execution or delivery of this Subsidiary Guarantee and, based on present law, no
deduction or  withholding  in respect of Taxes  imposed by or for the account of
any Applicable  Taxing  Authority is required to be made from any payment by the
Subsidiary  Guarantor  under  this  Subsidiary  Guarantee  except  for any  such
withholding or deduction arising out of the conditions  described in the proviso
to Section 4(a).

                  3.08  OWNERSHIP OF COLLATERAL; SECURITY DOCUMENTS.

                  (a) The  Subsidiary  Guarantors  are the sole  and  beneficial
owners of the  Collateral  which secures this  Subsidiary  Guarantee and no Lien
exists or will exist upon such  Collateral at any time,  except for the security
interest in favor of the Collateral Agent for the benefit of the Secured Parties
created or provided for in the Security  Documents  and except for Liens arising
in connection  with the Credit  Agreement  and any other  Permitted  Liens.  The
provisions of the Security  Documents  are effective to create,  in favor of the
Collateral Agent on behalf of the Secured Parties,  legal, valid and enforceable
Liens on or in all of the Collateral of the Subsidiary Guarantors intended to be
covered thereby, and as of the date of this Subsidiary Guarantee,  all necessary
recordings and filings will have been made in all necessary public offices (such
recordings  and  filings  being  identified  on Schedule 1 hereto) and all other
necessary and

------------------
1  The remainder  of  this  Section  is not  necessary in relation to Subsidiary
   Guarantors that are U.S. persons.

2  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.

                                       5

<PAGE>

appropriate  action  will  have  been  taken so that the  Liens  created  by the
Security  Documents will  constitute  perfected  Liens on or in such  Collateral
intended to be covered  thereby,  prior and  superior to all other Liens  (other
than  Liens  arising  in  connection  with the  Credit  Agreement  and any other
Permitted  Liens),  and  all  necessary  consents,  if  any,  to  the  creation,
effectiveness,  priority and perfection of each such Lien have been obtained. No
mortgage or financing statement or other instrument or recordation  covering all
or any part of the  Collateral  of the  Subsidiary  Guarantors is on file in any
recording office,  except such as may have been filed in favor of the Collateral
Agent for the  benefit of the  Secured  Parties and except such as may have been
filed in connection with the Credit Agreement and any other Permitted Liens.

                  (b) The chief place of business  and chief  executive  office
of the Subsidiary  Guarantors,  and the office where the  Subsidiary  Guarantors
keep their  respective  records  concerning  the  respective  Collateral of such
Subsidiary Guarantors, is listed on Schedule 2 hereto.

                  Section 4. TAX INDEMNITY.3 (a) Any and all payments under this
Subsidiary Guarantee to or for the account of any holder of a Note shall be made
free and clear of, and without  deduction or  withholding  for or on account of,
any Tax,  except to the extent such deduction or withholding is required by law.
If any Tax is required by law to be deducted or withheld  from any such payments
by any Subsidiary Guarantor, such Subsidiary Guarantor will make such deductions
or withholding and pay to the relevant taxing authority the full amount deducted
or withheld before penalties attach thereto or interest accrues thereon.  In the
event of the imposition by or for the account of any Applicable Taxing Authority
or of any  Governmental  Authority of any  jurisdiction  in which any Subsidiary
Guarantor  resides for tax purposes or any  jurisdiction  from or through  which
such  Subsidiary  Guarantor is making any payment in respect of this  Subsidiary
Guarantee,  other than any Governmental  Authority of or in the United States of
America or any political subdivision thereof or therein, of any Tax upon or with
respect to any  payments  in respect of this  Subsidiary  Guarantee,  whether by
withholding  or  otherwise,  such  Subsidiary  Guarantor  hereby  agrees  to pay
forthwith from time to time in connection  with each payment on this  Subsidiary
Guarantee  to each  holder of a Note such  amounts as shall be  required so that
every payment  received by such holder in respect of the Notes and every payment
received by such holder under this  Subsidiary  Guarantee  will not,  after such
withholding  or deduction or other payment for or on account of such Tax and any
interest or penalties relating thereto,  be less than the amount due and payable
to such holder in respect of such Note or under this Subsidiary Guarantee before
the assessment of such Tax; PROVIDED,  however,  that such Subsidiary  Guarantor
shall not be obliged  to pay such  amounts to any holder of a Note in respect of
Taxes to the extent such Taxes exceed the Taxes that would have been payable:

                           (i) had such  holder  not been a  resident  of Canada
                  within the meaning of the INCOME TAX ACT  (Canada) or not used
                  or held such Note in the course of  carrying  on a business in
                  Canada within the meaning of the INCOME TAX ACT (Canada); or

                           (ii)  had such  holder  not had any  connection  with
                  Canada or any territory or political subdivision thereof other
                  than  the  mere  holding  of a  Note  with  the

---------------
3  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.

                                       6

<PAGE>

                  benefit of a Guarantee and this  Subsidiary  Guarantee (or the
                  receipt of any  payments  in respect  thereof)  or  activities
                  incidental thereto (including enforcement thereof); or

                           (iii) had such  holder not dealt with the Issuer on a
                  non-arm's  length basis  (within the meaning of the INCOME TAX
                  ACT (Canada)) in connection with any such payment; or

                           (iv) but for the  delay  or  failure  by such  holder
                  (following a written request by such Subsidiary  Guarantor) in
                  the  filing  with an  appropriate  Governmental  Authority  or
                  otherwise of forms, certificates,  documents,  applications or
                  other reasonably  required  evidence  (collectively  "FORMS"),
                  that  are  required  to be filed  by such  holder  to avoid or
                  reduce such Taxes and that in the case of any of the foregoing
                  would not result in any confidential or proprietary income tax
                  return   information   being  revealed,   either  directly  or
                  indirectly, to any Person and such delay or failure could have
                  been  lawfully  avoided  by such  holder,  PROVIDED  that such
                  holder shall be deemed to have satisfied the  requirements  of
                  this clause (ii) upon the good faith completion and submission
                  of such Forms as may be specified in a written request of such
                  Subsidiary  Guarantor  no later than 45 days after  receipt by
                  such holder of such  written  request  (PROVIDED  that if such
                  Forms are  required  pursuant to the laws of any  jurisdiction
                  other  than the  United  States of  America  or any  political
                  subdivision thereof, such written request shall be accompanied
                  by such  Forms  in  English  or with  an  English  translation
                  thereof).

                  (b)  Within  60 days  after  the  date of any  payment  by any
Subsidiary  Guarantor  of any Tax in respect of any  payment  under the Notes or
this Section 4, such Subsidiary Guarantor shall furnish to each holder of a Note
the  original  tax receipt for the payment of such Tax (or if such  original tax
receipt is not  available,  a duly  certified copy of the original tax receipt),
together with such other  documentary  evidence with respect to such payments as
may be reasonably requested from time to time by any holder of a Note.

                  (c) The  obligations of the Subsidiary  Guarantors  under
this Section 4 shall survive the transfer or payment of any Note.

                  (d) If any  Subsidiary  Guarantor  has made a payment to or on
account of any holder of a Note pursuant to Subsection (a) above and such holder
is entitled to a refund of the Tax to which such  payment is  attributable  from
the  Governmental  Authority  to which the  payment of the Tax was made and such
refund can be obtained by filing one or more Forms,  then (i) such holder shall,
as soon as  practicable  after  receiving a written  request  therefor from such
Subsidiary Guarantor (which request shall specify in reasonable detail the Forms
to be filed),  file such Forms and (ii) upon  receipt  of such  refund,  if any,
promptly pay over such refund to such Subsidiary Guarantor.

                  Section 5.  MISCELLANEOUS.

                  5.01 AMENDMENTS,  ETC. This Guarantee may be amended,  and the
observance  of  any  term  hereof  may  be  waived  (either   retroactively   or
prospectively),  with (and only  with) the

                                       7

<PAGE>

written consent of the Subsidiary  Guarantors and the Required  Holders,  except
that no such amendment or waiver may, without the written consent of each holder
affected thereby, amend any of Section 2.01, 2.02 or this Section 5.01.

                  5.02  NOTICES.  All notices and  communications  provided  for
hereunder shall be in writing and sent as provided in Section 19 of the Note and
Guarantee  Agreement  (i) if to any holder,  to the address  specified  for such
holder  in the  Note  and  Guarantee  Agreement  and  (ii) if to any  Subsidiary
Guarantor,  to the  address  for  such  Subsidiary  Guarantor  set  forth on the
signature pages hereof.

                  5.03  JURISDICTION  AND PROCESS.4  EACH  SUBSIDIARY  GUARANTOR
AGREES THAT ANY LEGAL  ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING TO THIS
SUBSIDIARY GUARANTEE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION  HEREWITH,  OR
ANY LEGAL  ACTION OR  PROCEEDING  TO EXECUTE OR  OTHERWISE  ENFORCE ANY JUDGMENT
OBTAINED  AGAINST SUCH  SUBSIDIARY  GUARANTOR FOR BREACH  HEREOF OR THEREOF,  OR
AGAINST ANY OF ITS PROPERTIES,  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK
BY OR ON BEHALF OF ANY HOLDER OF A NOTE,  AS SUCH  HOLDER  MAY  ELECT,  AND SUCH
SUBSIDIARY  GUARANTOR  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY  SUBMITS TO THE
NON-EXCLUSIVE  JURISDICTION OF SUCH COURTS FOR PURPOSES OF ANY SUCH LEGAL ACTION
OR  PROCEEDING.  EACH  SUBSIDIARY  GUARANTOR  HEREBY  IRREVOCABLY  APPOINTS  AND
DESIGNATES CT CORPORATION SYSTEM,  WHOSE ADDRESS IS 111 EIGHTH AVENUE, NEW YORK,
NY 10011,  OR ANY OTHER PERSON HAVING AND MAINTAINING A PLACE OF BUSINESS IN THE
STATE OF NEW YORK WHOM THE SUBSIDIARY  GUARANTOR MAY FROM TIME TO TIME HEREAFTER
DESIGNATE  (HAVING  GIVEN 30 DAYS' NOTICE  THEREOF TO EACH HOLDER OF A NOTE THEN
OUTSTANDING),  AS THE DULY  AUTHORIZED  AGENT FOR ACCEPTANCE OF SERVICE OF LEGAL
PROCESS OF THE SUBSIDIARY  GUARANTOR.  EACH SUBSIDIARY  GUARANTOR  HEREBY AGREES
THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE EFFECTED BY SERVING NOTICE
UPON CT  CORPORATION  OR ANY SUCH OTHER  PERSON  AND BY  MAILING  NOTICE OF SUCH
SERVICE BY REGISTERED OR CERTIFIED  MAIL (OR ANY  SUBSTANTIALLY  SIMILAR FORM OF
MAIL),  POSTAGE  PREPAID,  TO IT AS ITS ADDRESS  SPECIFIED IN SECTION 5.02 OR AT
SUCH  OTHER  ADDRESS OF WHICH  EACH  HOLDER OF A NOTE  SHALL HAVE BEEN  NOTIFIED
PURSUANT  THERETO.  IN ADDITION,  EACH SUBSIDIARY  GUARANTOR HEREBY  IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING  ARISING
OUT OF OR RELATING TO THIS SUBSIDIARY  GUARANTEE OR ANY OTHER DOCUMENT  EXECUTED
IN  CONNECTION  HEREWITH  BROUGHT  IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED  STATES  DISTRICT  COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK,  AND ANY
CLAIM THAT ANY SUCH  SUIT,  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH COURT HAS
BEEN

---------------
4  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.

                                       8

<PAGE>

BROUGHT IN AN INCONVENIENT FORUM.

                  5.04   SUCCESSORS   AND  ASSIGNS.   All  covenants  and  other
agreements  of each  Subsidiary  Guarantor  in this  Guarantee  shall  bind  its
successors  and  assigns and shall inure to the benefit of the holders and their
respective successors and assigns.

                  5.05  SEVERABILITY.  Any provision of this  Guarantee  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

                  5.06  CONSTRUCTION.  Each agreement  contained herein shall be
construed  (absent  express  provision to the contrary) as being  independent of
each other agreement contained herein, so that compliance with any one agreement
shall  not  (absent  such an  express  contrary  provision)  be deemed to excuse
compliance with any other agreement. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking,  such
provision  shall  be  applicable  whether  such  action  is  taken  directly  or
indirectly by such Person.

                  5.07 EXPENSES.  Each Subsidiary Guarantor shall indemnify each
holder on demand in  respect of all  reasonable  costs and  expenses  (including
reasonable legal fees) incurred by it in connection with the enforcement of this
Guarantee  or the  preservation  of the rights of such holder as a result of any
breach by such Subsidiary Guarantor of its obligations hereunder.

                  5.08.   SURVIVAL  OF  REPRESENTATIONS   AND  WARRANTIES.   All
representations and warranties  contained herein shall survive the execution and
delivery  of this  Guarantee,  the Note and  Guarantee  Agreement  and the other
Financing  Documents,  the purchase or transfer by each Purchaser of any Note or
portion  thereof or interest  therein,  and may be relied upon by any subsequent
holder  of a Note,  regardless  of any  investigation  made at any time by or on
behalf of any Purchaser or any other holder of a Note.

                  5.09.  GOVERNING LAW. This  Guarantee  shall be governed by,
and construed and  interpreted  in accordance  with, the law of the State of
New York.

                  5.10. COUNTERPARTS; ADDITIONAL PARTIES.  This Guarantee may be
executed in any number of  counterparts  and by the different  parties hereto on
separate  counterparts,  and each  such  counterpart  shall be  deemed  to be an
original but all such  counterparts  shall together  constitute one and the same
Guarantee. At any time after the date of this Guarantee,  one or more additional
persons or entities may become parties hereto by executing and delivering to the
holders a counterpart  of this  Guarantee.  Immediately  upon such execution and
delivery (and without any further action), each such additional person or entity
will  become  a party  to,  and  will be  bound  by all of the  terms  of,  this
Guarantee.

                                       9

<PAGE>

                  IN WITNESS  WHEREOF,  this Guarantee has been duly executed by
the Subsidiary Guarantors as of the day and year first above written.

                         [NAME OF SUBSIDIARY GUARANTOR]

                        By ______________________________

                            Title:

                        Address:

                         [NAME OF SUBSIDIARY GUARANTOR]

                        By ______________________________

                           Title:

                           Address:

                                       10

<PAGE>

                                   Schedule 1

                             Recordings and Filings

                                       1

<PAGE>

                                   Schedule 2

                            Chief Place of Business,
                           Chief Executive Office and
                            Office Where Records Kept

<PAGE>

                                                                   EXHIBIT 4.11

                         [FORM OF UNDERTAKING TO SECURE]<Page>
                                                              EXHIBIT (10)(a)(1)

                            UNIT PURCHASE AGREEMENT
                         DATED AS OF SEPTEMBER 29, 2000
                                 BY AND BETWEEN
                           NORTHWESTERN CORPORATION,
                          TOUCH AMERICA HOLDINGS, INC.
                                      AND
                           THE MONTANA POWER COMPANY
                              WITH RESPECT TO ALL
                      OUTSTANDING MEMBERSHIP INTERESTS IN
                             THE MONTANA POWER LLC

<Page>

                               TABLE OF CONTENTS

    This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.

<Table>
<C>                     <S>                                                           <C>
ARTICLE I SALE OF SHARES AND CLOSING................................................     1
                 1.01   Purchase and Sale...........................................     1
                 1.02   Purchase Price..............................................     1
                 1.03   Closing.....................................................     1
                 1.04   Further Assurances; Post-Closing Cooperation................     1

ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND MPC.........................     2
                 2.01   Corporate Existence of Seller and MPC.......................     2
                 2.02   Authority...................................................     2
                 2.03   Existence of the Company....................................     2
                 2.04   Capitalization..............................................     3
                 2.05   Subsidiaries................................................     3
                 2.06   No Conflicts................................................     3
                 2.07   Governmental Approvals and Filings..........................     4
                 2.08   Books and Records...........................................     4
                 2.09   Financial Statements and Condition..........................     4
                 2.10   Taxes.......................................................     5
                 2.11   Legal Proceedings...........................................     6
                 2.12   Compliance With Laws and Orders.............................     7
                 2.13   Benefit Plans; ERISA........................................     7
                 2.14   Property....................................................     8
                 2.15   Intellectual Property Rights................................     8
                 2.16   Contracts...................................................     8
                 2.17   Licenses....................................................    10
                 2.18   Insurance...................................................    10
                 2.19   Affiliate Transactions......................................    11
                 2.20   Labor and Employment Matters................................    11
                 2.21   Environmental Matters.......................................    11
                 2.22   Information Supplied........................................    11
                 2.23   Vote Required...............................................    12
                 2.24   Brokers.....................................................    12
                 2.25   Public Utility Holding Company Act..........................    12
                 2.26   Regulatory Filings..........................................    12
                 2.27   Rights Agreement............................................    12
                 2.28   Effect of Restructuring.....................................    12

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.............................    13
                 3.01   Corporate Existence.........................................    13
                 3.02   Authority...................................................    13
                 3.03   No Conflicts................................................    13
                 3.04   Governmental Approvals and Filings..........................    13
                 3.05   Legal Proceedings...........................................    13
                 3.06   Purchase for Investment.....................................    13
                 3.07   Brokers.....................................................    14
                 3.08   Financing...................................................    14
                 3.09   Ownership of the Capital Stock..............................    14
                 3.10   Exon-Florio.................................................    14
                 3.11   Independent Evaluation......................................    14
</Table>

                                       i

<Page>

<Table>
<C>                     <S>                                                           <C>
ARTICLE IV COVENANTS OF SELLER AND MPC..............................................    14
                 4.01   Regulatory and Other Approvals..............................    15
                 4.02   HSR Filings.................................................    15
                 4.03   Investigation by Purchaser..................................    15
                 4.04   No Solicitations............................................    15
                 4.05   Conduct of Business.........................................    16
                 4.06   Financial Statements and Reports............................    16
                 4.07   Certain Restrictions........................................    17
                 4.08   Affiliate Transactions......................................    18
                 4.09   Fulfillment of Conditions...................................    19
                 4.10   Completion of Restructuring.................................    19
                 4.11   Preparation and Mailing of Proxy Statement..................    19
                 4.12   Approval of MPC Stockholders................................    19
                 4.13   Completion of the Divestiture...............................    19
                 4.14   Regulatory Proceedings......................................    19
                 4.15   Sale of Colstrip 1, 2, and 3 Transmission System............    19
                 4.16   QF Contracts................................................    20
                 4.17   MPC Benefit Restoration Plans...............................    20
                 4.18   Power Supply................................................    20
                 4.19   Generation Sale Proceeds....................................    20
                 4.20   Regional Transmission Organization and Independent
                        Transmission Company........................................    20
                 4.21   Notification of Certain Matters.............................    20
                 4.22   Confidentiality and Standstill Agreements...................    20

ARTICLE V COVENANTS OF PURCHASER....................................................    21
                 5.01   Regulatory and Other Approvals..............................    21
                 5.02   HSR.........................................................    21
                 5.03   [INTENTIONALLY OMITTED......................................    21
                 5.04   Employee Matters............................................    21
                 5.05   Fulfillment of Conditions...................................    24
                 5.06   Communication Between the Parties...........................    24
                 5.07   Charitable Contributions....................................    24
                 5.08   Transaction Structure.......................................    24

ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER...................................    25
                 6.01   Representations and Warranties..............................    25
                 6.02   Performance.................................................    25
                 6.03   Officers' Certificates......................................    25
                 6.04   Orders and Laws.............................................    25
                 6.05   Regulatory Consents and Approvals...........................    25
                 6.06   Third Party Consents........................................    25
                 6.07   Completion of the Restructuring.............................    25
                 6.08   Assignment of Contracts.....................................    25
                 6.09   Benefits Plans..............................................    25
                 6.10   Resignation of Seller as Manager of the Company.............    25

ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER.....................................    26
                 7.01   Representations and Warranties..............................    26
                 7.02   Performance.................................................    26
                 7.03   Officers' Certificates......................................    26
                 7.04   Orders and Laws.............................................    26
                 7.05   Regulatory Consents and Approvals...........................    26
                 7.06   Third Party Consents........................................    26
</Table>

                                       ii

<Page>

<Table>
<C>                     <S>                                                           <C>
ARTICLE VIII TAX MATTERS AND POST-CLOSING TAXES.....................................    26
                 8.01   Tax Returns.................................................    26
                 8.02   Notice of Audit.............................................    27
                 8.03   Tax Adjustments.............................................    27
                 8.04   Tax Sharing Agreements......................................    28
                 8.05   Transfer Taxes..............................................    28
                 8.06   Post-Closing Elections......................................    28
                 8.07   Post-Closing Transactions not in the Ordinary Course........    28
                 8.08   Allocation of Purchase Price................................    28
                 8.09   Section 338(h)(10) Election.................................    29
                 8.10   Section 338(g) Election.....................................    29
                 8.11   Nonforeign Affidavit........................................    29
                 8.12   Code Section 754 Election...................................    29

ARTICLE IX SURVIVAL; NO OTHER REPRESENTATIONS.......................................    29
                 9.01   Survival of Representations, Warranties, Covenants and
                        Agreements..................................................    29
                 9.02   No Other Representations....................................    29

ARTICLE X INDEMNIFICATION...........................................................    29
                10.01   Tax Indemnification.........................................    29
                10.02   Indemnification for Restructuring; Divestiture; Oil and Gas
                        Sale........................................................    30
                10.03   Other Indemnification.......................................    30
                10.04   Special Environmental Indemnity.............................    30
                10.05   Special Litigation Indemnity................................    31
                10.06   Method of Asserting Claims..................................    31
                10.07   Requirements for Indemnity..................................    33
                10.08   Exclusivity.................................................    33

ARTICLE XI TERMINATION..............................................................    33
                11.01   Termination.................................................    33
                11.02   Effect of Termination.......................................    34
                11.03   Fees and Expenses...........................................    35

ARTICLE XII DEFINITIONS.............................................................    35
                12.01   Definitions.................................................    35

ARTICLE XIII MISCELLANEOUS..........................................................    43
                13.01   Notices.....................................................    43
                13.02   Entire Agreement............................................    44
                13.03   Expenses....................................................    44
                13.04   Public Announcements........................................    44
                13.05   Confidentiality.............................................    44
                13.06   Waiver......................................................    45
                13.07   Amendment...................................................    45
                13.08   No Third Party Beneficiary..................................    45
                13.09   No Assignment; Binding Effect...............................    45
                13.10   Headings....................................................    45
                13.11   Invalid Provisions..........................................    45
                13.12   Governing Law...............................................    46
                13.13   Counterparts................................................    46
                13.14   Insurance Coverage After Closing............................    46
</Table>

                                       iii

<Page>

<Table>
<Caption>
                                      EXHIBITS
                                      --------
<S>                     <C>                                    <C>
EXHIBIT A               Officer's Certificate of Seller
EXHIBIT B               Secretary's Certificate of Seller
EXHIBIT C               Officer's Certificate of Purchaser
EXHIBIT D               Secretary's Certificate of Purchaser

                                      ANNEXES
                        ------------------------------------
Annex I                 Financial Statement
Annex II                Budget Principles
</Table>

                                       iv

<Page>

    This UNIT PURCHASE AGREEMENT dated as of September 29, 2000 is made and
entered into by and between NorthWestern Corporation, a Delaware corporation
("PURCHASER"), Touch America Holdings, Inc., a Delaware corporation
("SELLER") and The Montana Power Company, a Montana corporation ("MPC").
Capitalized terms not otherwise defined herein have the meanings set forth in
SECTION 12.01.

    WHEREAS, prior to the closing of the transactions contemplated by this
Agreement and as a condition to Purchaser's obligation to effect such
closing, Seller will cause the Restructuring (pursuant to which, among other
things, the Company (as defined below) shall become the owner of all assets
and securities currently owned by MPC, other than Entech and its
subsidiaries) to become effective; and

    WHEREAS, prior to the closing of the transactions contemplated by this
Agreement, Seller will own all of the outstanding membership interests in The
Montana Power LLC, a Montana limited liability company (the "COMPANY"), such
membership interests being referred to herein as the "UNITS"; and

    WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Units on the terms and subject to the conditions set forth in this Agreement;

    NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

                                   ARTICLE I
                           SALE OF SHARES AND CLOSING

    1.01  PURCHASE AND SALE.  Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, all of the right, title and
interest of Seller in and to the Units at the Closing on the terms and
subject to the conditions set forth in this Agreement.

    1.02  PURCHASE PRICE.  The aggregate purchase price for the Units is $602
million (the "PURCHASE PRICE"), payable in immediately available United
States funds at the Closing in the manner provided in SECTION 1.03.

    1.03  CLOSING.  The Closing will take place at the offices of Milbank,
Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New York
10005, or at such other place as Purchaser and Seller mutually agree, at
10:00 A.M. local time, on the Closing Date. At the Closing, Purchaser will
pay the Purchase Price by wire transfer of immediately available funds to
such account as Seller may reasonably direct by written notice delivered to
Purchaser by Seller at least two (2) Business Days before the Closing Date.
Simultaneously, Seller will assign and transfer to Purchaser all of Seller's
right, title and interest in and to the Units. At the Closing, there shall
also be delivered to Seller and Purchaser the certificates to be delivered
under ARTICLES VI and VII.

    1.04  FURTHER ASSURANCES; POST-CLOSING COOPERATION.  (a) Subject to the
terms and conditions of this Agreement, at any time or from time to time
after the Closing, each of the parties hereto shall execute and deliver such
other documents and instruments, provide such materials and information and
take such other actions as may reasonably be necessary, proper or advisable,
to the extent permitted by Law, to fulfill its obligations under this
Agreement.

    (b) Following the Closing, each party will provide the other party, its
counsel and its accountants with copies of information or other data relating
to the Business or Condition of MPC and the Company in its possession with
respect to periods prior to the Closing, to the extent that such information
or data may be reasonably required by the requesting party in connection with
(i) the preparation of Tax Returns, (ii) compliance with the requirements of
any Governmental or Regulatory

                                       1

<Page>

Authority, or (iii) any third party actual or threatened Action or
Proceeding. Further, each party agrees for a period extending six (6) years
after the Closing Date not to destroy or otherwise dispose of any such books,
records and other data (excluding copies of materials previously supplied to
the other party) unless such party shall first offer in writing to surrender
such books, records and other data to the other party and such other party
shall not agree in writing to take possession thereof during the thirty (30)
day period after such offer is made.

    (c) If, in order properly to prepare its Tax Returns, other documents or
reports required to be filed with Governmental or Regulatory Authorities or
its financial statements or to fulfill its obligations hereunder, it is
necessary that a party be furnished with additional information, documents or
records relating to the Business or Condition of MPC and the Company not
referred to in paragraph (b) above, and such information, documents or
records are in the possession or control of the other party, such other party
agrees to use its reasonable best efforts to furnish or make available such
information, documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by a party hereto in
accordance with this paragraph shall be held confidential by such party in
accordance with SECTION 13.05.

    (d) In addition to furnishing information pursuant to paragraph (b) and
(c) of this SECTION 1.04, in order to close the books of MPC, the Company and
the Subsidiaries for accounting purposes, each party agrees to direct its
accounting personnel to provide reasonable cooperation and assistance to any
other party's accounting personnel to accomplish the work necessary to close
such books. Seller and Purchaser also agree to direct their human resources
and payroll personnel to cooperate with, and provide reasonable cooperation
and assistance to each other in connection with, preparing W-2's and other
associated payroll tax or related documents.

                               ARTICLE II
             REPRESENTATIONS AND WARRANTIES OF SELLER AND MPC

    Seller and MPC, jointly and severally, hereby represent and warrant to
Purchaser as follows:

    2.01  CORPORATE EXISTENCE OF SELLER AND MPC.  Seller is a corporation
duly incorporated, validly existing and in good standing under the Laws of
the State of Delaware and MPC is a corporation duly incorporated, validly
existing and in good standing under the Laws of the State of Montana. Each of
Seller and MPC has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby, including, as to Seller, without
limitation, to own, hold, sell and transfer (pursuant to this Agreement) the
Units.

    2.02  AUTHORITY.  The execution and delivery by Seller and MPC of this
Agreement, and the performance by Seller of its obligations hereunder, have
been duly and validly authorized by the Boards of Directors of Seller and
MPC, and, with the exception of the vote referred to in SECTION 2.23, no
other corporate action on the part of Seller or MPC is necessary. This
Agreement has been duly and validly executed and delivered by Seller and MPC
and constitutes a legal, valid and binding obligation of Seller and MPC
enforceable against Seller and MPC in accordance with its terms.

    2.03  EXISTENCE OF THE COMPANY.  The Company is a limited liability
company duly organized, validly existing and in good standing under the Laws
of the State of Montana, and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its Assets and Properties. MPC is, and prior to and as of the Closing
Date, MPC and the Company will be, duly qualified, licensed or admitted to do
business and each is in good standing in those jurisdictions specified in
SECTION 2.03 OF THE DISCLOSURE SCHEDULE, which are the only jurisdictions in
which the ownership, use or leasing of its Assets and Properties, or the
conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for those jurisdictions in which the adverse
effects of all such failures to be qualified, licensed or admitted and in
good standing could not in the aggregate reasonably be expected to have a
material adverse effect on the Business or

                                       2

<Page>

Condition of MPC and the Company. Seller has prior to the execution of this
Agreement made available to Purchaser true and complete copies of the
certificate of formation of the Company as in effect on the date hereof.

    2.04  CAPITALIZATION.  The authorized capitalization of the Company consists
of the Units. The Units are duly authorized, validly issued, outstanding, fully
paid and nonassessable. On and as of the Closing Date, Seller will own the
Units, beneficially and of record, free and clear of all Liens. Except for this
Agreement and as disclosed in SECTION 2.04 OF THE DISCLOSURE SCHEDULE, as of the
date of this Agreement there are, and on and as of the Closing Date there will
be, no outstanding Options with respect to the Company. The delivery of a
certificate or certificates at the Closing representing the Units in the manner
provided in SECTION 1.03 will transfer to Purchaser good and valid title to the
Units, free and clear of all Liens other than Liens created or suffered to exist
by Purchaser.

    2.05  SUBSIDIARIES.  (a) Each Subsidiary is a corporation validly
existing and in good standing under the Laws of its jurisdiction of
incorporation disclosed in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, and
has full corporate power and authority to conduct its business as and to the
extent now conducted and to own, use and lease its Assets and Properties.
Each Subsidiary is duly qualified, licensed or admitted to do business and is
in good standing in those jurisdictions disclosed in SECTION 2.05(a) OF THE
DISCLOSURE SCHEDULE, which are the only jurisdictions in which the ownership,
use or leasing of such Subsidiary's Assets and Properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for those jurisdictions in which the adverse effects of all
such failures by MPC or the Company and the Subsidiaries to be qualified,
licensed or admitted and in good standing could not in the aggregate
reasonably be expected to have a material adverse effect on the Business or
Condition of MPC and the Company. SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE
lists for each Subsidiary the amount of its authorized capital stock, the
amount of its outstanding capital stock and the record owners of such
outstanding capital stock. Except as disclosed in SECTION 2.05(a) OF THE
DISCLOSURE SCHEDULE, all of the outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and are owned, directly or indirectly by MPC and, immediately
prior to the Closing will be owned, directly or indirectly, by the Company,
beneficially and of record, free and clear of all Liens. Except as set forth
in SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, there exists no restriction on
the payment of cash dividends by any Subsidiary. Except as disclosed in
SECTION 2.05(a) OF THE DISCLOSURE SCHEDULE, there are, and on and as of the
Closing Date there will be, no outstanding Options with respect to any
Subsidiary. Seller has prior to the execution of this Agreement made
available to Purchaser true and complete copies of the certificate or
articles of incorporation and by-laws (or other comparable corporate charter
documents) of each of the Subsidiaries as in effect on the date hereof.

    (b) Except as set forth on SECTION 2.05(b) OF THE DISCLOSURE SCHEDULE, as
of the Closing Date, the Company will not directly or indirectly beneficially
own more than five percent (5%) of either the equity interests in, or the
voting control of, any Person, other than the Subsidiaries.

    2.06  NO CONFLICTS.  The execution and delivery by Seller and MPC of this
Agreement do not, and the performance by Seller and MPC of their respective
obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:

    (a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate or articles of incorporation or
by-laws (or other comparable corporate charter documents) of Seller, MPC, the
Company or any Subsidiary;

    (b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in SECTION 2.07 OF THE DISCLOSURE
SCHEDULE, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Seller, MPC, the Company or any
Subsidiary or any of their respective Assets and Properties (other than such
conflicts, violations or breaches (i) which could not in the aggregate
reasonably be expected to adversely affect the validity or

                                       3

<Page>

enforceability of this Agreement or to have a material adverse effect on the
Business or Condition of MPC and the Company or (ii) as would occur solely as
a result of the identity or the legal or regulatory status of Purchaser or
any of its Affiliates); or

    (c) except as disclosed in SECTION 2.06 OF THE DISCLOSURE SCHEDULE or as
could not, individually or in the aggregate, reasonably be expected to be
materially adverse to the Business or Condition of MPC and the Company or to
adversely affect the ability of Seller or MPC to consummate the transactions
contemplated hereby or to perform their obligations hereunder, (i) conflict
with or result in a violation or breach of, (ii) constitute (with or without
notice or lapse of time or both) a default under, (iii) require Seller, MPC,
the Company or any Subsidiary to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result or under
the terms of, (iv) result in or give to any Person any right of termination,
cancellation, acceleration, non-performance or modification in or with
respect to, or (v) result in the creation or imposition of any Lien upon
Seller, MPC, the Company or any Subsidiary or any of their respective Assets
and Properties under, any Contract or License to which Seller, MPC, the
Company or any Subsidiary is a party or by which any of their respective
Assets and Properties is bound.

    2.07  GOVERNMENTAL APPROVALS AND FILINGS.  Except as disclosed in SECTION
2.07 OF THE DISCLOSURE SCHEDULE, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority on the part of
Seller, MPC, the Company or any Subsidiary is required in connection with the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby, except (i) where the failure to obtain
any such consent, approval or action, to make any such filing or to give any
such notice could not reasonably be expected to adversely affect the ability
of Seller or MPC to consummate the transactions contemplated by this
Agreement or to perform its obligations hereunder, or to have a material
adverse effect on the Business or Condition of MPC and the Company, or (ii)
those as would be required solely as a result of the identity or the legal or
regulatory status of Purchaser or any of its Affiliates.

    2.08  BOOKS AND RECORDS.  The minute books and other similar records of
MPC, the Company and the Subsidiaries as made available to Purchaser prior to
the execution of this Agreement contain a true and complete record, in all
material respects, of all action taken at all meetings and by all written
consents in lieu of meetings of the stockholders, members, the boards of
directors and committees of the boards of directors of MPC, the Company and
the Subsidiaries. The stock transfer ledgers and other similar records of
MPC, the Company and the Subsidiaries as made available to Purchaser prior to
the execution of this Agreement accurately reflect all record transfers prior
to the execution of this Agreement in the capital stock or membership
interests of MPC, the Company and the Subsidiaries.

    2.09  FINANCIAL STATEMENTS AND CONDITION.  (a) Prior to the execution of
this Agreement, Seller has made available to Purchaser true and complete
copies of the following financial statements:

        (i) the unaudited balance sheet of MPC and the Subsidiaries as of
    December 31, 1999 and the related unaudited consolidated statement of
    operations for fiscal years of 1997, 1998 and 1999; and

        (ii) the unaudited balance sheet of MPC and the Subsidiaries as of
    July 31, 2000 (attached as ANNEX I hereto).

Except as set forth in the notes thereto and as disclosed in SECTION 2.09(a)
OF THE DISCLOSURE SCHEDULE, all such financial statements were prepared in
accordance with GAAP and fairly present in all material respects the
consolidated financial condition and statement of operations of MPC and its
consolidated Subsidiaries as of the respective dates thereof and for the
respective periods covered thereby. Except for those Subsidiaries disclosed
in SECTION 2.09(a) OF THE DISCLOSURE SCHEDULE, the financial condition and
statement of operations of each Subsidiary are, and for all periods referred
to in this SECTION 2.09 have been, consolidated with those of MPC. Except as
disclosed in SECTION 2.09(a) OF THE DISCLOSURE SCHEDULE,

                                       4

<Page>

and except for matters reflected or reserved against in the financial
statements referred to in clauses (i) and (ii) above (or the notes thereto),
as of the date of this Agreement, neither MPC, the Company, nor any
Subsidiary has any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by GAAP to be reflected on a consolidated
balance sheet of MPC or the Company and Subsidiaries (including the notes
thereto), except liabilities or obligations (i) that were incurred in the
ordinary course of business consistent with past practice since July 31,
2000, or (ii) that, individually or in the aggregate, have not had and could
not reasonably be expected to have a material adverse effect on the Business
or Condition of MPC and the Company. At and as of the Closing Date, the total
of Indebtedness of the Company, the Subsidiaries and MPC Natural Gas Funding
Trust and the face amount of the outstanding preferred trust securities of
the Montana Power Capital I (Trust) shall not exceed $488 million.

    (b) Except for the execution and delivery of this Agreement and the
transactions to take place pursuant hereto on or prior to the Closing Date
and as disclosed in SECTION 2.09(b) OF THE DISCLOSURE SCHEDULE, since the
Interim Financial Statement Date the business of MPC and the Subsidiaries has
been operated in all material respects in the ordinary course of business
consistent with past practice and there has not been any material adverse
change in the Business or Condition of MPC, other than those occurring as a
result of general economic or financial conditions or other developments
which are not unique to MPC and the Subsidiaries but also affect to a similar
extent other Persons who participate or are engaged in the lines of business
in which MPC and the Subsidiaries participate or are engaged.

    2.10  TAXES.  (a) Seller, the Company, its Subsidiaries, and all members
of the MPC Affiliated Group, each have filed all material Income Tax Returns
(including, but not limited to, any consolidated federal Tax Return of
Seller, the Company, its Subsidiaries and all members of the MPC Affiliated
Group, and any state or local Income Tax Return that includes Seller, the
Company, the Subsidiaries and all members of the MPC Affiliated Group on a
consolidated, combined or unitary basis) that they were required to file. All
such Income Tax Returns were complete and correct in all material respects.
All Income Taxes owed by Seller, the Company, its Subsidiaries and all
members of the MPC Affiliated Group have been paid. MPC, Seller, the Company
and its Subsidiaries each have filed all material Tax Returns (including, but
not limited to, any federal Tax Return of MPC, Seller, the Company and the
Subsidiaries, and any state or local Tax Return that includes MPC, Seller,
the Company, and the Subsidiaries on a consolidated, combined or unitary
basis) that they were required to file. All such Tax Returns were complete
and correct in all material respects. All Taxes owed by MPC, Seller, the
Company and each Subsidiary have been paid. Except as disclosed in Section
2.10(a) of the Disclosure Schedule, there are no Liens on any of the Assets
or Properties of any of MPC, the Company or the Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax.

    (b) (i)  Except as disclosed in Section 2.10(b) of the Disclosure
Schedule, there is no dispute or claim concerning any Income Tax liability of
any of Seller, the Company, any Subsidiary, or any member of the MPC
Affiliated Group either (A) claimed or raised by any Governmental or
Regulatory Authority in writing or (B) as to which any of Seller, the
Company, the Subsidiaries, or any member of the MPC Affiliated Group and the
directors and officers thereof has any Knowledge. Section 2.10(b) of the
Disclosure Schedule lists all Income Tax Returns filed by the Company, its
Subsidiaries or any member of the MPC Affiliated Group for Tax periods ending
on or after December 31, 1990, (and for any prior Tax periods to the extent
that the statute of limitations for that Tax period has not lapsed),
indicates those Income Tax Returns that have been audited, and indicates
those Income Tax Returns that currently are the subject of audit. All Income
Taxes due with respect to such audits (as described in Section 2.10(b) of the
Disclosure Schedule) have been paid or have been reserved for in the
Financial Statements. Furthermore, all such Income Taxes being contested are
being contested in good faith by appropriate proceedings (as described in
Section 2.10(b) of the Disclosure Schedule).

                                       5

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    (ii) Except as disclosed in Section 2.10(b) of the Disclosure Schedule,
there is no dispute or claim concerning any Tax liability of any of MPC,
Seller, the Company, or any Subsidiary either (A) claimed or raised by any
Governmental or Regulatory Authority in writing or (B) as to which any of
MPC, Seller, the Company, or the Subsidiaries, and the directors and officers
thereof has any Knowledge. Section 2.10(b) of the Disclosure Schedule lists
all Tax Returns filed by MPC, the Company and its Subsidiaries for Tax
periods ending on or after December 31, 1990, (and for any prior Tax periods
to the extent that the statute of limitations for that Tax period has not
lapsed), indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. All Taxes due with
respect to such audits (as described in Section 2.10(b) of the Disclosure
Schedule) have been paid or have been reserved for in the Financial
Statements. Furthermore, all such Taxes being contested are being contested
in good faith by appropriate proceedings (as described in SECTION 2.10(b) OF
THE DISCLOSURE SCHEDULE).

    (c) Except as disclosed in SECTION 2.10(c) OF THE DISCLOSURE SCHEDULE,
neither MPC, Seller, the Company, any of the Subsidiaries (other than CMPL),
nor any member of the MPC Affiliated Group has waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time
with respect to an Income Tax assessment or deficiency for any Tax period.
Except as disclosed in SECTION 2.10(c) OF THE DISCLOSURE SCHEDULE, CMPL has
not waived any statute of limitations in respect of Income Taxes or agreed to
any extension of time with respect to an Income Tax assessment or deficiency
for any Tax period.

    (d) Except as disclosed in SECTION 2.10(d) OF THE DISCLOSURE SCHEDULE,
none of MPC, the Company and its Subsidiaries is or was a party to or liable
under any Income Tax allocation or sharing agreement.

    (e) Except as disclosed in SECTION 2.10(e) OF THE DISCLOSURE SCHEDULE,
neither the Company, any of its Subsidiaries, nor any member of the MPC
Affiliated Group has been a member of an Affiliated Group, filing a
consolidated federal Income Tax Return other than a group the common parent
of which is MPC.

    (f) Seller, the Company, the Subsidiaries, and the members of MPC
Affiliated Group have withheld and paid all material Taxes required to have
been withheld and paid and complied in all material respects with all
information reporting and backup withholding requirements, including
maintenance of records thereto, in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other Person.

    (g) None of Seller, the Company, the Subsidiaries, or any member of the
MPC Affiliated Group have filed a consent under Code section 341(f)
concerning collapsible corporations.

    (h) MPC, Seller, the Company, and the Subsidiaries have complied with the
normalization rules of accounting in accordance with Code section 168(i)(9).

    (i) For federal Income Tax purposes, the Company is or will be
disregarded as an entity separate from its owners under Treas. Reg. section
301.7701-3(b). No election with respect to the Company has been or will be
made to treat the Company as anything other than a disregarded entity.

    2.11  LEGAL PROCEEDINGS.

    (a) There are no Actions or Proceedings pending or, to the Knowledge of
Seller and MPC, threatened against, relating to or affecting Seller, MPC, the
Company or any Subsidiary in relation to any of their respective Assets and
Properties which could reasonably be expected (i) to result in the issuance
of an Order restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
(ii) except as disclosed in SECTION 2.11(a) OF THE DISCLOSURE SCHEDULE or in
SECTIONS 2.10(b), 2.13(e), 2.20 or 2.21(b), individually or in the aggregate

                                       6

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with other such Actions or Proceedings, to have a material adverse effect on
the Business or Condition of MPC and the Company.

    (b) There are no Orders outstanding against MPC, the Company or any
Subsidiary which, individually or in the aggregate with other such Orders,
have had, or could have, a material adverse effect on the Business or
Condition of MPC and the Company.

    2.12  COMPLIANCE WITH LAWS AND ORDERS.  Except as disclosed in SECTION
2.12 OF THE DISCLOSURE SCHEDULE or as described in SECTION 2.21, neither
Seller, MPC, the Company nor any Subsidiary is in violation of or in default
under any Law or Order applicable to Seller, MPC, the Company or any
Subsidiary or any of their respective Assets and Properties the effect of
which, individually or in the aggregate with other such violations and
defaults, could reasonably be expected to be materially adverse to the
Business or Condition of MPC and the Company.

    2.13  BENEFIT PLANS; ERISA.  (a) SECTION 2.13(a) OF THE DISCLOSURE
SCHEDULE contains a true and complete list and description of each of the
Benefit Plans, and identifies each of the Benefit Plans that is a Qualified
Plan.

    (b) Except as disclosed in SECTION 2.13(b) OF THE DISCLOSURE SCHEDULE,
neither MPC, the Company, any Subsidiary, nor any other corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA has at any time contributed to
any "multiemployer plan", as that term is defined in Section 4001 of ERISA
and incurred any withdrawal liability, as that term is defined in Section
4201 of ERISA, for any plan of the type described in Sections 4063 and 4064
of ERISA or in Section 413 of the Code (and regulations promulgated
thereunder).

    (c) Each of the Benefit Plans is, and its administration is and has been
since inception, in compliance with its terms and, where applicable, with
ERISA and the Code in all respects, except for such failures to comply which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the Business or Condition of MPC and the Company.

    (d) All contributions and other payments required to be made by Seller,
MPC, the Company or any Subsidiary or any ERISA Affiliate as defined in
SECTION 12.01 hereof to any Benefit Plan with respect to any period ending
before or at or including the Closing Date have been or will be made. Except
as disclosed in SECTION 2.13(d) OF THE DISCLOSURE SCHEDULE all benefit
obligations and liabilities under any Benefit Plan have been or will be
reflected in Financial Statements in accordance with GAAP.

    (e) Except as disclosed in SECTION 2.13(e) OF THE DISCLOSURE SCHEDULE, to
the Knowledge of Seller and MPC, there are no pending claims by or on behalf
of any Benefit Plan, by any employee, director, contractor or consultant of
MPC (or a beneficiary of such an employee, director, contractor or
consultant), which allege violations of Law which, individually or in the
aggregate, could reasonably be expected to result in liability on the part of
Purchaser, MPC, the Company, any Subsidiary or any ERISA Affiliate as defined
in SECTION 12.01 hereof or any fiduciary of any such Benefit Plan material to
the Business or Condition of MPC and the Company.

    (f) Except as set forth in SECTION 2.13(f) OF THE DISCLOSURE SCHEDULE,
complete and correct copies of the following documents have been made
available to the Purchaser prior to the execution of this Agreement:

        (i) the Benefit Plans and any related trust agreements and insurance
    contracts;

        (ii) current summary Plan descriptions of each Benefit Plan subject to
    ERISA;

       (iii) the most recent Form 5500 and Schedules thereto for each Benefit
    Plan subject to ERISA reporting requirements;

                                       7

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        (iv) the most recent determination of the IRS with respect to the
    qualified status of each Qualified Plan;

        (v) the most recent actuarial report of the qualified actuary of any
    Defined Benefit Plan or any other Benefit Plan with respect to which
    actuarial valuations are conducted; and

        (vi) all Governmental or Regulatory Authority filings with respect to
    any reportable event, excise tax, or other extraordinary event that occurred
    within the past three years and was related to a Benefit Plan.

    (g) Except as set forth in SECTION 2.13(g) OF THE DISCLOSURE SCHEDULE,
(i) neither MPC, the Company nor any Subsidiary is obligated to pay any
benefit under any Benefit Plan solely as a result of a "change in control" as
defined in 280G of the Code, (ii) neither MPC, the Company, nor any
Subsidiary is obligated to make any payment that would be disallowed as a
deduction under 280G or 162(m) of the Code, and (iii) neither this
transaction, the Restructuring or the Divestiture shall increase the
obligation of MPC, the Company or any Subsidiary to fund benefits accrued or
benefits payable under any Benefit Plan.

    2.14  PROPERTY.  MPC, the Company or a Subsidiary is in possession of and
has good title to, or has valid leasehold interests in or valid rights under
Contract to use, all property used in and individually or in the aggregate
with other such property material to the Business or Condition of MPC and the
Company. All such property is free and clear of all Liens, other than
Permitted Liens and Liens disclosed in SECTION 2.14 OF THE DISCLOSURE
SCHEDULE, and is in all material respects in good working order and
condition, ordinary wear and tear excepted.

    2.15  INTELLECTUAL PROPERTY RIGHTS.  MPC, the Company and the
Subsidiaries currently own, or have license to use, all Intellectual Property
material to the Business or Condition of MPC and the Company without any
material restrictions as to use or enjoyment. As soon as possible after the
execution hereof, Seller will furnish to Purchaser a list of all such
Intellectual Property. Neither MPC, the Company nor any of the Subsidiaries
has granted, nor is obligated to grant, any material license, sub-license or
assignment in respect of any of the Intellectual Property. Neither MPC, the
Company nor any of the Subsidiaries is in breach of any license, sub-license
or assignment granted to it in respect of any Intellectual Property, and to
the Knowledge of Seller and MPC, the operation of the business of MPC, the
Company and each Subsidiary does not infringe upon the intellectual property
rights of any other Person, except for such breaches or infringements that,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the Business or Condition of MPC and the Company.

    2.16  CONTRACTS.  (a) SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE (with
paragraph references corresponding to those set forth below) contains a true
and complete list of each of the following Contracts to which MPC, the
Company or any Subsidiary is a party or by which any of their respective
Assets and Properties is bound:

        (i) all Contracts (excluding Benefit Plans) providing for a commitment
    of employment for a specified or unspecified term or otherwise relating to
    employment or the termination of employment;

        (ii) all Contracts with any Person containing any provision or covenant
    prohibiting or materially limiting the ability of MPC, the Company or any
    Subsidiary to engage in any business activity or compete with any Person or
    prohibiting or materially limiting the ability of any Person to compete with
    MPC, the Company or any Subsidiary;

       (iii) all material partnership, joint venture, shareholders' or other
    similar Contracts with any Person other than Contracts listed pursuant to
    (vii) through (xvi) below;

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        (iv) all Contracts relating to Indebtedness of MPC, the Company or any
    Subsidiary in excess of $1,000,000 or to preferred stock issued by MPC, the
    Company or any Subsidiary (other than Indebtedness owing to or preferred
    stock owned by MPC, the Company or any wholly-owned Subsidiary);

        (v) all Contracts (other than Contracts listed pursuant to
    (vii) through (xvi) below) relating to (A) the future disposition or
    acquisition by MPC, the Company or any Subsidiary of any Assets and
    Properties individually or in the aggregate in excess of $1,000,000, and
    (B) any merger or other business combination;

        (vi) all collective bargaining or similar labor Contracts;

       (vii) all Contracts active as of June 30, 2000, relating to MPC's
    purchase of natural gas in its capacity as the natural gas supplier to MPC's
    utility customers calling for annual payments in excess of, or potentially
    in excess of $1,000,000 or having a term in excess of one year;

      (viii) all Contracts active as of June 30, 2000, relating to MPC's
    purchase of electrical power in its capacity as the electrical power
    supplier to MPC's utility customers calling for annual payments in excess
    of, or potentially in excess of, $1,000,000 or having a term in excess of
    one year;

        (ix) all Contracts active as of June 30, 2000, relating to MPC's sale of
    electric power as a commodity to third party customers calling for annual
    payments in excess of, or potentially in excess of, $1,000,000 or having a
    term in excess of one year;

        (x) all Contracts active as of June 30, 2000, relating to MPC's electric
    transmission system or the Colstrip Transmission System calling for annual
    payments in excess of, or potentially in excess of, $1,000,000 or having a
    term in excess of one year;

        (xi) all Contracts active as of June 30, 2000, relating to MPC's natural
    gas transmission and storage system calling for annual payments in excess
    of, or potentially in excess of, $1,000,000 or having a term in excess of
    one year;

       (xii) all material Contracts active as of June 30, 2000, relating to
    MPC's interest in Milltown Dam;

      (xiii) all material Contracts active as of June 30, 2000, relating to
    MPC's interest in Colstrip Unit 4;

       (xiv) all material Contracts between MPC and PPL Montana, LLC relating to
    the generation assets sale transaction between MPC and PPL Montana, LLC
    which closed on December 17, 1999;

       (xv) all material Contracts active as of June 30, 2000, to which One Call
    Locators, Ltd. is a party;

       (xvi) all material Contracts active as of June 30, 2000, to which DES is
    a party;

      (xvii) all Contracts, correspondence and other documents relating to the
    buy-out negotiations regarding MPC's contracts to purchase power from QFs,
    including, without limitation, signed letters of intent, whether or not
    binding on either or both parties thereto, offers and counteroffers;

      (xviii) all Contracts relating to MPC's electric and gas transmission and
    distribution business, not included in (i) through (xvi) above, under which
    MPC made payments to the other party in excess of $1,000,000 in 1999 or
    under which, as of the date of this Agreement, MPC expects to make payments
    to the other party in excess of $1,000,000 in 2000;

       (xix) all Contracts relating to MPC's electric and gas transmission and
    distribution business, not included in (i) through (xvi) above, under which
    MPC received payments from the other party

                                       9

<Page>

    in excess of $1,000,000 in 1999 or under which, as of the date of this
    Agreement, MPC expects to receive payments from the other party in excess of
    $1,000,000 in 2000; and

       (xx) all Contracts (other than this Agreement) that (A) limit or contain
    restrictions on the ability of MPC, the Company or any Subsidiary to declare
    or pay dividends on, to make any other distribution in respect of or to
    issue or purchase, redeem or otherwise acquire its capital stock, to incur
    Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any
    Assets and Properties, to change the lines of business in which it
    participates or engages or to engage in any merger or other business
    combination or (B) require MPC, the Company or any Subsidiary to maintain
    specified financial ratios or levels of net worth or other indicia of
    financial condition.

    (b) Each Contract required to be disclosed in SECTION 2.16(a) OF THE
DISCLOSURE SCHEDULE is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms, of
MPC, the Company or a Subsidiary and, to the Knowledge of Seller and MPC, of
each other party thereto; and except as disclosed in SECTION 2.16(b) OF THE
DISCLOSURE SCHEDULE neither MPC, the Company, any Subsidiary nor, to the
Knowledge of Seller and MPC, any other party to such Contract is in violation
or breach of or default under any such Contract (or with notice or lapse of
time or both, would be in violation or breach of or default under any such
Contract), the effect of which, individually or in the aggregate, could
reasonably be expected to be materially adverse to the Business or Condition
of MPC and the Company.

    (c) Prior to the Closing Date, Seller and MPC have furnished or made
available to Purchaser a copy of each Contract or other document required to
be disclosed in SECTION 2.16(a) OF THE DISCLOSURE SCHEDULE.

    2.17  LICENSES.  Each of MPC, the Company and the Subsidiaries has
obtained all Licenses used in and, individually or in the aggregate, with
other such Licenses material to the Business or Condition of MPC and the
Company. Except as disclosed in SECTION 2.17 OF THE DISCLOSURE SCHEDULE:

        (i) MPC or the Company and each Subsidiary owns or validly holds all
    such Licenses;

        (ii) each such License is valid, binding and in full force and effect;
    and

       (iii) to the Knowledge of Seller and MPC neither MPC, the Company nor any
    Subsidiary is in default (or with the giving of notice or lapse of time or
    both, would be in default) under any such License in any material respect.

    2.18  INSURANCE.  SECTION 2.18 OF THE DISCLOSURE SCHEDULE contains a true
and complete list of all material insurance policies currently in effect that
insure the business, operations or employees of MPC, the Company or any
Subsidiary or affect or relate to the ownership, use or operation of any of
the Assets and Properties of MPC, the Company or any Subsidiary. Except as
set forth in SECTION 2.18 OF THE DISCLOSURE SCHEDULE and except for failures
to maintain insurance that, individually or in the aggregate, have not had
and could not reasonably be expected to have a material adverse effect on the
Business or Condition of MPC and the Company, each of MPC, the Company, and
the Subsidiaries has been continuously insured with financially responsible
insurers, in each case in such amounts and with respect to such risks and
losses as are customary for companies in the United States conducting the
business conducted by MPC, the Company, and the Subsidiaries. Except as set
forth in SECTION 2.18 OF THE DISCLOSURE SCHEDULE, neither Seller, MPC, the
Company nor any of the Subsidiaries has received any notice of cancellation,
termination or suspension with respect to any of their respective insurance
policies, except with respect to any cancellation, termination or suspension
that, individually or in the aggregate, has not had and could not reasonably
be expected to have a material adverse effect on the Business or Condition of
MPC and the Company.

                                       10

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    2.19  AFFILIATE TRANSACTIONS.  Except as disclosed in SECTION 2.19 OF THE
DISCLOSURE SCHEDULE, as of Closing, neither MPC, the Company nor the
Subsidiaries will have any Contractual obligations with respect to Seller or
its Affiliates (other than MPC, the Company or the Subsidiaries).

    2.20  LABOR AND EMPLOYMENT MATTERS.  Except as disclosed in SECTION 2.20
OF THE DISCLOSURE SCHEDULE, no employee of MPC, the Company or any Subsidiary
is presently a member of a collective bargaining unit and, to the Knowledge
of Seller and MPC, there are no threatened or contemplated attempts to
organize for collective bargaining purposes any of the employees of MPC, the
Company or any Subsidiary, and, to the Knowledge of Seller and MPC, there are
no threatened or pending actions or proceedings before any Governmental or
Regulatory Authority relating to such attempts to organize. Since January 1,
1998, there has been no work stoppage, strike or other concerted action by
employees of MPC, the Company or any Subsidiary which materially adversely
affected the Business or Condition of MPC and the Company. Except as
disclosed in SECTION 2.20 OF THE DISCLOSURE SCHEDULE, there are no unfair
labor practice charges or other matters pending before the National Labor
Relations Board to which either MPC or any of the Subsidiaries is a party.

    2.21  ENVIRONMENTAL MATTERS.  (a) Each of MPC, the Company and the
Subsidiaries has obtained all Licenses which are required under applicable
Environmental Laws in connection with the conduct of the business or
operations of MPC, the Company or such Subsidiary, except where the failure
to obtain any such License could not reasonably be expected to be,
individually or in the aggregate with other such failures, materially adverse
to the Business or Condition of MPC and the Company. Each of such Licenses is
in full force and effect and each of MPC, the Company and the Subsidiaries is
in compliance with the terms and conditions of all such Licenses and with any
applicable Environmental Law, except where the failure to be in compliance
could not reasonably be expected to be, individually or in the aggregate with
other such failures, materially adverse to the Business or Condition of MPC
and the Company.

    (b) Except as noted in the Pilko Environmental Reports and as set forth
in SECTION 2.21 OF THE DISCLOSURE SCHEDULE, (i) neither MPC, the Company, nor
any Subsidiary has received written notice of violation of an Environmental
Law with respect to any of the Assets and Properties of MPC, the Company, or
any Subsidiary, which individually, or in the aggregate with other violations
of Environmental Laws, would materially adversely affect the Business or
Condition of MPC and the Company; (ii) no site or facility now or previously
owned, operated, or leased by MPC, the Company, or any Subsidiary is listed
or proposed for listing on the NPL, CERCLIS or any similar state or local
list of sites requiring investigation or clean-up, or would require
remediation or response under applicable Environmental Laws that would result
in expenditures in excess of $500,000 individually, or $1,000,000 in the
aggregate; and (iii) to the Knowledge of MPC and Seller, no facts, events or
conditions relating to the past or present facilities, properties or
operations of MPC, the Company, or any of the Subsidiaries will prevent
continued compliance with Environmental Laws or can reasonably be expected to
give rise to any investigatory, remedial or corrective obligations pursuant
to Environmental Laws, including without limitation any such liabilities or
noncompliance relating to onsite or offsite releases or threatened releases
of hazardous materials, substances or wastes, which individually or in the
aggregate with other such facts, events or conditions, would materially
adversely affect the Business or Condition of MPC and the Company.

    2.22  INFORMATION SUPPLIED.  The proxy statement relating to the MPC
Stockholders' Meeting (as defined in SECTION 4.11), as amended or
supplemented from time to time (as so amended and supplemented, the "PROXY
STATEMENT"), and any other documents to be filed by MPC with the SEC or any
other Governmental or Regulatory Authority in connection with the
Restructuring and the other transactions contemplated hereby will (in the
case of the Proxy Statement and any such other documents filed with the SEC
under the Exchange Act or the Securities Act) comply as to form in all
material respects with the requirements of the Exchange Act and the
Securities Act, respectively, and will not, on the date of its filing or, in
the case of the Proxy Statement, at the date it is mailed to

                                       11

<Page>

stockholders of MPC and at the time of the MPC Stockholders' meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.

    2.23  VOTE REQUIRED.  Assuming the accuracy of the representation and
warranty contained in SECTION 3.09, the affirmative vote of the holders of
record of at least two-thirds of the issued and outstanding common stock of
MPC with respect to the adoption of this Agreement and the Restructuring is
the only vote of the holders of any class or series of the capital stock of
MPC required to adopt this Agreement and approve the Restructuring and the
other transactions contemplated hereby.

    2.24  BROKERS.  Except for Goldman, Sachs & Co., whose fees, commissions
and expenses are the sole responsibility of Seller, all negotiations relative
to this Agreement and the transactions contemplated hereby have been carried
out by Seller and MPC directly with Purchaser without the intervention of any
Person on behalf of Seller and MPC in such manner as to give rise to any
valid claim by any Person against Purchaser, MPC, the Company or any
Subsidiary for a finder's fee, brokerage commission or similar payment.

    2.25  PUBLIC UTILITY HOLDING COMPANY ACT.  As of the date of this
Agreement, none of the Subsidiaries is a "public utility company," a "holding
company," a "subsidiary company" or an "affiliate" of any public utility
company within the meaning of SECTION 2(a)(5), 2(a)(8) or 2(a)(11) of the
Public Utility Holding Company Act of 1935, as amended (the "1935 ACT"),
respectively. Neither MPC, the Company nor any Subsidiary is currently
regulated under the 1935 Act.

    2.26  REGULATORY FILINGS.  All filings (other than immaterial filings)
required to be made by MPC or any of the Subsidiaries since January 1, 1997
under the 1935 Act, the Federal Power Act, the Federal Communications Act of
1934 and applicable state Laws, have been timely filed with the SEC, the
FERC, the Department of Energy, the FCC or any applicable state public
utility commissions (including, to the extent required, the Montana Public
Service Commission), as the case may be, including all forms, statements,
reports, agreements (oral or written) and all documents, exhibits, amendments
and supplements appertaining thereto, including all rates, tariffs,
franchises, service agreements and related documents and all such filings
complied in all material respects, as of their respective dates, with all
applicable requirements of the applicable statute and the rules and
regulations thereunder, except for filings the failure of which to make,
individually or in the aggregate, have not had and could not reasonably be
expected to have a material adverse effect on the Business or Condition of
MPC and the Company.

    2.27  RIGHTS AGREEMENT.  As of the date of this Agreement, MPC, or the
Board of Directors of MPC, as the case may be, has taken all necessary
actions so as to render the Rights Agreement dated March 2, 1999, as amended,
inapplicable to the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, the Restructuring, the
Divestiture and any other transactions contemplated hereby.

    2.28  EFFECT OF RESTRUCTURING.  Except as disclosed in Section 2.28 of
the Disclosure Schedule, as a consequence of the Restructuring, as of the
Closing Date, by operation of law pursuant to Section 35-1-817 and 35-8-1203
of the Montana Code Annotated (1999), the Company will have succeeded to all
of MPC's right, title and interest in the Assets and Properties of MPC and
constituting the utility business of MPC (the "UTILITY BUSINESS"), as
described in that certain Confidential Offering Memorandum dated May 2000
prepared by Goldman, Sachs & Co., except for Assets or Properties acquired or
disposed of in compliance with this Agreement, including SECTION 4.07.

                                       12

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                                 ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF PURCHASER

    Purchaser hereby represents and warrants to Seller and MPC as follows:

    3.01  CORPORATE EXISTENCE.  Purchaser is a corporation duly incorporated,
validly existing and in good standing under the Laws of the state of its
incorporation. Purchaser has full corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby.

    3.02  AUTHORITY.  The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder,
have been duly and validly authorized by the Board of Directors of Purchaser,
no other corporate action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.

    3.03  NO CONFLICTS.  The execution and delivery by Purchaser of this
Agreement do not, the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will
not:

    (a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of
Purchaser;

    (b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in SCHEDULE 3.04 hereto, conflict
with or result in a violation or breach of any term or provision of any Law
or Order applicable to Purchaser or any of its Assets and Properties (other
than such conflicts, violations or breaches which could not in the aggregate
reasonably be expected to adversely affect the validity or enforceability of
this Agreement); or

    (c) except as disclosed in SCHEDULE 3.03 hereto or as could not,
individually or in the aggregate, reasonably be expected to adversely affect
the ability of Purchaser to consummate the transactions contemplated hereby
or to perform its obligations hereunder, (i) conflict with or result in a
violation or breach of, (ii) constitute (with or without notice or lapse of
time or both) a default under, (iii) require Purchaser to obtain any consent,
approval or action of, make any filing with or give any notice to any Person
as a result or under the terms of, or (iv) result in the creation or
imposition of any Lien upon Purchaser or any of its Assets or Properties
under, any Contract or License to which Purchaser is a party or by which any
of its Assets and Properties is bound.

    3.04  GOVERNMENTAL APPROVALS AND FILINGS.  Except as disclosed in
SCHEDULE 3.04 hereto, no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of Purchaser
is required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby,
except where the failure to obtain any such consent, approval or action, to
make any such filing or to give any such notice could not reasonably be
expected to adversely affect the ability of Purchaser to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.

    3.05  LEGAL PROCEEDINGS.  There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its Assets and Properties which could reasonably be
expected to result in the issuance of any Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.

    3.06  PURCHASE FOR INVESTMENT.  The Units will be acquired by Purchaser
(or, if applicable, its assignee pursuant to SECTION 13.09(b)) for its own
account for the purpose of investment, it being understood that the right to
dispose of such Units shall be entirely within the discretion of Purchaser

                                       13

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(or such assignee, as the case may be). Purchaser (or such assignee, as the
case may be) will refrain from transferring or otherwise disposing of any of
the Units, or any interest therein, in such manner as to cause Seller to be
in violation of the registration requirements of the Securities Act or
applicable state securities or blue sky laws.

    3.07  BROKERS.  Except for Credit Suisse First Boston, whose fees,
commissions and expenses are the sole responsibility of Purchaser, all
negotiations relative to this Agreement and the transactions contemplated
hereby have been carried out by Purchaser directly with Seller without the
intervention of any Person on behalf of Purchaser in such manner as to give
rise to any valid claim by any Person against Seller, the Company or any
Subsidiary for a finder's fee, brokerage commission or similar payment.

    3.08  FINANCING.  Purchaser has sufficient cash and/or available credit
facilities or written commitments for credit facilities (and has provided
Seller and MPC with evidence thereof) to pay the Purchase Price and to make
all other necessary payments of fees and expenses in connection with the
transactions contemplated by this Agreement.

    3.09  OWNERSHIP OF THE CAPITAL STOCK.  Purchaser does not beneficially
own any of the capital stock of MPC.

    3.10  EXON-FLORIO.  Purchaser is not a "foreign person" for purposes of
the Exon-Florio Amendment.

    3.11  INDEPENDENT EVALUATION.  Purchaser is experienced and knowledgeable
in the utility business, and is aware of its risks. Purchaser has been
afforded the opportunity to examine the materials made available to it by
Seller in Seller's offices in Butte, Montana (the "Data Room") with respect
to MPC, the Company, its Subsidiaries and their business (the "Background
Materials"). The Background Materials include files, or copies thereof, that
MPC, the Company and its Subsidiaries have used in their normal course of
business and other information about MPC, the Company and its Subsidiaries
and their business that MPC, the Company and its Subsidiaries have compiled
or generated; however, Purchaser acknowledges and agrees that neither MPC,
the Seller nor the Company, the Subsidiaries or other Person has made any
representations or warranties, express or implied, written or oral, as to the
accuracy or completeness of the Background Materials or, except for the
representations and warranties of Seller contained in this Agreement, as to
any other information relating to MPC, the Company, the Subsidiaries or their
business furnished or to be furnished to Purchaser or its representatives by
or on behalf of Seller. In entering into this Agreement, Purchaser
acknowledges and affirms that it has relied and will rely solely on the terms
of this Agreement and upon its independent analysis, evaluation and
investigation of, and judgment with respect to, the business, economic,
legal, tax or other consequences of this transaction including its own
estimate and appraisal of the extent and value of and the risks associated
with the utility business. Purchaser's representatives have visited the
offices of Seller and have been given opportunities to examine the Books and
Records Seller has made available relating to MPC, the Company, the
Subsidiaries and their business. Except as expressly provided in this
Agreement, neither Seller nor MPC, the Company nor the Subsidiaries shall
have any liability to Purchaser or its Affiliates, agents, representatives or
employees resulting from any use, authorized or unauthorized, by Purchaser or
its Affiliates, agents, representatives or employees of the Background
Materials or other information relating to MPC, the Company, the Subsidiaries
or their business provided by or on behalf of MPC, any Seller, the Company or
its Subsidiaries.

                                  ARTICLE IV
                          COVENANTS OF SELLER AND MPC

    Each of Seller and MPC covenants and agrees with Purchaser that, at all
times from and after the date hereof until the Closing, Seller and MPC will
comply with all covenants and provisions of this ARTICLE IV, except to the
extent Purchaser may otherwise consent in writing.

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    4.01  REGULATORY AND OTHER APPROVALS.  Seller and MPC will, and will
cause the Company and the Subsidiaries to, as promptly as practicable (a)
take all commercially reasonable steps necessary or desirable to obtain all
consents, approvals or actions of, make all filings with and give all notices
to Governmental or Regulatory Authorities or any other Person required of
Seller, MPC, the Company or any Subsidiary to consummate the transactions
contemplated hereby, including without limitation those described in SECTIONS
2.06 AND 2.07 OF THE DISCLOSURE SCHEDULE, (b) provide such other information
and communications to such Governmental or Regulatory Authorities or other
Persons as such Governmental or Regulatory Authorities or other Persons may
reasonably request in connection therewith and (c) provide reasonable
cooperation to Purchaser in connection with the performance of its
obligations under SECTIONS 5.01 and 5.02. Seller and MPC will provide prompt
notification to Purchaser when any such consent, approval, action, filing or
notice referred to in clause (a) above is obtained, taken, made or given, as
applicable, and will advise Purchaser of any communications (and, unless
precluded by Law, provide copies of any such communications that are in
writing) with any Governmental or Regulatory Authority or other Person
regarding any of the transactions contemplated by this Agreement.

    4.02  HSR FILINGS.  In addition to and not in limitation of Seller's and
MPC's covenants contained in SECTION 4.01, Seller and MPC will (a) take
promptly all actions necessary to make the filings required of Seller, MPC or
their Affiliates under the HSR Act, (b) comply at the earliest practicable
date with any request for additional information received by Seller, MPC or
their Affiliates from the Federal Trade Commission or the Antitrust Division
of the Department of Justice pursuant to the HSR Act and (c) cooperate with
Purchaser in connection with Purchaser's filing under the HSR Act and in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement commenced by either the Federal
Trade Commission or the Antitrust Division of the Department of Justice or
state attorneys general. In the event that a suit or objection is instituted
by any Person challenging this Agreement and the transactions contemplated
hereby as violative of applicable competition and antitrust laws, each of
Purchaser and Seller, MPC and the Company shall use commercially reasonable
efforts to resist or resolve such suit or objection.

    4.03  INVESTIGATION BY PURCHASER.  Seller and MPC will, and will cause
the Company and the Subsidiaries to, (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, consultants and other
representatives (together, "REPRESENTATIVES") with full access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents and accountants of MPC, the Company and the Subsidiaries
and their Assets and Properties and Books and Records, but only to the extent
that such access does not unreasonably interfere with the business and
operations of MPC, the Company and the Subsidiaries, and (b) furnish
Purchaser and such other Persons with all such information and data
(including without limitation copies of Contracts, Benefit Plans and other
Books and Records) concerning the business and operations of MPC, the Company
and the Subsidiaries as Purchaser or any of such other Persons reasonably may
request in connection with such investigation (and permit the copying
thereof), except to the extent that furnishing any such information or data
would violate any Law, Order, Contract or License applicable to Seller, MPC,
the Company or any Subsidiary or by which any of their respective Assets and
Properties is bound.

    4.04  NO SOLICITATIONS.  Seller and MPC will not take, nor will they
permit the Company, the Subsidiaries or any Affiliate of Seller or MPC (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of Seller,
MPC, the Company, the Subsidiaries or any such Affiliate) to take, directly
or indirectly, any action to solicit, encourage, receive, negotiate, assist
or otherwise facilitate (including by furnishing confidential information
with respect to MPC, the Company or any Subsidiary or permitting access to
the Assets and Properties and Books and Records of MPC, the Company or any
Subsidiary) or accept any offer or inquiry from any Person concerning an
Acquisition Proposal. Notwithstanding the foregoing, MPC or its Board of
Directors shall be permitted to (A) to the extent applicable, comply with
Rule 14e-2(a)

                                       15

<Page>

promulgated under the Exchange Act with regard to an Acquisition Proposal, or
(B) engage in any discussions or negotiations with, or provide any
information to any Person in response to an unsolicited bona fide written
Acquisition Proposal, by any such Person, if and only to the extent that, in
the case of the actions referred to in clause (B), (i) the MPC Stockholders'
Meeting shall not have occurred, (ii) the Board of Directors of MPC,
concludes in good faith after consultation with its financial advisors and
legal advisors, that such Acquisition Proposal would reasonably be expected
to constitute a Superior Proposal, (iii) prior to providing any information
or data to any Person in connection with an Acquisition Proposal by any such
Person, the Board of Directors of MPC receives from such Person an executed
confidentiality agreement on terms no less favorable to the Company than
those contained in the Confidentiality Agreement between MPC and Purchaser
regarding the sale of the Utility Business and (iv) prior to providing any
information or data to any Person or entering into discussions or
negotiations with any Person, the Board of Directors of MPC notifies
Purchaser immediately of such inquiries, proposals or offers received by, any
such information requested from, or any such discussions or negotiations
sought to be initiated or continued with, any of its representatives
indicating, in connection with such notice, the name of such Person and the
material terms and conditions of any proposals or offers. Seller and MPC
agree immediately to cease and cause to be terminated any existing
activities, discussions, or negotiations with any parties heretofore
conducted with respect to any Acquisition Proposal. Seller and MPC agree to
take the necessary steps promptly to inform all such Persons of its
obligations hereunder. Nothing in this Section 4.04 shall (x) permit Seller
or MPC to terminate this Agreement (except as specifically provided in
Article XI), or (y) affect any other obligation of Seller or MPC under this
Agreement.

    4.05  CONDUCT OF BUSINESS.  MPC will, and will cause the Company and the
Subsidiaries to, conduct business only in the ordinary course consistent with
past practice and in compliance with applicable Law and will timely seek
renewal of all Licenses and permits required or necessary for the operation
of the Utility Business. Without limiting the generality of the foregoing,
and other than with respect to, and in connection with, the Restructuring and
the Divestiture, MPC will, and will cause the Company and the Subsidiaries
to, use commercially reasonable efforts, to the extent the officers of MPC
believe such action to be in the best interests of MPC and the Subsidiaries,
to (a) preserve intact the present business organization, reputation and
franchises of MPC, the Company and the Subsidiaries in all material respects,
(b) keep available (subject to dismissals and retirements (including
retirements pursuant to MPC's "Special Retirement Program") in the ordinary
course of business and consistent with past practice and transfers to any
Affiliate of MPC) the services of the key officers and employees of MPC and
the Subsidiaries, (c) maintain the Assets and Properties of MPC, the Company
and the Subsidiaries in good working order and condition, ordinary wear and
tear excepted, and (d) maintain the good will of key customers, suppliers and
lenders and other Persons with whom MPC or any Subsidiary otherwise has
significant business relationships.

    4.06  FINANCIAL STATEMENTS AND REPORTS.  (a) As promptly as practicable
and in any event no later than forty five (45) days after the end of each
fiscal quarter ending after the date hereof and before the Closing Date
(other than the fourth quarter) or ninety (90) days after the end of each
fiscal year ending after the date hereof and before the Closing Date, as the
case may be, MPC will deliver to Purchaser true and complete copies of the
unaudited consolidated balance sheet and the related unaudited consolidated
statement of operations of MPC and the Subsidiaries, in each case as of and
for the fiscal year then ended or as of and for each such fiscal quarter and
the portion of the fiscal year then ended, as the case may be, together with
the notes, if any, relating thereto, which financial statements shall be
prepared on a basis consistent with the Financial Statements.

    (b) As promptly as practicable, MPC will deliver to Purchaser true and
complete copies of such other regularly-prepared financial statements,
reports and analyses as may be prepared or received by MPC, the Company or
any Subsidiary relating to the business or operations of MPC, the Company or
any Subsidiary.

                                       16

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    4.07  CERTAIN RESTRICTIONS.  MPC will, and will cause the Subsidiaries to
refrain from:

    (a) except as disclosed in SECTION 4.07(a) OF THE DISCLOSURE SCHEDULE,
and except as may be necessary or desirable in connection with the
Restructuring, amending their certificates or articles of incorporation or
by-laws (or other comparable corporate charter documents) in any material
respect or taking any action with respect to any such amendment or any
recapitalization, reorganization, liquidation or dissolution of any such
corporation;

    (b) except as disclosed in SECTION 4.07(b) OF THE DISCLOSURE SCHEDULE,
and except as may be necessary or desirable in connection with the
Restructuring, authorizing, issuing, selling or otherwise disposing of any
shares of capital stock of or any Option with respect to MPC, the Company or
any Subsidiary, or modifying or amending any right of any holder of
outstanding shares of capital stock of or Option with respect to MPC, the
Company or any Subsidiary;

    (c) except for (i) the declaration of regular quarterly cash dividends on
the MPC common stock not to exceed twenty (20) cents per share, and (ii) the
payment of dividends required to be paid in respect of MPC outstanding
preferred stock, declaring, setting aside or paying any dividend or other
distribution in respect of the capital stock of MPC, the Company or any
Subsidiary or directly or indirectly redeeming, purchasing or otherwise
acquiring any capital stock of or any Option with respect to MPC, the Company
or any Subsidiary;

    (d) except as disclosed in SECTION 4.07(d) OF THE DISCLOSURE SCHEDULE and
as specified in the Budget, acquiring or disposing of, or incurring any Lien
(other than a Permitted Lien) on, any Assets and Properties individually or
in the aggregate material to the Business or Condition of MPC and the Company;

    (e) except (i) as disclosed in SECTION 4.07(e) OF THE DISCLOSURE
SCHEDULE, and (ii) in the ordinary course of business consistent with past
practices, the Budget and the terms and provisions of this Agreement,
entering into, or in any material respect amending, modifying, terminating
(partially or completely), granting any waiver under or giving any consent
with respect to any Contract to which MPC, the Company or any Subsidiary is a
party which is material to the Business or Condition of MPC and the Company;

    (f) other than as specified in the Budget, (i) voluntarily incurring
Indebtedness in an aggregate principal amount exceeding $5,000,000 (other
than refinancings where the principal amount refinanced is no greater than
the amount repaid), or (ii) purchasing, canceling, prepaying or otherwise
providing for a complete or partial discharge in advance of a scheduled
payment date with respect to, or waiving any right under, any Indebtedness in
an aggregate principal amount exceeding $1,000,000 (in either case other than
Indebtedness of MPC, the Company or a Subsidiary owing to MPC, the Company or
a wholly-owned Subsidiary); PROVIDED, HOWEVER, that MPC, Seller, the Company
and the Subsidiaries may take any and all actions necessary or appropriate to
terminate the Employee Stock Ownership Plan portion of the MPC 401(k) Plan,
and to prepay any outstanding Indebtedness of MPC, the Company and the
Subsidiaries attributable to such Employee Stock Ownership Plan;

    (g) other than in connection with the Restructuring, engaging with any
Person in any merger or other business combination;

    (h) except as set forth in the Budget, making (1) capital expenditures or
commitments for additions to property, plant or equipment constituting
capital assets or (2) making expenditures with respect to operations and
maintenance or incurring general and administrative expenses, in each case in
an aggregate amount exceeding $1,000,000;

                                       17

<Page>

    (i) except to the extent required by applicable Law or reasonably and in
good faith believed by the officers of MPC or the Company to be in the best
interests of MPC, the Company and the Subsidiaries (and subject in each case
to prior written notice to, and consultation with, Purchaser), making any
material change in (A) any pricing, investment, accounting, financial
reporting, inventory, credit, allowance or Tax practice or policy, or (B) any
method of calculating any bad debt, contingency or other reserve for
accounting, financial reporting or Tax purposes;

    (j) other than in the ordinary course of business or to the extent
required by applicable Law (including without limitation, the duty to bargain
in good faith under any collective bargaining agreement) (and subject in each
case to prior written notice to, and consultation with, Purchaser), adopting,
entering into or becoming bound by any material Benefit Plan,
employment-related Contract or collective bargaining agreement, or amending,
modifying or terminating (partially or completely) any such Benefit Plan
(other than the Employee Stock Ownership Plan portion of the MPC 401(k)
Plan), employment-related Contract or collective bargaining agreement if such
action will result in material additional cost to MPC;

    (k) making any change in its fiscal year;

    (l) except as set forth in the Budget, making any loans or advances by it
to, or guarantee, endorse or otherwise be or become contingently liable,
directly or indirectly, in connection with the obligations, stocks or
dividends of, or owning, purchasing or acquiring stock, obligations or
securities of, or any other interest in, or make any capital contributions
to, any Person;

    (m) effectuating a "plant closing" or "mass layoff", as those terms are
defined in the Worker Adjustment and Retraining Act, affecting in whole or in
part any site of employment, facility, operating unit or employee of MPC, the
Company or any Subsidiary;

    (n) paying, discharging or satisfying any claims, liabilities or
obligations (obsolete, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practice of liabilities reflected
or reserved against in the balance sheet comprising the Interim Financial
Statements;

    (o) making or changing any Tax election, filing any amended Tax Return,
settling or compromising any federal, state, local or foreign Tax liability,
changing any annual Tax accounting period, changing any method of Tax
accounting, entering into any closing agreement relating to any Tax,
surrendering any right to claim a Tax refund, or consenting to any extension
or waiver of the limitations period applicable to any Tax claim or
assessment, in each case in a manner which could reasonably be expected to
have material adverse effect on Purchaser, the Company or the Subsidiaries
for any post Closing period; or

    (p) selling any cushion gas other than sales in accordance with prudent
utility practices, the proceeds of which will remain with, or be used for the
benefit of, MPC; or

    (q) entering into any Contract to do or engage in any of the foregoing.

    Notwithstanding any provision to the contrary, nothing in this SECTION
4.07 or SECTION 4.05 shall require MPC, Seller or the Company to revise,
dishonor or delay performance of any obligation under agreements in existence
prior to the date hereof.

    4.08  AFFILIATE TRANSACTIONS.  Except as disclosed in SECTION 4.08 OF THE
DISCLOSURE SCHEDULE, immediately prior to the Closing, all Indebtedness and
other amounts owing under Contracts between Seller, any officer, director or
Affiliate (other than MPC, the Company or any Subsidiary) of Seller, on the
one hand, and MPC, the Company or any of the Subsidiaries, on the other (each
an "AFFILIATE CONTRACT"), including the policy among the members of the MPC
Affiliated Group as described in SECTION 2.10(d) OF THE DISCLOSURE SCHEDULE,
will be paid in full. With respect to any Affiliate Contract disclosed in
SECTION 4.08 OF THE DISCLOSURE SCHEDULE or entered into after the date
hereof, which provides

                                       18

<Page>

for the provision of services to MPC, the Company or any Subsidiary, Seller
and MPC will, at Purchaser's election prior to the Closing Date, either (i)
terminate such Contract or cause it to be terminated, effective as of the
Closing Date, or (ii) cause such Contract to provide, effective as of the
Closing Date, that the same is terminable at the option of MPC, the Company
or the Subsidiary, as applicable, upon not more than 30 days prior notice or
such shorter period as may be provided for under the existing provisions of
such Contract.

    4.09  FULFILLMENT OF CONDITIONS.  Seller and MPC will take all
commercially reasonable steps necessary or desirable and proceed diligently
and in good faith to satisfy each condition to the obligations of Purchaser
contained in this Agreement and will not, and will not permit the Company or
any Subsidiary to, take or fail to take any action that could reasonably be
expected to result in the nonfulfillment of any such condition.

    4.10  COMPLETION OF RESTRUCTURING.  Seller and MPC will use their best
efforts to cause the Restructuring to become effective prior to the Closing.

    4.11  PREPARATION AND MAILING OF PROXY STATEMENT.  As soon as practicable
after the date of this Agreement, MPC shall prepare and mail the Proxy
Statement to the holders of MPC capital stock entitled to vote at the meeting
of the stockholders of MPC to be called by MPC for the purpose of obtaining
the MPC Stockholders Approval (the "MPC STOCKHOLDERS' MEETING") at the
earliest practicable time following the date hereof.

    4.12  APPROVAL OF MPC STOCKHOLDERS.  MPC shall, through its Board of
Directors, duly call, give notice of, convene and hold the MPC Stockholders
Meeting for the purpose of voting on the approval and adoption of this
Agreement and the Restructuring (the "MPC STOCKHOLDERS' APPROVAL") as soon as
reasonably practicable after the date hereof. Subject to the following
sentence MPC shall, through its Board of Directors, include in the Proxy
Statement the recommendation of the Board of Directors of MPC that the
stockholders of MPC approve and adopt this Agreement and the Restructuring,
and shall use its best efforts to obtain such approval and adoption. The
Board of Directors of MPC shall not withdraw, amend or modify in a manner
adverse to Purchaser its recommendation referred to in the preceding sentence
(or announce publicly its intention to do so), except that such Board of
Directors shall be permitted to withdraw, amend or modify its recommendation
(or publicly announce its intention to do so) if: (i) Seller and MPC have
complied with SECTION 4.04; (ii) an unsolicited Superior Proposal shall have
been proposed by any Person other than Purchaser and such proposal is pending
at the time of such withdrawal, amendment or modification; and (iii) MPC
shall have notified Purchaser in writing of such Superior Proposal at least
three (3) Business Days in advance of such withdrawal, amendment or
modification.

    4.13  COMPLETION OF THE DIVESTITURE.  Seller and MPC will use their
commercially reasonable efforts to cause the Divestiture to be completed
prior to the Closing.

    4.14  REGULATORY PROCEEDINGS.  Seller, MPC and the Company will take
commercially reasonable steps to enable Purchaser to participate as a party
in interest in all current and future FERC proceedings and PSC proceedings,
including but not limited to, stranded costs, default supplier rules,
regional transmission organizations and electric and gas rate increase
requests. In the event that applicable rules will not allow Purchaser to so
participate in such proceedings, Seller, MPC and the Company agree to furnish
Purchaser with all documentation filed in connection therewith and to consult
and cooperate with Purchaser on an ongoing basis regarding the conduct
thereof.

    4.15  SALE OF COLSTRIP 1, 2, AND 3 TRANSMISSION SYSTEM.  Seller and MPC
will use their commercially reasonable efforts to consummate the sale of the
interest in the Colstrip 1, 2, and 3 Transmission System to PPL Montana LLC
for the agreed consideration of $97 million cash and the proceeds of which
will remain with, or be used for the benefit of, MPC.

                                       19

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    4.16  QF CONTRACTS.  Seller and MPC agree to advise, consult and
cooperate with Purchaser regarding all negotiations for the buyout or buydown
of QF contracts and promptly furnish copies to Purchaser of all new letters
of intent and definitive agreement for the buyout or buydown of QF contracts.

    4.17  MPC BENEFIT RESTORATION PLANS.  Seller and MPC agree that, from and
after the date of this Agreement, Seller and MPC will not allow any new
participant in the MPC Benefit Restoration Plan for Senior Executives or the
MPC Benefit Restoration Plan for Directors nor amend or modify the terms of
such plans other than to transfer participants or obligations out of such
plans to Seller or its Affiliates in a manner that results in no liability to
Purchaser.

    4.18  POWER SUPPLY.  Seller and MPC agree to advise, consult and
cooperate with Purchaser regarding steps to be taken to manage power supply
risks, including (i) securing power to replace that currently supplied under
the wholesale buyback agreement with PPL Montana LLC that expires on June 30,
2001, (ii) supplying MPC's residual customer load in full in the event the
PSC proceeding on default supplier rules is not resolved by June 30, 2001, or
if MPC's default supplier role is extended beyond July 1, 2002, and (iii)
securing power to serve MPC's power supply obligations to Advanced Silicon
Materials, Inc. Seller and MPC agree to take reasonable and prudent steps to
mitigate such risk, including contracting for additional power supply, and to
consult and cooperate with Purchaser in the taking of such steps.

    4.19  GENERATION SALE PROCEEDS.  Seller and MPC agree to maintain the net
after tax cash proceeds from the sale of generation and related assets to PPL
Montana LLC, after reduction for unrecovered regulatory assets, as cash
reserves (which as of the date hereof, shall not be less than $55,000,000)
and not to apply the same except as mandated by the PSC or FERC final order
(or if such order is appealed by the final non-appealable order of the
applicable court with jurisdiction over such appeal) on stranded cost
recovery or as otherwise consented to by Purchaser.

    4.20  REGIONAL TRANSMISSION ORGANIZATION AND INDEPENDENT TRANSMISSION
COMPANY.  Seller and MPC agree to advise, consult and cooperate with
Purchaser regarding all negotiations and agreements for the potential
inclusion of MPC or the Company in any Independent Transmission Company or
Regional Transmission Company or Regional Transmission Organization. Seller
and MPC agree to promptly furnish Purchaser copies of all agreements
regarding the Independent Transmission Company or Regional Transmission
Organization.

    4.21  NOTIFICATION OF CERTAIN MATTERS.  Seller and MPC shall give prompt
notice to Purchaser, and Purchaser shall give prompt notice to Seller and
MPC, of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate and (ii) any
failure of Seller, MPC, the Company, or any Subsidiary or Purchaser, as the
case may be, to comply with or satisfy any covenant, condition or agreement
to be completed with or satisfied by it hereunder; PROVIDED, HOWEVER, that
the delivery of any notice pursuant to this SECTION 4.21 shall not limit or
otherwise affect the remedies available hereunder to the party entitled to
receive such notice.

    4.22  CONFIDENTIALITY AND STANDSTILL AGREEMENTS.  From the date hereof to
the Closing Date, neither Seller, MPC, nor the Company shall terminate,
amend, modify or waive any provisions of any confidentiality or standstill
agreement relating to the Utility Business to which it is a party or by which
it is bound. During such period, Seller, MPC and the Company each shall
enforce, to the fullest extent permitted under applicable law, the provisions
of any such agreement, including but not limited to, by obtaining injunctive
relief to prevent any breaches of such agreements and to enforce specifically
the terms and provisions thereof in any court having jurisdiction.

                                       20

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                                   ARTICLE V
                             COVENANTS OF PURCHASER

    Purchaser covenants and agrees with Seller and MPC that, at all times
from and after the date hereof until the Closing and, in the case of SECTION
5.04 and SECTION 5.07, thereafter, Purchaser will comply with all covenants
and provisions of this ARTICLE V, except to the extent Seller and MPC may
otherwise consent in writing.

    5.01  REGULATORY AND OTHER APPROVALS.  Purchaser will as promptly as
practicable (a) take all commercially reasonable steps necessary or desirable
to obtain all consents, approvals or actions of, make all filings with and
give all notices to Governmental or Regulatory Authorities or any other
Person required of Purchaser to consummate the transactions contemplated
hereby, including without limitation those disclosed in SCHEDULES 3.03 and
3.04 hereto, and those that may be required in connection with the
transaction structure contemplated by SECTION 5.08, (b) provide such other
information and communications to such Governmental or Regulatory Authorities
or other Persons as such Governmental or Regulatory Authorities or other
Persons may reasonably request in connection therewith and (c) provide
reasonable cooperation to Seller, the Company and the Subsidiaries in
connection with the performance of their obligations under SECTIONS 4.01 and
4.02. Purchaser will provide prompt notification to Seller when any such
consent, approval, action, filing or notice referred to in clause (a) above
is obtained, taken, made or given, as applicable, and will advise Seller of
any communications (and, unless precluded by Law, provide copies of any such
communications that are in writing) with any Governmental or Regulatory
Authority or other Person regarding any of the transactions contemplated by
this Agreement.

    5.02  HSR.  In addition to and without limiting Purchaser's covenants
contained in SECTION 5.01, Purchaser will (i) take promptly all actions
necessary to make the filings required of Purchaser or its Affiliates under
the HSR Act, (ii) comply at the earliest practicable date with any request
for additional information received by Purchaser or its Affiliates from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice pursuant to the HSR Act and (iii) cooperate with Seller in connection
with Seller's filing under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the transactions contemplated by
this Agreement commenced by either the Federal Trade Commission or the
Antitrust Division of the Department of Justice or state attorneys general.

    5.03  [INTENTIONALLY OMITTED.]

    5.04  EMPLOYEE MATTERS.

    (a)  CONTINUATION OF COMPENSATION AND BENEFITS.  Except as otherwise
provided in this SECTION 5.04, during the period from the Closing Date until
twenty-four months following the Closing Date, the Purchaser will maintain,
or shall cause the Company and the Subsidiaries to maintain, base salary,
wages, compensation levels (including, without limitation, incentive
compensation or comparable cash equivalent plan) and employee pension and
welfare benefit plans and programs for the benefit of the employees of MPC,
the Company and the Subsidiaries, which, in the aggregate, are at least equal
to, or equivalent in value to, the base salary, wages, compensation levels,
and Benefit Plans listed in SECTION 2.13(a) OF THE DISCLOSURE SCHEDULE
provided to the employees of MPC, the Company and the Subsidiaries on the
date of this Agreement, plus any base salary and wage adjustments made in the
ordinary course of business between the date of this Agreement and the
Closing Date.

    (b)  SERVICE CREDIT.  The Purchaser shall provide, or shall cause the
Company and the Subsidiaries to provide, each employee of MPC, the Company
and the Subsidiaries with credit for all service with MPC, the Company and
the Subsidiaries for all purposes under each employee benefit plan, program,
or arrangement of the Purchaser or its Affiliates in which such employee is
eligible to participate,

                                       21

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except to the extent that such service credit would result in a duplication
of benefits with respect to the same period of service.

    (c)  BONUSES; INCENTIVE COMPENSATION.  The Purchaser shall maintain, or
shall cause the Company and the Subsidiaries to maintain, the bonus plans and
other incentive compensation plans and programs maintained by Seller and/or
any of its Affiliates or comparable cash equivalent plans in which the
employees of MPC, the Company and the Subsidiaries are eligible to
participate (including terminated or retired employees) who remain eligible
to participate under the terms of such plans, as in effect on the date of
this Agreement, through the end of the calendar year in which the Closing
Date occurs, with the bonuses and incentive compensation to be paid
thereunder by Purchaser and/or its Affiliates determined (i) in accordance
with calculation methods directed by Seller, such methods to be consistent
with the terms of such incentive compensation plans in effect on the date of
this Agreement and MPC's, the Company's and the Subsidiaries' past practices,
as appropriate, and (ii) in such a manner so that the effects of the
transaction contemplated by this Agreement will not unduly burden or benefit
the employees of MPC, the Company and the Subsidiaries.

    (d)  SEVERANCE POLICY; OTHER AGREEMENTS.  Except as disclosed in SECTION
5.04(d) OF THE DISCLOSURE SCHEDULE, if the employment of any employee of the
Company or a Subsidiary, is terminated within twenty-four months after the
Closing Date by (i) action of the Purchaser or any of its Affiliates other
than for Cause or (ii) action of an employee following (A) a reduction in
such employee's base salary equal to or greater than fifteen percent (15%) or
(B) such employee's decision not to relocate more than fifty (50) miles from
his or her then current job location, then Purchaser shall pay, or shall
cause the Company or the affected Subsidiary to pay, each such employee a
lump sum severance benefit (less required tax withholding and other
withholding obligations required by Law) in an amount equal to the sum of (x)
ten percent (10%) of such employee's base salary multiplied by such
employee's "years of service" up to a maximum of one hundred percent (100%)
of such base salary, plus (y) six thousand dollars ($6,000). For purposes of
the foregoing, "years of service" shall mean the employee's aggregate total
years of service (pro-rated to the date of termination) with MPC, the
Purchaser and any of their respective Affiliates. Notwithstanding the
foregoing, for those employees disclosed in SECTION 5.04(d) OF THE DISCLOSURE
SCHEDULE who are parties to an individual change in control severance
agreement with MPC, the terms of such agreement shall apply with respect to
any termination of such employee, and the consummation of the transaction
contemplated by this Agreement will be deemed to constitute a "Change in
Control" for purposes of each such agreement. The Purchaser shall honor, or
shall cause the Company and the Subsidiaries to honor, all such individual
change in control severance agreements with such employees, and the Purchaser
shall be liable for any amount(s) or benefit(s) due thereunder.

    (e)  BENEFIT PLAN OBLIGATIONS.  The Purchaser shall be, or shall cause
the Company and the Subsidiaries to be, responsible for all obligations
existing on the Closing Date (including, without limitation, any such
obligations that have been incurred but not yet paid) under any Benefit Plan
(including, without limitation, all health and welfare, life insurance and
disability plans and programs) applicable to the employees and former
employees of MPC, the Company and the Subsidiaries and to certain former
employees of Affiliates of MPC, as disclosed in SECTION 5.04(e) OF THE
DISCLOSURE SCHEDULE (collectively, the "COVERED PARTICIPANTS") and their
covered dependents. Effective as of the Closing Date, Seller and its
Affiliates (other than MPC, the Company or any Subsidiary) shall have no
liability or responsibility for any obligation under any Benefit Plan
applicable to the Covered Participants and their covered dependents with
respect to claims incurred by the Covered Participants or their covered
dependents prior to the Closing Date under each Benefit Plan. Expenses and
benefits with respect to claims incurred by the Covered Participants or their
covered dependents on or after the Closing Date shall be the responsibility
of Purchaser. For purposes of this paragraph, a claim is deemed incurred when
the services that are the subject of the claim are performed; in the case of
life insurance, when the death occurs, and, in the case of short-term or
long-term disability benefits, when the disability occurs. The Purchaser
shall, or shall cause the Company and the Subsidiaries to (i) waive all
limitations

                                       22

<Page>

as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Covered
Participants and their covered dependents under any Benefit Plan, in which
such Covered Participants and their covered dependents may be eligible to
participate after the Closing Date and (ii) provide each Covered Participant
and their covered dependents with credit for any co-payments and deductibles
paid prior to the Closing Date in satisfying any applicable deductible or
out-of-pocket requirements under any Benefit Plan in which such Covered
Participants and their covered dependents are eligible to participate after
the Closing Date.

    (f)  MPC 401(k) PLAN.  Effective as of the Closing Date, Purchaser shall
sponsor and maintain, or shall cause the Company to sponsor and maintain, the
MPC 401(k) Plan, or a comparable Qualified Plan (with the employer
contribution being made in cash not shares), for the eligible participants
and beneficiaries (including continuing the Seller stock investment fund for
the exclusive benefit of the eligible participants and beneficiaries who had
balances in such fund on the Closing Date) for at least twenty-four months
after the Closing Date. Effective as of the Closing Date, employees of the
Seller and its Affiliates (other than MPC, the Company and the Subsidiaries)
shall cease to accrue benefits and service credits under the MPC 401(k) Plan.
To the extent Purchaser sponsors or maintains a comparable plan rather than
the MPC 401(k) Plan, such comparable plan shall provide for the acceptance of
a trust to trust transfer and rollover distributions from MPC Qualified Plans
and/or conduit individual retirement accounts established by such
participants and beneficiaries.

    (g)  MPC PENSION PLAN.  Effective as of the Closing Date, Purchaser shall
sponsor and maintain, or shall cause the Company to sponsor and maintain, the
Montana Power Company Pension Plan (the "MPC PENSION PLAN"), or a comparable
plan, for eligible participants and beneficiaries for at least twenty-four
months after the Closing Date. Effective as of the Closing Date, employees of
the Seller and its Affiliates (other than MPC, the Company and the
Subsidiaries) shall cease to accrue benefits under the MPC Pension Plan.

    (h)  SUPPLEMENTAL RETIREMENT PLANS.  Except as disclosed in SECTION
5.04(h) OF THE DISCLOSURE SCHEDULE, effective as of the Closing Date the
Purchaser shall maintain and shall be responsible for, or shall cause the
Company and the Subsidiaries to maintain and be responsible for, all current
and future obligations of MPC, the Company and the Subsidiaries under any
supplemental pension benefit or benefit replacement or restoration plan,
program or individual arrangement maintained by MPC, the Company and the
Subsidiaries as in effect on the Closing Date.

    (i)  STOCK OPTION OBLIGATION.  On the Closing Date, each unvested stock
option on MPC common stock issued under any plan or program of MPC or its
Affiliates under which the employees of MPC, the Company and the Subsidiaries
have previously been awarded stock options on MPC common stock (an "MPC STOCK
OPTION") shall be cancelled, and the holder thereof shall be entitled to
receive on the Closing Date or as soon as practicable thereafter, from the
Purchaser as consideration for such cancellation, either (i) stock options of
substantially equivalent value ("SUBSTITUTE STOCK OPTIONS") to such holder's
MPC Stock Options (with Seller reserving reasonable discretion to determine
whether such Substitute Stock Options are of "substantially equivalent
value"), or (ii) an amount in cash (less required tax withholding and other
withholding obligations required by Law) equal to the product of (x) the
number of shares previously subject to such MPC Stock Option and (y) the
excess, if any, of the market price per share (the average of the high and
low prices of the underlying MPC common stock as reported on the New York
Stock Exchange Composite Tape on the Closing Date) over the exercise price
per share of the cancelled MPC Stock Option; PROVIDED, HOWEVER, that if the
Purchaser provides Substitute Stock Options in accordance with (i) of this
paragraph, then the Purchaser shall pay, or shall cause the Company or the
Subsidiaries to pay, in cash to any employee of MPC, the Company and the
Subsidiaries who receives Substitute Stock Options, but whose employment
terminates before such Substitute Stock Options vest under circumstances that
would entitle the employee to the benefit described in SECTION 5.04(d), the
amount computed under (ii) above as of the Closing Date.

                                       23

<Page>

    (j)  RETIREE BENEFITS.  Except as disclosed in SECTION 5.04(j) OF THE
DISCLOSURE SCHEDULE, effective as of the Closing Date, the Purchaser shall
maintain and shall be responsible for, or shall cause the Company and the
Subsidiaries to maintain and be responsible for, all current and future
obligations of MPC, the Company and the Subsidiaries with respect to (i) any
post-retirement health or welfare benefit plan, program or arrangement
maintained by MPC, the Company and the Subsidiaries as in effect on the
Closing Date and (ii) the utility discount provided to certain retired
employees and certain other employees, as disclosed in SECTION 5.04(j) OF THE
DISCLOSURE SCHEDULE, of MPC, the Company and the Subsidiaries. The post
retirement health and welfare benefits described in (i) above shall be
continued for their full terms as provided in the applicable plan, program or
arrangement as in effect on the Closing Date, and the utility discount
described in (ii) above shall be continued at least until residential
customer choice for electric and natural gas utility service is fully
implemented in Montana.

    (k)  COLLECTIVE BARGAINING AGREEMENTS.  The wages, compensation levels
and employee pension and welfare benefit plans and programs for the benefit
of employees of MPC, the Company and the Subsidiaries who are covered by a
collective bargaining agreement shall be governed by the terms of such
collective bargaining agreement, except (i) to the extent that an employee is
eligible for the benefits provided under SECTION 5.04(c) and/or SECTION
5.04(d)and (ii) SECTION 5.04(b) shall apply with respect to all such
employees. To the extent that the terms or provisions of any such collective
bargaining agreement conflict with any of the terms or provisions of this
Agreement, the terms or provisions of the collective bargaining agreement
shall govern.

    (l)  CONTINUING OBLIGATION.  If the Purchaser sells or otherwise disposes
of all or substantially all of the stock or assets of the Company within
twenty-four months of the Closing Date, or such other longer time period as
may be applicable to any individual change in control severance agreement,
the Purchaser shall, in connection with such disposition cause the transferee
of such stock or assets to honor the provisions of this SECTION 5.04 until
twenty-four months after the Closing Date, or such other longer time period
as may be applicable under any individual change in control severance
agreement.

    5.05  FULFILLMENT OF CONDITIONS.  Purchaser will take all commercially
reasonable steps necessary or desirable and proceed diligently and in good
faith to satisfy each condition to the obligations of Seller contained in
this Agreement and will not take or fail to take any action that could
reasonably be expected to result in the nonfulfillment of any such condition.

    5.06  COMMUNICATION BETWEEN THE PARTIES.  If Purchaser develops
information prior to the Closing Date that leads Purchaser to believe that
Seller has breached a representation or warranty under this Agreement,
Purchaser shall inform Seller of such potential breach as soon as possible,
but in any event, at or prior to Closing.

    5.07  CHARITABLE CONTRIBUTIONS.  During the period from the Closing Date
until twenty-four months following the Closing Date, Purchaser shall, or
shall cause the Company and the Subsidiaries to, continue to provide
charitable contributions or other financial support for non-profit
organizations and educational institutions as disclosed in SECTION 5.07 OF
THE DISCLOSURE SCHEDULE, in amounts substantially comparable to MPC's past
practices as set forth in SECTION 5.07 OF THE DISCLOSURE SCHEDULE taking into
account the Restructuring and the Divestiture.

    5.08  TRANSACTION STRUCTURE.  Purchaser may determine, in its discretion,
to obtain the approval of the SEC under the 1935 Act, or to make the
requisite filing within the SEC under Rule 2 of the 1935 Act, to consummate
the transactions contemplated by this Agreement pursuant to an exempt holding
company structure under the 1935 Act.

                                       24

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                                   ARTICLE VI
                     CONDITIONS TO OBLIGATIONS OF PURCHASER

    The obligations of Purchaser hereunder to purchase the Units are subject
to the fulfillment, at or before the Closing, of each of the following
conditions (all or any of which may be waived in whole or in part by
Purchaser in its sole discretion):

    6.01  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
made by Seller and MPC in this Agreement shall be true and correct on and as
of the Closing Date as though made on and as of the Closing Date or, in the
case of representations and warranties made as of a specified date earlier
than the Closing Date, on and as of such earlier date; except for such
failures of representations and warranties to be true and correct (without
regard to any materiality qualifier therein) that, individually or in the
aggregate, could not result in a material adverse effect to the Business or
Condition of MPC and the Company.

    6.02  PERFORMANCE.  Seller and MPC shall have performed and complied
with, in all material respects, the agreements, covenants and obligations
required by this Agreement to be so performed or complied with by Seller and
MPC at or before the Closing.

    6.03  OFFICERS' CERTIFICATES.  Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed in the name and on behalf of
Seller by the Chairman of the Board, the President or any Executive or Senior
Vice President of Seller, substantially in the form and to the effect of
EXHIBIT A hereto, and a certificate, dated the Closing Date and executed by
the Secretary or any Assistant Secretary of Seller, substantially in the form
and to the effect of EXHIBIT B hereto.

    6.04  ORDERS AND LAWS.  There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.

    6.05  REGULATORY CONSENTS AND APPROVALS.  All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority set forth in SCHEDULES 3.03 and 3.04 necessary to permit Purchaser
and Seller to perform their obligations under this Agreement and to
consummate the transactions contemplated hereby, other than those referred to
in SECTION 5.08, shall have been duly obtained, made or given and shall be in
full force and effect, and all terminations or expirations of waiting periods
imposed by any Governmental or Regulatory Authority necessary for the
consummation of the transactions contemplated by this Agreement, including
under the HSR Act, shall have occurred.

    6.06  THIRD PARTY CONSENTS.  The consents (or in lieu thereof waivers)
listed in SECTION 6.06 OF THE DISCLOSURE SCHEDULE shall have been obtained
and shall be in full force and effect.

    6.07  COMPLETION OF THE RESTRUCTURING.  The Restructuring shall have been
completed.

    6.08  ASSIGNMENT OF CONTRACTS.  All rights and obligations under those
Contracts listed on SCHEDULE 6.08 hereto shall have been duly and validly
assigned to the Company or the Subsidiaries by MPC and any required third
party consents shall have been obtained.

    6.09  BENEFITS PLANS.  All Benefits Plans listed on SCHEDULE 6.09 OF THE
DISCLOSURE SCHEDULE hereto shall either have been terminated to the
satisfaction of Purchaser or transferred to Seller in a manner that results
in no liability to Purchaser.

    6.10  RESIGNATION OF SELLER AS MANAGER OF THE COMPANY.  Immediately prior
to Closing, Seller shall have resigned as manager of the Company.

                                       25

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                                  ARTICLE VII
                      CONDITIONS TO OBLIGATIONS OF SELLER

    The obligations of Seller hereunder to sell the Units are subject to the
fulfillment, at or before the Closing, of each of the following conditions
(all or any of which may be waived in whole or in part by Seller in its sole
discretion):

    7.01  REPRESENTATIONS AND WARRANTIES.  The representations and warranties
made by Purchaser in this Agreement, taken as a whole, shall be true and
correct in all material respects on and as of the Closing Date as though made
on and as of the Closing Date.

    7.02  PERFORMANCE.  Purchaser shall have performed and complied with, in
all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Purchaser at or before
the Closing.

    7.03  OFFICERS' CERTIFICATES.  Purchaser shall have delivered to Seller a
certificate, dated the Closing Date and executed in the name and on behalf of
Purchaser by the Chairman of the Board, the President or any Executive or
Senior Vice President of Purchaser, substantially in the form and to the
effect of EXHIBIT C hereto, and a certificate, dated the Closing Date and
executed by the Secretary or any Assistant Secretary of Purchaser,
substantially in the form and to the effect of EXHIBIT D hereto.

    7.04  ORDERS AND LAWS.  There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.

    7.05  REGULATORY CONSENTS AND APPROVALS.  All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory
Authority set forth in SECTIONS 2.06 AND 2.07 OF THE DISCLOSURE SCHEDULE
necessary to permit Seller and Purchaser to perform their obligations under
this Agreement and to consummate the transactions contemplated hereby shall
have been duly obtained, made or given and shall be in full force and effect,
and all terminations or expirations of waiting periods imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement, including under the HSR Act,
shall have occurred.

    7.06  THIRD PARTY CONSENTS.  The consents (or in lieu thereof waivers)
listed in SECTION 7.06 OF THE DISCLOSURE SCHEDULE shall have been obtained
and shall be in full force and effect.

                                  ARTICLE VIII
                       TAX MATTERS AND POST-CLOSING TAXES

    8.01  TAX RETURNS.  (a) Seller and MPC will include the income of the
Company and the Subsidiaries (including any deferred income triggered into
income by Treas. Reg. section 1.1502-13 and any excess loss accounts taken
into account under Treas. Reg. section 1.1502-19) on Seller's or MPC's
consolidated, combined or unitary federal or state or local Tax Returns for
all periods through the Closing Date. Seller shall prepare or cause to be
prepared and file or caused to be filed all Tax Returns for MPC, the Company
and the Subsidiaries for all periods ending on or prior to the Closing Date
which are filed after the Closing Date in accordance with past custom and
practice. The Company and the Subsidiaries will furnish Tax information to
Seller for inclusion in the relevant Tax Returns in accordance with the past
custom and practice of MPC, the Company and the Subsidiaries. Seller shall
pay all amounts shown as owing on such Tax Returns, and shall be liable for
all such Taxes for periods ending on or prior to the Closing Date.

    (b) Purchaser shall prepare or cause to be prepared and Purchaser shall
file or cause to be filed any Tax Returns of MPC, the Company and the
Subsidiaries for Tax periods which begin before the Closing Date and end
after the Closing Date in accordance with past custom and practice. Purchaser
will allow Seller an opportunity to review and comment upon such Tax Returns
(including any amended

                                       26

<Page>

returns) to the extent that they relate to MPC, the Company and the
Subsidiaries. Purchaser will take no position on such Tax Returns that relate
to MPC, the Company and the Subsidiaries that would materially adversely
affect Seller after the Closing Date without the prior written consent of
Seller. Seller will furnish Tax information to Purchaser for inclusion in the
relevant Tax Returns in accordance with the past custom and practice of MPC,
the Company and the Subsidiaries. Seller shall pay to Purchaser within
fifteen Business Days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of the amounts shown as owing on
such Tax Returns which relates to the portion of such Tax period ending on
the Closing Date to the extent such amounts are not reflected in a reserve
(other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax) for tax liability on MPC's, the Company's
or the Subsidiaries' financial statements made available to the Purchaser
pursuant to SECTION 2.09(ii) or SECTION 4.06 hereof. For purposes of this
Section, in the case of any Taxes that are imposed on a periodic basis and
are payable for a Tax period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such Tax period
ending on the Closing Date shall (x) in the case of any Taxes other than
Income Taxes, be deemed to be the amount of such Tax for the entire Tax
period multiplied by a fraction, the numerator of which is the number of days
in the Tax period ending on the Closing Date and the denominator of which is
the number of days in the entire Tax period, and (y) in the case of any
Income Tax, be deemed to be equal to the amount which would be payable if the
relevant Tax period ended on the Closing Date. Any credits relating to a Tax
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made by Purchaser in a manner consistent with prior practice of MPC, the
Company and the Subsidiaries. Seller shall be liable for Taxes of MPC, the
Company and the Subsidiaries which are attributable to periods ending on or
prior to the Closing Date pursuant to this SECTION 8.01(b) to the extent such
Taxes are not reflected in a reserve (other than any reserve for deferred
Taxes established to reflect timing differences between book and Tax) for tax
liability on MPC's, the Company's or the Subsidiaries' financial statements
made available to the Purchaser pursuant to SECTION 2.09(ii) or SECTION 4.06
hereof. Purchaser shall be liable for Taxes of the Company and the
Subsidiaries which are attributable to periods after the Closing Date
pursuant to this SECTION 8.01(b).

    (c) As soon as reasonably practicable after the signing of this
Agreement, Seller will deliver to Purchaser true and correct copies of the
federal Income Tax workpapers of the Subsidiaries, Income Tax Returns of the
Subsidiaries filed on a stand alone basis within any State, and the Canadian
Income Tax Returns of CMPL, each with respect to the Tax periods from 1997
through 1999.

    8.02  NOTICE OF AUDIT.  Seller and Purchaser agree that if any of them
receives any notice of an audit or examination from any Governmental or
Regulatory Authority with respect to Taxes of MPC, the Company, or the
Subsidiaries for any taxable period or portion thereof ending on or prior to
the Closing Date, then the recipient of such notice shall, within ten days of
the receipt thereof, notify and provide copies of such notice to the other
party, as the case may be, in accordance with the notice provisions of
SECTION 13.01.

    8.03  TAX ADJUSTMENTS.  (a) Any Tax refunds that are received by
Purchaser or MPC, Seller, the Company or any Subsidiary, and any amounts
credited against Tax to which Purchaser or MPC, Seller, the Company or any
Subsidiary become entitled, that relate to Tax periods or portions thereof
ending on or before the Closing Date shall be for the account of Seller, and
Purchaser shall pay over to Seller any such refund or the amount of any such
credit within fifteen days after receipt or entitlement thereto. In addition,
to the extent that a claim for refund or a proceeding results in a payment or
credit against Tax by a taxing authority to Purchaser or MPC, Seller, the
Company or any Subsidiary of any amount accrued on MPC's, Seller's, the
Company's or any Subsidiary's financial statements made available to
Purchaser pursuant to SECTION 2.09(a)(ii) or SECTION 4.06 hereof, Purchaser
shall pay such amount to Seller within fifteen days after receipt or
entitlement thereto.

                                       27

<Page>

    (b) Any increase in Tax liability of MPC, the Company or any Subsidiary
which is the responsibility of Seller under the provisions of SECTION 8.01(a)
or SECTION 8.01(b) shall be paid by Seller to Purchaser or the relevant
Governmental or Regulatory Authority as appropriate. Seller has the right to
control the handling and disposition of the audit and any related
administrative or court proceeding which might give rise to such increase in
Tax liability of MPC, the Company or any Subsidiary; PROVIDED, HOWEVER, that
the Seller will not enter into any compromise or agreement to settle any Tax
claim pursuant to a Tax audit or proceeding which could reasonably be
expected to have a material adverse effect on Purchaser, the Company, MPC, or
the Subsidiaries for any post Closing period without the prior written
consent of Purchaser (which shall not be unreasonably withheld). Purchaser
shall, and shall cause the Company and the Subsidiaries to, cooperate fully
with Seller with respect to the handling and disposition of any such audit or
related administrative or court proceeding.

    (c) Any increase or decrease in Taxes of MPC, the Company or any
Subsidiary resulting from adjustments made for periods after the Closing Date
shall be for the account of Purchaser.

    8.04  TAX SHARING AGREEMENTS.  All tax sharing agreements or similar
agreements with respect to or involving MPC, the Company or the Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, MPC,
the Company and the Subsidiaries shall not be bound thereby or have any
liability thereunder.

    8.05  TRANSFER TAXES.  All transfer, documentary, sales, use, stamp,
registration, and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by
Purchaser when due, and Purchaser will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration and other Taxes and
fees, and, Seller will, if necessary, join in the execution of any such Tax
Returns and other documentation.

    8.06  POST-CLOSING ELECTIONS.  At Seller's request, the Purchaser will
cause the Company and its Subsidiaries to make and/or join with Seller in
making any tax election if the making of such election does not have a
material adverse impact on the Purchaser, the Company or the Subsidiaries for
any post-acquisition period.

    8.07  POST-CLOSING TRANSACTIONS NOT IN THE ORDINARY COURSE.  Purchaser
and Seller agree to report all transactions not in the ordinary course of
business occurring on the Closing Date after Purchaser's purchase of the
Units of the Company on Purchaser's federal income tax return to the extent
permitted by Treas. Reg. section 1.1502-76(b)(1)(B).

    8.08  ALLOCATION OF PURCHASE PRICE.  (a) To the extent that Purchaser and
Seller make a Code section 338(h)(10) election (and any corresponding
elections under state, local or foreign Tax Law) as provided in SECTION 8.09
of this Agreement, Purchaser and Seller shall cooperate fully with each other
in the making of such election. In particular, and not by way of limitation,
Purchaser shall, within 150 days of the Closing Date, prepare for Seller's
review Internal Revenue Service Form 8023, any attachments to be filed
therewith, and an allocation of the purchase price attributable thereto, all
in accordance with applicable Laws. Upon Seller's approval (which shall not
be unreasonably withheld or delayed), Purchaser and Seller shall jointly
execute such form. Purchaser, Seller, MPC, the Company and the Subsidiaries
will file all Tax Returns (including all amended returns and claims for
refund) and information reports in a manner consistent with such form.

    (b) Purchaser shall, within 150 days of the Closing Date, prepare for
Seller's review Internal Revenue Service Form 8594, and any attachments to be
filed therewith, in accordance with applicable Laws. Upon Seller's approval
(which shall not be unreasonably withheld), Purchaser and Seller shall each
file such Form 8594 with their Income Tax Returns for the year in which
Closing occurs. Purchaser, Seller, MPC, the Company and the Subsidiaries will
file all Tax Returns (including all

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amended returns and claims for refund) and information reports in a manner
consistent with the allocation contained on such Form 8594.

    8.09  SECTION 338(H)(10) ELECTION.  At Purchaser's option (which must be
exercised by written notice to Seller on or before the Closing Date) Seller
will join with Purchaser in making an election under Code Section 338(h)(10)
(and any corresponding elections under state, local, or foreign tax law) with
respect to the purchase and sale of the stock of any of the Subsidiaries
hereunder (other than CMPL).

    8.10  SECTION 338(G) ELECTION.  At Purchaser's option, Purchaser shall
make an election under Code Section 338(g) (and any corresponding election
under state, local, or foreign tax law) with respect to the purchase of the
stock of CMPL hereunder.

    8.11  NONFOREIGN AFFIDAVIT.  Seller shall furnish Purchaser an affidavit,
stating under penalty of perjury, the transferor's United States taxpayer
identification number and that the transferor is not a foreign person
pursuant to Code Section 1445(b)(2).

    8.12  CODE SECTION 754 ELECTION.  At Purchaser's request, with respect to
any interest in a Person that is taxed as a partnership for federal Income
Tax purposes (a "Partnership") that Purchaser acquires hereunder, Seller
agrees to cause any such Partnership (if Seller has control over such
Partnership) to make a Code section 754 election for the Tax period in which
the purchase of the Units occurs.

                                   ARTICLE IX
                       SURVIVAL; NO OTHER REPRESENTATIONS

    9.01  SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Except as otherwise set forth herein, the representations, warranties,
covenants and agreements contained in this Agreement shall not survive
Closing and there shall be no liability in respect thereof, whether such
liability has accrued prior to the Closing Date or after the Closing Date, on
the part of either party or its officers, directors, employees, agents and
Affiliates. This Section shall not limit in any way the survival and
enforceability of any covenant or agreement of the parties hereto which by
its terms contemplates performance after the Closing Date, which shall
survive for the respective periods set forth herein.

    9.02  NO OTHER REPRESENTATIONS.  Notwithstanding anything to the contrary
contained in this Agreement, it is the explicit intent of each party hereto
that neither Seller, MPC nor anyone on their behalf, including its advisor
Goldman, Sachs & Co. is making any representation or warranty whatsoever,
express or implied, except any representation or warranty contained in
ARTICLE II and in any certificate delivered pursuant to SECTION 6.03. In
particular, neither Seller nor MPC makes any representation or warranty to
Purchaser with respect to (i) the information set forth in the Confidential
Offering Memorandum dated May 2000 prepared by Goldman, Sachs & Co. or (ii)
any financial projection or forecast relating to the Business or Condition of
MPC and the Company. With respect to any projection or forecast delivered by
or on behalf of Seller or MPC to Purchaser, Purchaser acknowledges that (i)
there are uncertainties inherent in attempting to make such projections and
forecasts, (ii) it is familiar with such uncertainties, (iii) it is taking
full responsibility for making its own evaluation of the adequacy and
accuracy of all such projections and forecasts furnished to it and (iv) it
shall have no claim against Seller with respect thereto.

                                   ARTICLE X
                                INDEMNIFICATION

    10.01  TAX INDEMNIFICATION.

    (a) Seller agrees to indemnify, defend and hold harmless, Purchaser, any
Affiliate of Purchaser and their officers, directors, employees,
stockholders, representatives and agents, including after the

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Closing Date, the Company, and the Subsidiaries (collectively "PURCHASER
INDEMNITEES") from and against any Adverse Consequences the Purchaser
Indemnitees may suffer resulting from, arising out of, or relating to any
liability of Seller, the Company, MPC, and the Subsidiaries (x) for any Taxes
of the Seller, the Company, MPC and any member of the MPC Affiliated Group
(other than the Subsidiaries) and for any Taxes of the Subsidiaries, with
respect to any Tax year or portion thereof ending on or before the Closing
Date (or for any Tax year beginning before and ending after the Closing Date
to the extent allocable (determined in a manner consistent with SECTION
8.01(b)) to the portion of such period beginning before and ending on the
Closing Date), and (y) for the unpaid Taxes of any Person under Treas. Reg.
Section 1.1502-6.

    (b) Purchaser agrees to indemnify Seller, and their officers, directors,
employees, stockholders, representatives and agents (the "SELLER
INDEMNITEES"), from and against any Adverse Consequences Seller Indemnitees
may suffer resulting from, arising out of, or relating to, any liability of
Seller for any Taxes of Purchaser, the Company and the Subsidiaries with
respect to any Tax year or portion thereof after the Closing Date (or for any
Tax year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with SECTION 8.01(b)), to the
portion of such period ending after the Closing Date.

    (c) The obligations of Seller and Purchaser under this SECTION 10.01
shall survive until the expiration of the applicable statute of limitations.

    10.02  INDEMNIFICATION FOR RESTRUCTURING; DIVESTITURE; OIL AND GAS SALE.
(a) Seller agrees to indemnify Purchaser Indemnitees in respect of and hold
each of them harmless from and against any Adverse Consequences suffered,
incurred or sustained by any of them and resulting from, arising out of or
relating to (i) the Restructuring and/or the Divestiture, (ii) any aspect of
the business of Seller (other than the Company and the Subsidiaries) or (iii)
regulatory requirements with respect to the use of the proceeds of the Oil
and Gas Sale. Seller's obligations under this SECTION 10.02 shall survive
indefinitely.

    (b) To the extent such amount is not paid prior to Closing, Seller agrees
to indemnify Purchaser Indemnitees in respect of and hold each of them
harmless with respect to the amount of $3,894,823 set forth on PP&L Montana,
LLC's Invoice Number 82200, dated September 25, 2000 relating to the
Wholesale Transmission Services Agreement.

    10.03  OTHER INDEMNIFICATION.  Subject to the other Sections of this
ARTICLE X, Purchaser shall indemnify the Seller and its directors, officers,
employees and agents in respect of, and hold each of them harmless from and
against, any and all Adverse Consequences suffered, incurred or sustained by
any of them or of or relating to MPC, the Company and the Subsidiaries
resulting from or arising out of the operation of the business of MPC, the
Company and the Subsidiaries from and after Closing (including, without
limitation, Adverse Consequences arising out of or relating to any
Environmental Law); PROVIDED, HOWEVER, that such indemnity shall not apply
until the total amount of such Adverse Consequences shall exceed $1,000,000
at which time the entire amount of all such Adverse Consequences shall be
indemnified hereunder.

    10.04  SPECIAL ENVIRONMENTAL INDEMNITY.  Seller shall indemnify, defend
and hold harmless Purchaser Indemnitees against any Adverse Consequences
which Purchaser Indemnitees may suffer, sustain, or become subject to,
resulting from or arising out of: any claims, damages, liabilities, taxes,
injuries to Persons, property or natural resources, fines, penalties, costs
and expenses, including without limitation, settlement costs and reasonable
legal, accounting or other expert fees and costs, incurred in connection with
investigating or defending any action (an "ENVIRONMENTAL LOSS") sustained or
required to be paid by reason of, or arising out of or caused by any act or
omission occurring, or condition existing, on or prior to the Closing Date
which related directly or indirectly to the business or operations or
facilities (past or present) of MPC, the Company or its Subsidiaries, and
which relate to a violation of or liability to pay costs, penalties, fines or
damages under Environmental Laws; PROVIDED,

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<Page>

HOWEVER, that such indemnity shall be subject to the following: (i) it shall
not apply until the total amount of such Environmental Loss exceeds
$50,000,000; (ii) after the first $50,000,000 of Environmental Loss, Seller
shall be liable for the next $25,000,000 of Environmental Loss; (iii) Seller
shall be liable for 50% of all Environmental Loss in excess of $75,000,000 in
the aggregate; and (iv) in no event shall Seller's obligations under this
SECTION 10.04 exceed $100,000,000. Seller's obligations under this SECTION
10.04 shall survive for a period of five years from the Closing Date.

    10.05  SPECIAL LITIGATION INDEMNITY.  Seller shall indemnify, defend and
hold harmless Purchaser Indemnitees against and pay on behalf of or reimburse
Purchaser Indemnitees as and when incurred for any Adverse Consequences which
Purchaser Indemnitees may suffer, sustain or become subject to, resulting
from or arising out of those matters set forth on SCHEDULE 10.05 hereto.
Seller's obligations under this SECTION 10.05 shall survive indefinitely.
Purchaser agrees that it will make any employees of the Company or the
Subsidiaries connected to the matters set forth in SCHEDULE 10.05 reasonably
available to Seller, upon Seller's reasonable request and at Seller's sole
expense, for the purposes of defending the matters set forth in this SECTION
10.05.

    10.06  METHOD OF ASSERTING CLAIMS.  All claims for indemnification by any
Indemnified Party under this ARTICLE X will be asserted and resolved as
follows:

    (a) In the event any claim or demand in respect of which an Indemnified
Party might seek indemnity under this ARTICLE X is asserted against or sought
to be collected from such Indemnified Party by a Person other than Seller or
any Affiliate of Seller or of Purchaser (a "THIRD PARTY CLAIM"), the
Indemnified Party shall deliver a Claim Notice with reasonable promptness to
the Indemnifying Party. The Indemnifying Party will notify the Indemnified
Party as soon as practicable within the Dispute Period whether the
Indemnifying Party disputes its liability to the Indemnified Party under this
ARTICLE X and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim.

        (i) If the Indemnifying Party notifies the Indemnified Party within the
    Dispute Period that the Indemnifying Party desires to defend the Indemnified
    Party with respect to the Third Party Claim pursuant to this
    SECTION 10.06(A), then the Indemnifying Party will have the right to defend,
    at the sole cost and expense of the Indemnifying Party, such Third Party
    Claim by all appropriate proceedings, which proceedings will be vigorously
    and diligently prosecuted by the Indemnifying Party to a final conclusion or
    will be settled at the discretion of the Indemnifying Party (but only with
    the consent of the Indemnified Party, which consent will not be unreasonably
    withheld, in the case of any settlement that provides for any relief other
    than the payment of monetary damages as to which the Indemnified Party will
    be indemnified in full). The Indemnifying Party will have full control of
    such defense and proceedings, including (except as provided in the
    immediately preceding sentence) any settlement thereof and shall keep the
    Indemnified Party informed of all material developments relating to such
    proceedings; PROVIDED, HOWEVER, that if requested by the Indemnifying Party,
    the Indemnified Party will, at the sole cost and expense of the Indemnifying
    Party, cooperate with the Indemnifying Party and its counsel in contesting
    any Third Party Claim that the Indemnifying Party elects to contest, or, if
    appropriate and related to the Third Party Claim in question, in making any
    counterclaim against the Person asserting the Third Party Claim, or any
    cross-complaint against any Person (other than the Indemnified Party or any
    of its Affiliates). The Indemnified Party may retain separate counsel to
    represent it in, but not control, any defense or settlement of any Third
    Party Claim controlled by the Indemnifying Party pursuant to this
    clause (i), and the Indemnified Party will bear its own costs and expenses
    with respect to such separate counsel except as provided in the preceding
    sentence and except that the Indemnifying Party will pay the costs and
    expenses of such separate counsel if (x) in the Indemnified Party's good
    faith judgment, it is advisable, based on advice of counsel, for the
    Indemnified Party to be represented by separate counsel because a conflict
    or potential conflict exists between the Indemnifying Party and the
    Indemnified Party or (y) the named parties to such

                                       31

<Page>

    Third Party Claim include both the Indemnifying Party and the Indemnified
    Party and the Indemnified Party determines in good faith, based on advice of
    counsel, that defenses are available to it that are unavailable to the
    Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party may
    retain or take over the control of the defense or settlement of any Third
    Party Claim the defense of which the Indemnifying Party has elected to
    control if the Indemnified Party irrevocably waives its right to indemnity
    under this ARTICLE X with respect to such Third Party Claim.

        (ii) If the Indemnifying Party fails to notify the Indemnified Party
    within the Dispute Period that the Indemnifying Party desires to defend the
    Third Party Claim pursuant to SECTION 10.06(a), then the Indemnified Party
    will have the right to defend, at the sole cost and expense of the
    Indemnifying Party, the Third Party Claim by all appropriate proceedings,
    which proceedings will be vigorously and diligently prosecuted by the
    Indemnified Party to a final conclusion or will be settled at the discretion
    of the Indemnified Party (with the consent of the Indemnifying Party, which
    consent will not be unreasonably withheld). The Indemnified Party will have
    full control of such defense and proceedings, including (except as provided
    in the immediately preceding sentence) any settlement thereof; PROVIDED,
    HOWEVER, that if requested by the Indemnified Party, the Indemnifying Party
    will, at the sole cost and expense of the Indemnifying Party, cooperate with
    the Indemnified Party and its counsel in contesting any Third Party Claim
    which the Indemnified Party is contesting, or, if appropriate and related to
    the Third Party Claim in question, in making any counterclaim against the
    Person asserting the Third Party Claim, or any cross-complaint against any
    Person (other than the Indemnifying Party or any of its Affiliates).
    Notwithstanding the foregoing provisions of this clause (ii), if the
    Indemnifying Party has notified the Indemnified Party within the Dispute
    Period that the Indemnifying Party disputes its liability hereunder to the
    Indemnified Party with respect to such Third Party Claim and if such dispute
    is resolved in favor of the Indemnifying Party in the manner provided in
    clause (iii) below, the Indemnifying Party will not be required to bear the
    costs and expenses of the Indemnified Party's defense pursuant to this
    clause (ii) or of the Indemnifying Party's participation therein at the
    Indemnified Party's request, and the Indemnified Party will reimburse the
    Indemnifying Party in full for all reasonable costs and expenses incurred by
    the Indemnifying Party in connection with such litigation. The Indemnifying
    Party may retain separate counsel to represent it in, but not control, any
    defense or settlement controlled by the Indemnified Party pursuant to this
    clause (ii), and the Indemnifying Party will bear its own costs and expenses
    with respect to such participation.

       (iii) If the Indemnifying Party notifies the Indemnified Party that it
    does not dispute its liability to the Indemnified Party with respect to the
    Third Party Claim under this ARTICLE X or fails to notify the Indemnified
    Party within the Dispute Period whether the Indemnifying Party disputes its
    liability to the Indemnified Party with respect to such Third Party Claim,
    the Adverse Consequences arising from such Third Party Claim will be
    conclusively deemed a liability of the Indemnifying Party under this
    Article X and the Indemnifying Party shall pay the amount of such Adverse
    Consequences to the Indemnified Party on demand following the final
    determination thereof. If the Indemnifying Party has timely disputed its
    liability with respect to such claim, the Indemnifying Party and the
    Indemnified Party will proceed in good faith to negotiate a resolution of
    such dispute, and if not resolved through negotiations within the Resolution
    Period, such dispute shall be resolved by litigation in a court of competent
    jurisdiction.

        (iv) Notwithstanding any other provision of this SECTION 10.06(a) to the
    contrary, Purchaser shall have the right to defend all Third Party Claims
    covered by SECTION 10.04, by all appropriate proceedings, which proceedings
    will be vigorously and diligently prosecuted by Purchaser to a final
    conclusion or will be settled at the discretion of Purchaser (but only with
    the consent of Seller, which consent will not be unreasonably withheld, in
    the case of any settlement that provides for any relief involving Seller
    other than the payment of monetary damages). Purchaser will have full

                                       32

<Page>

    control of such defense and proceedings, including (except as provided in
    the immediately preceding sentence) any settlement thereof, and shall keep
    Seller informed of all material developments relating to such proceedings.
    Seller may retain separate counsel to represent it in, but not control, any
    defense or settlement of any Third Party Claim controlled by Purchaser
    pursuant to this SECTION 10.06(a)(iv) and Seller will bear its own costs and
    expenses with respect to such counsel.

    (b) In the event any Indemnified Party should have a claim under this
ARTICLE X against any Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim described
in such Indemnity Notice or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the Adverse Consequences arising from the claim
specified in such Indemnity Notice will be conclusively deemed a liability of
the Indemnifying Party under this ARTICLE X and the Indemnifying Party shall
pay the amount of such Adverse Consequences to the Indemnified Party on
demand following the final determination thereof. If the Indemnifying Party
has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
litigation in a court of competent jurisdiction.

    (c) In the event of any claim for indemnity under this ARTICLE X, each
party agrees to give reasonable access to its Books and Records and employees
in connection with the matters for which indemnification is sought to the
extent a party reasonably deems necessary in connection with its rights and
obligations under this ARTICLE X.

    10.07  REQUIREMENTS FOR INDEMNITY.  Notwithstanding anything to the
contrary contained in this Agreement, no amounts of indemnity shall be
payable as a result of any claim in respect of any and all Adverse
Consequences arising under this ARTICLE X, (a) unless the Indemnified Party
has given the Indemnifying Party a Claim Notice or Indemnity Notice, as
applicable, with respect to such claim, setting forth in reasonable detail
the specific facts and circumstances pertaining thereto, (i) as soon as
practical following the time at which an officer of the Indemnified Party
discovered or reasonably should have discovered such claim and (ii) in any
event prior to the applicable Cut-off Date, and (b) to the extent that the
Indemnified Party had a reasonable opportunity, but failed, in good faith to
mitigate the Adverse Consequences, including but not limited to the failure
to use commercially reasonable efforts to recover under a policy of insurance
or under a contractual right of set-off or indemnity.

    10.08  EXCLUSIVITY.  After the Closing, to the extent permitted by Law,
the indemnities set forth in this ARTICLE X shall be the exclusive remedies
of Purchaser and Seller and their respective officers, directors, employees,
agents and Affiliates for any misrepresentation, breach of warranty or
nonfulfillment or failure to be performed of any covenant or agreement
contained in this Agreement, and the parties shall not be entitled to a
rescission of this Agreement or to any further indemnification rights or
claims of any nature whatsoever in respect thereof, all of which the parties
hereto hereby waive.

                                   ARTICLE XI
                                  TERMINATION

    11.01  TERMINATION.  This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing, whether prior to or after the MPC Stockholders' Approval:

    (a) by mutual written agreement of Seller, MPC and Purchaser;

                                       33

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    (b) by Seller, MPC or Purchaser, in the event that any Order or Law
becomes effective, and is non-appealable, restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement, upon notification of the non-terminating
party by the terminating party;

    (c) by Seller, MPC or Purchaser if the MPC Stockholders' Approval shall
not be obtained by reason of the failure to obtain the requisite vote upon a
vote actually held at the MPC Stockholders' Meeting;

    (d) by Seller, MPC or Purchaser (provided that the terminating party is
not then in material breach of any representation, warranty, covenant or
other agreement contained herein) if there shall have been a material breach
of any of the representations, warranties, covenants or other agreements
contained in this Agreement on the part of the other party, which breach
either (i) is not cured with fifteen (15) days following written notice by
the terminating party to the party committing such breach, or (ii) by its
nature, cannot be cured prior to March 31, 2002;

    (e) at any time after March 31, 2002, by Seller, MPC or Purchaser upon
notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating
party;

    (f) by Purchaser if (i) the Board of Directors of MPC shall have (A)
failed to recommend, or withdrawn, modified or amended in any respect adverse
to Purchaser its approval or recommendation of, this Agreement or the
transactions contemplated herein or resolved to do so, or (B) approved or
recommended a Superior Proposal from a Person (other than Purchaser) or
resolved to do so, or (ii) Seller or MPC breaches any of its agreements in
SECTION 4.04, SECTION 4.11 or SECTION 4.12; or

    (g) by Seller or MPC (but only prior to adoption of the MPC Stockholders'
Approval), if the Board of Directors of MPC, by majority vote, shall have
determined that an Acquisition Proposal constitutes a Superior Proposal;
provided that, (i) MPC shall have provided to Purchaser three (3) Business
Days' notice of its intention to terminate this Agreement pursuant to this
SECTION 11.01(g) (which notice shall include the most current version of the
agreement to be entered into in connection with the Superior Proposal (or a
description of all of the material terms and conditions thereof)), (ii) MPC
has complied with the provisions of SECTION 4.04, SECTION 4.11 and SECTION
4.12, (iii) the Superior Proposal is pending at the time of such termination,
(iv) the Board of Directors shall have determined in good faith, after giving
effect to all concessions and modifications which may be offered by Purchaser
pursuant to clause (v) below, and after consultation with its financial
advisors and outside legal counsel, that such proposal is a Superior
Proposal, (v) during the three (3) Business Days' notice referred to in (i)
above, Seller and MPC shall, and shall cause the financial and legal advisors
to, negotiate in good faith with Purchaser with respect to any modifications
to the terms of this Agreement proposed by Purchaser that would enable MPC
and Purchaser to proceed with the transactions contemplated hereby, and (vi)
it shall be a condition precedent to the termination of this Agreement by
Seller or MPC pursuant to this SECTION 11.01(g) that Seller and MPC shall
have made the payment of the Fee and Expenses required by SECTION 11.03.

    11.02  EFFECT OF TERMINATION.  If this Agreement is validly terminated
pursuant to SECTION 11.01 and subject to the payment of amounts due under
SECTION 11.03 below, this Agreement will forthwith become null and void, and
there will be no liability or obligation on the part of Seller, MPC or
Purchaser (or any of their respective officers, directors, employees, agents
or other representatives or Affiliates), except that (i) the provisions with
respect to expenses in SECTION 13.03 and confidentiality in SECTION 13.05
will continue to apply following any such termination, and (ii) that nothing
contained herein shall relieve any party hereto from liability for willful
breach of its representations, warranties, covenants or agreements contained
in this Agreement.

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    11.03  FEES AND EXPENSES.

    (a) If this Agreement is terminated (i) pursuant to SECTION 11.01(f)or
(g), then Seller and MPC, jointly and severally, shall pay to Purchaser, (A)
simultaneously with any termination by Seller or MPC pursuant to SECTION
11.01(g), and (B) within one Business Day following any termination by
Purchaser contemplated by SECTION 11.01(f), a fee, in cash, equal to
$50,000,000 (the "FEE"), and (ii) by Purchaser pursuant to SECTION 11.01(d),
and any Person shall have made an Acquisition Proposal prior to such
termination, then MPC and Seller, jointly and severally, shall pay to
Purchaser on the date of execution of a definitive agreement with respect to
an Acquisition Proposal, or, if earlier, consummation of an Acquisition
Proposal, the Fee, PROVIDED, HOWEVER, that no Fee shall be payable pursuant
to clause (ii) of this SECTION 11.03 unless and until, within 12 months of
such termination, MPC or Seller enter into a definitive agreement to
consummate, or consummates, any transaction the proposal of which would have
constituted an Acquisition Proposal, and PROVIDED, FURTHER, that Seller and
MPC shall not in any event be obligated to pay more than one such fee with
respect to all such occurrences and such termination. It is understood and
agreed that the Fee constitutes liquidated damages and not a penalty.

    (b) In addition to the Fee payable pursuant to SECTION 11.03(a), (i)
within one Business Day after the termination of this Agreement pursuant to
SECTION 11.01(c), (f) or (g), or (ii) if this Agreement is terminated by
Purchaser pursuant to SECTION 11.01(d) and Purchaser is entitled to receive a
Fee pursuant to SECTION 11.03(a) in connection with such termination, on the
date of the execution of a definitive agreement with respect to an
Acquisition Proposal, or, if earlier, consummation of an Acquisition
Proposal, Seller and MPC, jointly and severally, shall pay all of Purchaser's
Expenses (as defined below) up to a maximum payment pursuant to this SECTION
11.03(b) of $10,000,000. The term "Expenses" shall include all out-of-pocket
expenses and fees (including without limitation fees and expenses payable to
all banks, investment banking firms and other financial institutions and
their respective agents and counsel for arranging or providing financial
advice or financing commitments with respect to this Agreement and the
transactions contemplated hereby and all reasonable fees and expenses of
counsel, accountants, experts and consultants to Purchaser) actually incurred
by Purchaser or on its behalf in connection with the consummation of all
transactions contemplated by this Agreement.

                                  ARTICLE XII
                                  DEFINITIONS

    12.01  DEFINITIONS.  (a) Defined Terms. As used in this Agreement, the
following defined terms have the meanings indicated below:

    "1935 ACT" has the meaning ascribed to it in SECTION 2.25.

    "ACQUISITION PROPOSAL" means any proposal or offer with respect to (i) a
merger, reorganization, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
(x) prior to the Restructuring MPC or any of its subsidiaries, and (y) from
and after the Restructuring but prior to Closing, Seller or any of its
subsidiaries, or (ii) any direct or indirect acquisition of all or any
substantial portion of the assets or 10% or more of the equity securities of
(x) prior to the Restructuring, MPC or any of its subsidiaries, and (y) from
and after the Restructuring but prior to Closing, Seller or any of its
subsidiaries, other than, in any such case, the transactions contemplated by
this Agreement and the Divestiture.

    "ACTIONS OR PROCEEDINGS" means any action, suit, proceeding, claims,
demands, complaints, arbitration or Governmental or Regulatory Authority
investigation.

    "ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, deficiencies,
costs, liabilities, obligations, taxes, liens, losses, expenses, and fees,
including, without

                                       35

<Page>

limitation, court costs, interest and reasonable fees of attorneys,
accountants and other experts or other reasonable expenses of litigation or
other proceedings or of any claim, default or assessment.

    "AFFILIATE" means any Person that directly, or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a
Person means the power, direct or indirect, to direct or cause the direction
of the management and policies of such Person whether by Contract or
otherwise.

    "AFFILIATE CONTRACT" has the meaning ascribed to it in SECTION 4.08.

    "AFFILIATED GROUP" means any affiliated group within the meaning of Code
Section 1504(a), or any similar group defined under a similar provision of
state, local or foreign Law.

    "AGREEMENT" means this Stock Purchase Agreement and the Disclosure
Schedule and the certificates delivered in accordance with SECTIONS 6.03 and
7.03, as the same shall be amended from time to time.

    "ASSETS AND PROPERTIES" of any Person means all assets and properties of
every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, and wherever situated), including the
goodwill related thereto, operated, owned or leased by such Person.

    "BENEFICIALLY" means the beneficial owner of such securities under Rule
13d-3 of the Securities Exchange Act of 1934, as amended, including
securities which such Person has a right to acquire (whether such right is
exercisable immediately or only after the passage of time).

    "BENEFIT PLAN" means any Plan established by MPC, the Company or any
Subsidiary, or any predecessor or Affiliate of any of the foregoing, existing
at the Closing Date (or at any time within the five (5) year period prior
thereto for a Plan subject to Title IV of ERISA), to which MPC, the Company
or any Subsidiary contributes or has contributed, or under which any
employee, former employee or director of MPC, the Company or any Subsidiary
or any beneficiary thereof is covered, is eligible for coverage or has
benefit rights.

    "BACKGROUND MATERIALS" has the meaning ascribed to it in SECTION 3.11.

    "BOOKS AND RECORDS" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of MPC and the
Company, including without limitation financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing
guidelines, ledgers, journals, deeds, title policies, minute books, stock
certificates and books, stock transfer ledgers, Contracts, Licenses, customer
lists, computer files and programs, retrieval programs, operating data and
plans and environmental studies and plans.

    "BUDGET" means, with respect to fiscal year 2000, the FY2000 operating
and capital budget of MPC and the Subsidiaries attached as SECTION 12.01 OF
THE DISCLOSURE SCHEDULE hereto, and, with respect to fiscal year 2001, the
FY2001 operating and capital budget of MPC and the Subsidiaries which shall
be delivered to Purchaser not later than December 15, 2000 provided that the
amounts budgeted therein shall be within 5% (plus or minus) of the amounts
set forth in ANNEX II attached hereto for the line items set forth thereon,
unless MPC has previously notified Purchaser and Purchaser has consented to
such other amounts, such consent not to be unreasonably withheld or delayed.

    "BUSINESS DAY" means a day other than Saturday, Sunday or any day on
which banks located in the State of Montana are authorized or obligated to
close.

    "BUSINESS OR CONDITION OF MPC AND THE COMPANY" means the business,
financial condition or results of operations of MPC, the Company and the
Subsidiaries taken as a whole.

                                       36

<Page>

    "CAUSE" means the failure to satisfactorily perform job duties,
disruption of the employer's operation, or other legitimate business reason;
provided, however, that legitimate business reasons shall not include
reductions in force, reorganizations, nor restructuring.

    "CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended and the rules and regulations promulgated
thereunder.

    "CERCLIS" means the Comprehensive Environmental Response and Liability
Information System, as provided by 40 C.F.R. Section300.5.

    "CLAIM NOTICE" means written notification pursuant to SECTION 10.06(a) of
a Third Party Claim as to which indemnity under ARTICLE X is sought by an
Indemnified Party, enclosing a copy of all papers served, if any, and
specifying the nature of and the basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under ARTICLE X,
together with the amount of, or if not then reasonably determinable, the
estimated amount, determined in good faith, of the Adverse Consequences
arising from such Third Party Claim.

    "CLOSING" means the closing of the transactions contemplated by SECTION
1.03.

    "CLOSING DATE" means (a) the fifth Business Day after the day on which
the last of the consents, approvals, actions, filings, notices or waiting
periods described in or related to the filings described in SECTIONS 6.04
through 6.10 and SECTIONS 7.04 through 7.06 has been obtained, made or given
or has expired, as applicable, or (b) such other date as Purchaser and Seller
mutually agree upon in writing.

    "CMPL" means Canadian-Montana Pipe Line Corporation, an Alberta
corporation.

    "COAL SALE" means the sale, by Entech, of all the outstanding capital
stock of Basin Resources Inc., a Colorado corporation, Horizon Coal Services
Inc., a Montana corporation, North Central Energy Company, a Colorado
corporation, Northwestern Resources Co., a Montana corporation and Western
Energy Company, a Montana corporation.

    "CODE" means the Internal Revenue Code of 1986, as amended, or any
replacement, and the rules and regulations promulgated thereunder.

    "COLSTRIP 1, 2 AND 3 TRANSMISSION ASSETS" has the meaning ascribed to it
in that certain Asset Purchase Agreement, dated October 31, 1998, as amended,
by and between PPL Montana LLC and MPC.

    "COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.

    "COMPANY" has the meaning ascribed to it in the forepart of this
Agreement.

    "CONTRACT" means any agreement, lease, license, evidence of Indebtedness,
mortgage, indenture, security agreement or other contract; PROVIDED, HOWEVER,
that Contract shall not mean a transaction under a published tariff approved
by a Governmental or Regulatory Authority.

    "COVERED PARTICIPANTS" has the meaning ascribed to it in SECTION 5.04(e).

    "CUT-OFF DATE" means, with respect to any representation, warranty,
covenant or agreement contained in this Agreement, the date on which such
representation, warranty, covenant or agreement ceases to survive as provided
in SECTION 9.01 or ARTICLE X.

    "DATA ROOM" has the meaning ascribed to it in SECTION 3.11.

    "DEFINED BENEFIT PLAN" means each Benefit Plan which is subject to Part 3
of Title I of ERISA, Section 412 of the Code or Title IV of ERISA.

    "DES" means Discovery Energy Solutions, Inc., a Montana corporation.

                                       37

<Page>

    "DISCLOSURE SCHEDULE" means the record delivered to Purchaser by Seller
herewith and dated as of the date hereof, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by Seller pursuant to this Agreement.

    "DISPUTE PERIOD" means the period ending thirty (30) days following
receipt by an Indemnifying Party of either a Claim Notice or an Indemnity
Notice.

    "DIVESTITURE" means the completion of the IPP Sale, the Oil and Gas Sale
and the Coal Sale.

    "DOLLAR" or "$" means a United States dollar, the lawful currency of the
United States, unless otherwise designated.

    "ENTECH" means Entech, Inc., a Montana corporation.

    "ENVIRONMENTAL LAW" means any Law or Order relating to the regulation or
protection of human health, public health or safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes into the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes.

    "ENVIRONMENTAL LOSS" has the meaning ascribed to it in SECTION 10.04.

    "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.

    "ERISA AFFILIATE" means any Person who is in the same controlled group of
corporations or who is under common control with Seller or, before the
Closing, the Company or any Subsidiary (within the meaning of Section 414 of
the Code).

    "EXCHANGE ACT" means the Exchange Act of 1934, as amended.

    "EXON-FLORIO AMENDMENT" means Section 721 of the Defense Production Act
of 1950, as amended, and any successor thereto and the regulations issued
pursuant thereto or in consequence thereof.

    "EXPENSES" shall have the meaning ascribed to it in SECTION 11.03(b).

    "FEE" shall have the meaning ascribed to it in SECTION 11.03(a).

    "FCC" means the Federal Communications Commission, or any successor
entity thereto.

    "FERC" means the Federal Energy Regulatory Commission, or any successor
entity thereto.

    "FINANCIAL STATEMENTS" means the consolidated financial statements of MPC
and its consolidated subsidiaries delivered to Purchaser pursuant to SECTION
2.09 or 4.06.

    "GAAP" means United States generally accepted accounting principles,
consistently applied throughout the specified period and in the immediately
prior comparable period.

    "GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality
of the United States or Canada or any state, county, city or other political
subdivision.

    "HSR ACT" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the
rules and regulations promulgated thereunder.

    "INCOME TAXES" means any federal, state, local, or foreign income Tax,
including any interest, penalty, or addition thereto, whether disputed or not.

                                       38

<Page>

    "INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.

    "INDEBTEDNESS" means, with respect to any Person, whether recourse is to
all or a portion of the Assets or Properties of such Person and whether or
not contingent, (i) every obligation of such Person for money borrowed, (ii)
every obligation for such Person evidenced by bonds, debentures, notes or
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses, (iii) every obligation of such
Person issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business), (iv) every capital lease obligation of
such Person, (v) the maximum fixed redemption or repurchase price of
mandatorily redeemable stock of such Person at the time of determination,
(vii) every obligation to pay rent or other payment amounts of such Person
with respect to any sale and leaseback transaction to which such Person is a
party, (vii) all obligations under interest rate protection, hedging or
similar agreements, (ix) every obligation of the type referred to in clauses
(i) through (vii) of another Person and all dividends of another Person the
payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor, guarantor or
otherwise, or which is secured by a Lien on any Asset or Property of such
Person.

    "INDEMNIFIED PARTY" means any Person claiming indemnification under any
provision of ARTICLE X.

    "INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of ARTICLE X.

    "INDEMNITY NOTICE" means written notification pursuant to SECTION
10.06(b) of a claim for indemnity under ARTICLE X by an Indemnified Party,
specifying the nature of and basis for such claim, together with the amount
or, if not then reasonably determinable, the estimated amount, determined in
good faith, of the Adverse Consequences arising from such claim.

    "INDEPENDENT TRANSMISSION COMPANY" means a for-profit independent
transmission company proposed to be created by MPC, Avista Corp., Portland
General Electric Co., Puget Sound Energy, Inc., Sierra Pacific Power Co., and
Nevada Power Co., pursuant to the Independent Transmission Company Memorandum
of Understanding dated April 26, 2000, or any other independent transmission
company of similar nature that conforms to FERC Order 2000, whether in
existence or proposed to be created, of which MPC, the Company or any
Subsidiary is a member or proposes to be a member.

    "INTELLECTUAL PROPERTY" means all patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service mark rights, service names and service name rights, brand names,
inventions, copyrights and copyright rights, processes, formulae, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes but excluding third party commercial software used in the
ordinary course of business) and related documentation, technical
information, manufacturing, engineering and technical drawings, know-how and
all pending applications for and registrations of patents, trademarks,
service marks and copyrights.

    "INTERIM FINANCIAL STATEMENT DATE" means July 31, 2000.

    "INTERIM FINANCIAL STATEMENTS" means the Financial Statements for the
most recent fiscal period of MPC delivered to Purchaser pursuant to SECTION
2.09(a)(ii).

    "IPP SALE" means the sale of the outstanding capital stock of Continental
Energy Services, Inc. a Montana corporation, by Entech.

    "IRS" means the United States Internal Revenue Service or any successor
agency.

                                       39

<Page>

    "KNOWLEDGE OF SELLER AND MPC" (including any correlative term) with
respect to a particular fact or other matters, means that any officer of MPC,
the Company or any Subsidiary, or a reasonably prudent individual in the
position of such officer, after due inquiry, knows or is actually aware of
such fact or other matter.

    "LAWS" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.

    "LICENSES" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.

    "LIENS" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale Contract, title retention Contract or other Contract to give
any of the foregoing.

    "MPC" has the meaning ascribed to it in the forepart of this Agreement.

    "MPC AFFILIATED GROUP" means the Affiliated Group of which MPC has been
or is the common parent including MPC.

    "MPC 401(k) PLAN" means the Montana Power Company and Subsidiaries
Employee Retirement Savings Plan, as in effect from time to time.

    "MPC PENSION PLAN" has the meaning ascribed to it in SECTION 5.04(g).

    "MPC STOCK OPTION" has the meaning ascribed to it in SECTION 5.04(i).

    "MPC STOCKHOLDERS' APPROVAL" has the meaning ascribed to it in SECTION 4.12.

    "MPC STOCKHOLDERS' MEETING" has the meaning ascribed to it in SECTION 4.11.

    "NPL" means the National Priorities List under CERCLA.

    "OIL AND GAS SALE" means the sale, by Entech, of all the outstanding
capital stock and assets of Altana Exploration Company, a Montana
corporation, and all the outstanding capital stock of Entech Gas Ventures,
Inc., a Montana corporation, Glacier Gas Company, a Montana corporation,
North American Resources Company, a Montana corporation, The Montana Power
Gas Company, a Montana corporation, The Montana Power Trading & Marketing
Company, a Montana corporation, and Altana Exploration Ltd., an Alberta
corporation.

    "OPTION" with respect to any Person means any security, convertible
security, right, subscription, call, warrant, option, "phantom" stock right
or other Contract that gives the right to (i) purchase or otherwise receive
or be issued any shares of capital stock of such Person or any security of
any kind convertible into or exchangeable or exercisable for any shares of
capital stock of such Person or (ii) receive or exercise any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares
of capital stock of such Person, including any rights to participate in the
equity or income of such Person or to participate in or direct the election
of any directors or officers of such Person or the manner in which any shares
of capital stock of such Person are voted.

    "ORDER" means any writ, judgment, decree, injunction or other order of
any Governmental or Regulatory Authority (in each such case whether
preliminary or final).

    "PARTNERSHIP" has the meaning ascribed to it in SECTION 8.12.

    "PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.

    "PSC" means the Montana Public Service Commission.

                                       40

<Page>

    "PERMITTED LIEN" means (i) any Lien for Taxes not yet due or delinquent
or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a Liability that is not yet due or delinquent and (iii) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other such Liens could not reasonably be expected to
materially adversely affect the Business or Condition of MPC and the Company.

    "PENSION BENEFIT PLAN" means each Benefit Plan which is a pension benefit
plan within the meaning of Section 3(2) of ERISA.

    "PERSON" means any natural person, corporation, limited liability
company, general partnership, limited partnership, proprietorship, other
business organization, trust, union, association or Governmental or
Regulatory Authority.

    "PILKO ENVIRONMENTAL REPORTS" means the reports prepared by Pilko &
Associates, Inc. for MPC, titled as follows: "Environmental Assessment of
Montana Power's Utility Business" (including Attachments A and B thereto)
dated June, 2000; "Phase II Investigation Colstrip Project" dated August,
1998; "Phase II Investigation Corette Project" dated August, 1998; "Phase II
Investigation Hydroelectric Project Portfolio (except Milltown)" dated
August, 1998; and "Phase II Investigation Milltown Hydroelectric Project"
dated August, 1998.

    "PLAN" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited
to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA.

    "PROXY STATEMENT" has the meaning ascribed to it in SECTION 2.22.

    "PURCHASE PRICE" has the meaning ascribed to it in SECTION 1.02.

    "PURCHASER" has the meaning ascribed to it in the forepart of this
Agreement.

    "PURCHASER INDEMNITEES" has the meaning ascribed to it in SECTION 10.01.

    "QUALIFIED PLAN" means each Benefit Plan which is intended to qualify
under Section 401 of the Code.

    "QF" means Qualified Facilities as defined in the Public Utility
Regulatory Policies Act of 1978 and the regulations promulgated thereunder,
specifically 18 CFR Part 292.

    "REGIONAL TRANSMISSION ORGANIZATION" means that not-for-profit
corporation incorporated in the State of Washington on April 27, 2000 in
relation to the creation of a regional transmission organization (having the
characteristics and functions set forth in FERC Order 2000) by and among
Avista, the Bonneville Power Authority, Idaho Power Company, MPC, Nevada
Power Company, PacifiCorp, Portland General Electric Company, Puget Sound
Energy, Inc. and Sierra Pacific Power Company and any other electric energy
transmission system owners willing to participate.

    "REPRESENTATIVES" has the meaning ascribed to it in SECTION 4.03.

    "RESOLUTION PERIOD" means the period ending thirty (30) days following
receipt by an Indemnified Party of a written notice from an Indemnifying
Party stating that it disputes all or any portion of a claim set forth in a
Claim Notice or an Indemnity Notice.

    "RESTRUCTURING" means the reorganization of the corporate structure of
MPC including, but not limited to, (i) the merger of Entech with and into
Entech LLC, a Montana limited liability company wholly owned by MPC,
following which Entech LLC shall be the survivor, (ii) the merger of MPC with

                                       41

<Page>

and into the Company, a Montana limited liability company wholly owned by
Seller, pursuant to which shareholders of MPC will receive capital stock of
Seller in exchange for capital stock of MPC, and following which the Company
shall be the survivor, and (iii) the distribution of the capital stock of
Entech LLC by the Company to Seller.

    "RIGHTS AGREEMENT" has the meaning ascribed to it in SECTION 2.27.

    "SEC" means the Securities and Exchange Commission or any successor
entity thereto.

    "SECURITIES ACT" means the Securities Act of 1933, as amended.

    "SELLER" has the meaning ascribed to it in the forepart of this Agreement.

    "SELLER INDEMNITEES" has the meaning ascribed to it in SECTION 10.01(b).

    "SUBJECT DEFINED BENEFIT PLAN" means each Defined Benefit Plan listed and
described in SECTION 2.13(a) OF THE DISCLOSURE SCHEDULE.

    "SUBSIDIARIES" means CMPL, DES, Colstrip Community Services Company, a
Montana corporation, Montana Power Services Company, a Montana corporation,
and One Call Locators, Ltd., a Montana corporation.

    "SUBSTITUTE STOCK OPTIONS" has the meaning ascribed to it in SECTION
5.04(i).

    "SUPERIOR PROPOSAL" shall mean a bona fide written Acquisition Proposal
which the Board of Directors of MPC (prior to the Restructuring and prior to
Closing) or Seller (after the Restructuring but prior to Closing) concludes
in good faith after consultation with a financial advisor of nationally
recognized reputation, taking into account, all legal, financial, regulatory
and other aspects of the proposal and the Person making the proposal
(including, but not limited to, any break-up fees, expense reimbursement
provisions and conditions to consummation), (i) would, if consummated, result
in a transaction that is more favorable to all of the stockholders (in their
capacities as stockholders) of MPC (prior to the Restructuring) or Seller
(after the Restructuring but prior to Closing), from a financial point of
view than the transactions contemplated by this Agreement and (ii) is
reasonably capable of being consummated; provided, that for purposes of this
definition, the term "Acquisition Proposal" shall have the meaning set forth
in SECTION 12.01 except that (x) the reference to "10%" in the definition of
"Acquisition Proposal" shall be deemed to be a reference to "51%", (y)
"Acquisition Proposal" shall only be deemed to refer to a transaction
involving, prior to the Restructuring MPC, and after the Restructuring, but
prior to Closing, Seller, and (z) the reference to "assets" shall refer to
the assets of, prior to the Restructuring, MPC and its subsidiaries taken as
a whole, and after the Restructuring but prior to Closing to Seller and its
subsidiaries, taken as a whole, and not the assets of any of the Subsidiaries
alone.

    "TAX RETURNS" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

    "TAXES" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.

    "THIRD PARTY CLAIM" has the meaning ascribed to it in SECTION 10.06(A).

                                       42

<Page>

   "TREAS REG." means the regulations (including any proposed or temporary
regulations) issued under the Code by the Department of Treasury as they may
be amended from time to time, or any applicable successor regulations.

    "UNITS" has the meaning ascribed to it in the recitals to this Agreement.

    "UTILITY BUSINESS" has the meaning ascribed to it in SECTION 2.28.

    "WHOLESALE TRANSMISSION SERVICES AGREEMENT" means the Wholesale
Transmission Services Agreement dated December 17, 1999, by and between MPC
and PP&L Montana, LLC.

    (b) CONSTRUCTION OF CERTAIN TERMS AND PHRASES. Unless the context of this
Agreement otherwise requires, (i) words of any gender include each other
gender; (ii) words using the singular or plural number also include the
plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) the phrase "ordinary course of business" refers to
the business of the Company or a Subsidiary. Whenever this Agreement refers
to a number of days, such number shall refer to calendar days unless Business
Days are specified. All accounting terms used herein and not expressly
defined herein shall have the meanings given to them under GAAP. Any
representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at Law).

                                  ARTICLE XIII
                                 MISCELLANEOUS

    13.01  NOTICES.  All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:

<Table>
<S>                                                           <C>
        If to Purchaser, to:

        NorthWestern Corporation
        125 South Dakota Avenue
        Sioux Falls, SD 57104-6403
        Facsimile No.: (605) 978-2910
        Attn: Eric R. Jacobsen
             Vice President, General Counsel

        with a copy to:

        Paul, Hastings, Janofsky, & Walker, LLP
        1299 Pennsylvania Avenue, N.W.
        Washington, D.C. 20004-2400
        Facsimile No.: (202) 508-9700
        Attn: Charles A. Patrizia

        If to Seller, to:

        Touch America Holdings, Inc.
        40 East Broadway Street
        Butte, Montana 59701-9394
        Facsimile No.: (406) 497-2451
        Attn: Vice President and General Counsel
</Table>

                                       43
<Page>

<Table>
<S>                                                           <C>
        If to MPC:

        40 East Broadway Street
        Butte, Montana 59701-9394
        Facsimile No.: (406) 497-2451
        Attn: Vice President and General Counsel

        , in each case with a copy to:

        Milbank, Tweed, Hadley & McCloy LLP
        One Chase Manhattan Plaza
        New York, NY 10005
        Facsimile No.: (212) 530-5219
        Attn: John T. O'Connor
</Table>

All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number
as provided in this Section, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices
to that party by giving notice specifying such change to the other party
hereto.

    13.02  ENTIRE AGREEMENT.  This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof,
including without limitation that certain confidentiality agreement between
the parties dated June 1, 2000, and contains the sole and entire agreement
between the parties hereto with respect to the subject matter hereof.

    13.03  EXPENSES.  Except as otherwise expressly provided in this
Agreement (including without limitation as provided in SECTIONS 11.02 and
11.03), whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with
the negotiation, execution and closing of this Agreement and the transactions
contemplated hereby.

    13.04  PUBLIC ANNOUNCEMENTS.  At all times at or before the Closing, MPC,
Seller and Purchaser will not issue or make any reports, statements or
releases to the public or generally to the employees, customers, suppliers or
other Persons to whom MPC, the Company and the Subsidiaries sell goods or
provide services or with whom the Company and the Subsidiaries otherwise have
significant business relationships with respect to this Agreement or the
transactions contemplated hereby (including transition, integration and
similar plans) without the consent of the other, which consent shall not be
unreasonably withheld. If any party is unable to obtain the approval of its
public report, statement or release from the other party and such report,
statement or release is, in the opinion of legal counsel to such party,
required by Law in order to discharge such party's disclosure obligations,
then such party may make or issue the legally required report, statement or
release and promptly furnish the other party with a copy thereof. MPC, Seller
and Purchaser will also obtain the other party's prior approval which
approval shall not be unreasonably withheld of any press release to be issued
immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.

    13.05  CONFIDENTIALITY.  Each party hereto will hold, and will use its
best efforts to cause its Affiliates, and in the case of Purchaser, any
Person who has provided, or who is considering providing, financing to
Purchaser to finance all or any portion of the Purchase Price, and their
respective Representatives to hold, in strict confidence from any Person
(other than any such Affiliate, Person who has provided, or who is
considering providing, financing or Representative), unless (i) compelled

                                       44

<Page>

to disclose by judicial or administrative process (including without
limitation in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or
Regulatory Authorities) or by other requirements of Law or (ii) disclosed in
an Action or Proceeding brought by a party hereto in pursuit of its rights or
in the exercise of its remedies hereunder, all documents and information
concerning the other party or any of its Affiliates furnished to it by the
other party or such other party's Representatives in connection with this
Agreement or the transactions contemplated hereby, except to the extent that
such documents or information can be shown to have been (a) previously known
by the party receiving such documents or information, (b) in the public
domain (either prior to or after the furnishing of such documents or
information hereunder) through no fault of such receiving party or (c) later
acquired by the receiving party from another source if the receiving party is
not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential; provided that following the
Closing the foregoing restrictions will not apply to Purchaser's use of
documents and information concerning MPC, the Company and the Subsidiaries
furnished by Seller and MPC hereunder. In the event the transactions
contemplated hereby are not consummated, upon the request of the other party,
each party hereto will, and will cause its Affiliates, any Person who has
provided, or who is providing, financing to such party and their respective
Representatives to, promptly (and in no event later than five (5) Business
Days after such request) redeliver or cause to be redelivered all copies of
confidential documents and information furnished by the other party in
connection with this Agreement or the transactions contemplated hereby and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by
the party which furnished such documents and information or its
Representatives.

    13.06  WAIVER.  Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will
be cumulative and not alternative.

    13.07  AMENDMENT.  This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.

    13.08  NO THIRD PARTY BENEFICIARY.  The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person.

    13.09  NO ASSIGNMENT; BINDING EFFECT.  Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt
to do so will be void, except (a) for assignments and transfers by operation
of Law and (b) that Purchaser may assign any or all of its rights, interests
and obligations hereunder to a wholly-owned subsidiary, provided that any
such subsidiary agrees in writing to be bound by all of the terms, conditions
and provisions contained herein, but no such assignment referred to in clause
(b) shall relieve Purchaser of its obligations hereunder. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of
and is enforceable by the parties hereto and their respective successors and
assigns.

    13.10  HEADINGS.  The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.

    13.11  INVALID PROVISIONS.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if
the rights or obligations of any party hereto under this Agreement will not
be materially and adversely affected thereby, (a) such provision will be

                                       45

<Page>

fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part
hereof, and (c) the remaining provisions of this Agreement will remain in
full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.

    13.12  GOVERNING LAW.  This Agreement shall be governed by and construed
in accordance with the Laws of the State of New York applicable to a Contract
executed and performed in such State.

    13.13  COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

    13.14  INSURANCE COVERAGE AFTER CLOSING.  The parties hereto agree and
acknowledge that, except as disclosed in SECTION 13.14 OF THE DISCLOSURE
SCHEDULE, each insurance policy listed in SECTION 2.18 OF THE DISCLOSURE
SCHEDULE maintained by Seller and its Affiliates (including MPC, the Company
and the Subsidiaries) shall be available to or cover MPC, the Company and the
Subsidiaries or their respective assets, properties, operations and
liabilities after the Closing Date, and all benefits and coverage under each
such insurance policy shall continue following the Closing Date.

                                       46

<Page>

    IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first
above written.

<Table>
<S>                                                    <C>  <C>
                                                       NORTHWESTERN CORPORATION

                                                       By:  /s/ ERIC R. JACOBSEN
                                                            -----------------------------------------
                                                            Name: Eric R. Jacobsen
                                                            Title: Vice President, General Counsel

                                                       TOUCH AMERICA HOLDINGS, INC.

                                                       By:  /s/ J.P. PEDERSON
                                                            -----------------------------------------
                                                            Name: J.P. Pederson
                                                            Title: Vice President & Chief Financial
                                                            Officer

                                                       THE MONTANA POWER COMPANY

                                                       By:  /s/ J.P. PEDERSON
                                                            -----------------------------------------
                                                            Name: J.P. Pederson
                                                            Title: Vice President & Chief Financial
                                                            Officer
</Table>

                                       47

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