Document:

THIRD AMENDMENT

         THIS THIRD AMENDMENT (this "Amendment") dated as of December 4, 2000
amends the Second Amended and Restated Credit Agreement dated as of November 26,
1999 (as previously amended, the "Credit Agreement") among CERI, L.P., a
Delaware limited partnership (the "Company"), CAPITAL ENVIRONMENTAL RESOURCE
INC./RESSOURCES ENVIRONNEMENTALES CAPITAL INC., an Ontario corporation
("Parent"), various financial institutions, CANADIAN IMPERIAL BANK OF COMMERCE,
as Syndication Agent, BANK OF AMERICA, N.A., as U.S. Agent, and BANK OF AMERICA
CANADA, as Canadian Agent. Capitalized terms used but not defined herein shall
have the meanings given to them in the Credit Agreement.

         WHEREAS, Parent, the Company, the Lenders and the Agents have entered
into the Credit Agreement; and

         WHEREAS, the parties hereto desire to amend the Credit Agreement;

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

         SECTION 1. AMENDMENTS. Effective on (and subject to the occurrence of)
the Amendment Effective Date (as defined below), the Credit Agreement shall be
amended as set forth below:

         1.1      ADDITION OF NEW DEFINITIONS. The following new definitions are
added to Section 1. 1 in appropriate alphabetical sequence:

         ADJUSTED WORKING CAPITAL means at any time the excess of:

                  (a)(i) the consolidated current assets of Parent and its
         Subsidiaries less (ii) the amount of cash and cash equivalents included
         in such consolidated current assets;

         OVER

                  (b)(i) the consolidated current liabilities of Parent and its
         Subsidiaries LESS (ii) to the extent included in such consolidated
         current liabilities, all Short-Term Debt of Parent and its Subsidiaries
         PLUS any portion of Long-Term Debt of Parent and its Subsidiaries
         which is payable within one year from the date of determination.

<PAGE>

         AGGREGATE BORROWING COMMITMENT means the remainder of (a) the sum of
the combined Canadian Commitments and the combined U.S. Commitments MINUS (b)
U.S.$4,000,000.

         AGGREGATE BORROWINGS means at any time the aggregate principal Dollar
Equivalent amount of all outstanding Loans hereunder plus the Dollar Equivalent
face amount of all outstanding Bankers' Acceptances accepted hereunder plus the
Dollar Equivalent face amount of all outstanding BA Equivalent Notes hereunder.

         ASSET SALE means the sale or other disposition by Parent or any
Subsidiary to any Person (other than Parent or any Subsidiary) of any asset or
rights of Parent or such Subsidiary (including any sale or other disposition of
stock of any Subsidiary, whether by merger, consolidation or otherwise, but
EXCLUDING (i) sales of inventory in the ordinary course of business and (ii)
transactions governed by SUBSECTION 8.11 (a) or (c)).

         CAPITAL EXPENDITURES means all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of Parent and its Subsidiaries, but excluding expenditures made in
connection with the replacement or restoration of assets to the extent financed
(i) from insurance proceeds (or other similar recoveries) paid on account of the
loss of or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.

         EXCESS CASH FLOW means, for any period, the remainder of

         (a)      Consolidated Net Income for such period before deducting cash
Interest Expense, taxes, depreciation, amortization,

         LESS

         (b)      the total (without duplication) of

                  (i)      regularly scheduled principal payments (including the
         portion of all payments under capital leases which is attributable to
         principal) arising with respect to any Long-Term Debt (including the
         Term Loan Agreement) of Parent and its Subsidiaries made during such
         period (other than Debt hereunder and the payment of principal under
         the Term Loan Agreement on December 4, 2000),

                  PLUS

                  (ii)     the amount of any reduction of the Commitments made
         pursuant to SECTION 2.8.1(a) (other than the reduction on December 4,
         2000) or 2.8.2 and the amount of all prepayments made pursuant to
         Section 2.2.4 of the Term Loan Agreement during such period,

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<PAGE>

                  PLUS

                  (iii)    all income taxes paid by Parent and its Subsidiaries
         during such period

                  PLUS

                  (iv)     cash Interest Expense of Parent and its Subsidiaries
         during such period

                  PLUS

                  (v)      all Capital Expenditures made in cash during such
         period,

                  PLUS

                  (vi)     any increase in Adjusted Working Capital during such
         period,

                  LESS

                  (vii)    any decrease in Adjusted Working Capital during such
         period.

         LONG-TERM DEBT means all Funded Debt which matures more than one year
after the date of determination or which is renewable or extendable at the
option of the obligor to a date which is more than one year after the date of
determination.

         NET CASH PROCEEDS means:

                  (a) with respect to any Asset Sale, the aggregate cash
         proceeds (including cash proceeds received by way of deferred payment
         of principal pursuant to a note, installment receivable or otherwise,
         but only as and when received) received by Parent or any Subsidiary
         pursuant to such Asset Sale net of (i) the direct costs relating to
         such Asset Sale (including sales commissions and legal, accounting and
         investment banking fees), (ii) taxes paid or reasonably estimated by
         Parent to be payable as a result thereof (after taking into account any
         available tax credits or deductions and any tax sharing arrangements),
         (iii) amounts required to be applied to the repayment of any Debt
         secured by a Lien on the asset subject to such Asset Sale (other than
         Debt hereunder) and (iv) any cash proceeds which Parent certifies to
         the U.S. Agent are to be used, and which are used, within 30 days after
         such Asset Sale to purchase replacement assets which perform the same
         or a similar function;

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                  (b) with respect to any issuance of equity securities or
         Subordinated Debt described in clause (iii) of the definition thereof,
         the aggregate cash proceeds received by Parent or any Subsidiary
         pursuant to such issuance, net of the direct costs relating to such
         issuance (including sales and underwriter's discounts and commissions,
         upfront fees and legal, accounting and investment banking fees); and

                  (c) with respect to the termination of any Hedging Agreement,
         the aggregate cash proceeds received by Parent or any Subsidiary
         pursuant to such termination, net of any direct costs relating to such
         termination.

                  SENIOR DEBT TO EBITDA RATIO means as of the last day of any
         Fiscal Quarter, the ratio of: (i) all Funded Debt of Parent and its
         Subsidiaries as of such day to (ii) EBITDA for the Computation Period
         ending on such day (other than Debt of  the  type  described in clause
         (iii) of the definition of Subordinated Debt).

                  SHORT-TERM DEBT means all Funded Debt other than Long-Term
         Debt.

         1.2      AMENDMENT OF CERTAIN DEFINITIONS.  The definitions of
"Canadian L/C Commitment", "Commitment Reduction Date", "EBITDA", "Interest
Coverage Ratio", "Termination Date" and "U.S. L/C Commitment" set forth in
Section 1.1 are amended in their entirety to read as follows, respectively:

                  Canadian L/C Commitment means the commitment of the Canadian
         Issuing Lender to Issue, and the commitment of the Canadian Lenders
         severally to participate in, Letters of Credit from time to time Issued
         for the account of Parent under Article IV, in an aggregate Effective
         Amount not to exceed on any date an amount equal to the lesser of (a)
         the remainder of the Dollar Equivalent amount of U.S.$6,000,000 minus
         the Effective Amount of all outstanding Letters of Credit issued for
         the account of the Company and (b) the amount of the combined Canadian
         Commitments; IT BEING UNDERSTOOD that the Canadian L/C Commitment is a
         part of the combined Canadian Commitments, rather than a separate,
         independent commitment.

                  COMMITMENT REDUCTION DATE- - see SECTION 2.8.1(a).

                  EBITDA means, with respect to any Computation period,
         Consolidated Net Income for such period before deducting Interest
         Expense, taxes, depreciation, amortization and excluding any non-cash
         charges resulting from any write-off of unamortized finance fees during
         such Computation Period, all calculated based on the assumption that
         each Acquisition made during such Computation Period had been made on
         the first day of such Computation Period, but excluding non-recurring
         private company expenses which are discontinued upon any such
         Acquisition, all as certified by Parent and agreed to by the Required
         Lenders.

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<PAGE>

                  INTEREST COVERAGE RATIO means the ratio for any Computation
         Period of (a) Consolidated Net Income before deducting Interest
         Expense, taxes, depreciation and amortization for such period, but
         excluding (i) pooling charges taken during such period and (ii) any
         non-cash charges resulting from any write-off of unamortized finance
         fees during such period, TO (b) Interest Expense for such period.

                  TERMINATION DATE means November 1, 2002.

                  U.S. L/C COMMITMENT means the commitment of the U.S. Issuing
         Lender to Issue, and the commitment of the U.S. Lenders severally to
         participate in, Letters of Credit from time to time Issued for the
         account of the Company under ARTICLE IV, in an aggregate Effective
         Amount not to exceed on any date the lesser of (a) the remainder of
         U.S.$6,000,000 minus the Effective Amount of all Letters of Credit
         issued for the account of Parent and (b) the amount of the combined
         U.S. Commitments; IT BEING UNDERSTOOD that the U.S. L/C Commitment is a
         part of the combined U.S. Commitments, rather than a separate,
         independent commitment.

         1.3      AMENDMENT TO SECTION 2.1.1. The first proviso to the first
sentence of Section 2.1.1 is amended in its entirety to read as follows:

         PROVIDED that, after giving effect to any Borrowing of U.S. Dollar
         Loans by the Company, (i) the Total Company Outstandings shall not
         exceed the amount of the combined U.S. Commitments and (ii) the
         Aggregate Borrowings shall not exceed the Aggregate Borrowing
         Commitment;

         1.4      AMENDMENT TO SECTION 2.1.2. The first proviso to the first
sentence of Section 2.1.2 is amended in its entirety to read as follows:

         PROVIDED that, after giving effect to any Borrowing of U.S. Dollar
         Loans by Parent, (i) the Total Parent Outstandings shall not exceed the
         amount of the combined Canadian Commitments and (ii) the Aggregate
         Borrowings shall not exceed the Aggregate Borrowing Commitment;

         1.5      AMENDMENT TO SECTION 2.2.1. The first proviso in Section
2.2.1 is amended in its entirety to read as follows:

         PROVIDED that, after giving effect to any Canadian Dollar Borrowing,
         (i) the Total Parent Outstandings shall not exceed the combined
         Canadian Commitments and (ii) the Aggregate Borrowings shall not exceed
         the Aggregate Borrowing Commitment;

         1.6      AMENDMENT TO SECTION 2.3.1. The first proviso in Section
2.3.1 is amended in its entirety to read as follows:

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<PAGE>

         PROVIDED that, after giving effect to any BA Borrowing, (i) the Total
         Parent Outstandings shall not exceed the combined Canadian Commitments
         and (ii) the Aggregate Borrowings shall not exceed the Aggregate
         Borrowing Commitment;

         1.7      AMENDMENT TO SECTION 2.7.1. Section 2.7.1 is amended by
deleting the reference to "SUBSECTION 2.8.1(a) or 2.8.2(a), respectively"
therein and substituting "Section 2.8.1 therefor.

         1.8      AMENDMENT TO SECTION 2.7.2. The first two sentences of Section
2.7.2 are amended in their entirety to read as follows:

         If, on any Computation Date: (a) the Total Parent Outstandings exceed
         the combined Canadian Commitments, then Parent shall immediately prepay
         Loans in an amount sufficient to eliminate such excess; or (b) the
         Aggregate Borrowings exceed the Aggregate Borrowing Commitment, then
         one or both Borrowers shall immediately prepay Loans in an amount
         sufficient to eliminate such excess. Any such prepayment shall be made
         in accordance with the provisions of Section 2.1.5 or 2.2.5, as
         applicable, except that such prepayment shall be required and not
         optional.

         1.9      AMENDMENT OF SECTIONS 2.8.1 and 2.8.2. Sections 2.8.1 and
2.8.2 are amended in their entirety to read as follows:

         2.8.1 MANDATORY REDUCTION OF COMMITMENTS. (a) The Commitments shall be
         reduced on each of the following dates (each a "COMMITMENT REDUCTION
         DATE"), pro rata (except for a non-pro rata reduction of the
         Commitments, on December 4, 2000) between the combined U.S. Commitments
         and the combined Canadian Commitments as in effect after the first
         Commitment Reduction Date, by an amount equal to the sum of (i) the
         amount (if any) by which the principal amount of the loans under the
         Term Loan Agreement would have been required to be repaid on such date
         absent the provisions of Section 2.2.5(c) of the Term Loan Agreement
         PLUS (ii) the amount set forth below opposite such date:

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<PAGE>

                   Date                                  Amount
                   ----                                  ------

                   December 4, 2000              U.S.$6,204,450
                   December 31, 2000                    765,000
                   March 31, 2001                       765,000
                   June 30, 2001                        765,000
                   September 30, 2001                   765,000
                   December 31, 2001                    765,000
                   March 31, 2002                       956,300
                   June 30, 2002                        956,300
                   September 30, 2002                   956,300

                  (b)      In addition, the Commitments shall be reduced, pro
         rata between the combined U.S. Commitments and the combined Canadian
         Commitments as in effect after the first Commitment Reduction Date, (i)
         within 90 days after the end of each Fiscal Year, by an amount equal to
         the sum of 78,795,550/103,000,000ths of Excess Cash Flow for such
         Fiscal Year; (ii) concurrently with the receipt by Parent or any of its
         Subsidiaries of any Net Cash Proceeds from any Asset Sale, any issuance
         of equity securities or of Debt described in CLAUSE (iii) of the
         definition of Subordinated Debt or any termination of any Hedging
         Agreement, by an amount equal to 78,795,550/103,000,000ths of such Net
         Cash Proceeds; and (iii) at the time of any reduction pursuant to
         CLAUSE (i) or (ii) above, by the amount (if any) by which the principal
         amount of the loans under the Term Loan Agreement would have been
         required to be repaid on such date pursuant to Section 2.2.5(b) of the
         Term Loan Agreement absent the provisions of Section 2.2.5(c) of the
         Term Loan Agreement. Notwithstanding the foregoing, no reduction of the
         Commitments shall be required to be made pursuant to CLAUSE (ii) or
         (iii) above on account of the receipt of any Net Cash Proceeds unless
         and until the aggregate amount of the all Net Cash Proceeds which have
         been received since December 4, 2000 which are required to be applied
         to reduce the Commitments and/or to prepay loans under the Term Loan
         Agreement, less the aggregate amount of all Net Cash Proceeds
         previously applied to reduce the Commitments pursuant to CLAUSE (ii) or
         (iii) above PLUS all Net Cash Proceeds previously applied to prepay
         loans under the Term Loan Agreement, equals or exceeds U.S.$100,000.

                  2.8.2    VOLUNTARY REDUCTION OF COMMITMENTS.

                           (a)      The Company may from time to time on at
                  least three Business Days' prior written notice received by
                  the U.S. Agent (which shall promptly advise each U.S. Lender
                  thereof) permanently reduce the amount of the combined U.S.
                  Commitments to an amount not less than the Total Company
                  Outstandings. Any such reduction shall be in an amount not
                  less than U.S.$30,000, PROVIDED that concurrently with such
                  reduction

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<PAGE>

                  the Company shall prepay the loans under the Term Loan
                  Agreement by an amount equal to 24,204,450/19,263,700ths of
                  the amount of such reduction and Parent shall reduce the
                  Canadian Commitments by an amount equal to
                  59,531,850/19,263,700ths of the amount of such reduction. The
                  Company may at any time on like notice terminate the U.S.
                  Commitments upon payment in full by the Company of all Loans
                  to the Company and all other obligations of the Company
                  hereunder and Cash Collateralization in full, pursuant to
                  documentation in form and substance reasonably satisfactory to
                  the U.S. Lenders, of all obligations (contingent or otherwise)
                  arising with respect to the Letters of Credit issued for the
                  account of the Company.

                           (b)      Parent may from time to time on at least
                  three Business Days' prior written notice received by the
                  Canadian Agent (which shall promptly advise each Canadian
                  Lender thereof) permanently reduce the amount of the combined
                  Canadian Commitments to an amount not less than the Total
                  Parent Outstandings. Any such reduction shall be in an amount
                  not less than U.S.$100,000, PROVIDED that concurrently with
                  such reduction the Company shall prepay the loans under the
                  Term Loan Agreement by an amount equal to
                  24,204,450/59,531,850ths of the amount of such reduction and
                  the Company shall reduce the U.S. Commitments by an amount
                  equal to 19,263,700/59,531,850ths of the amount of such
                  reduction. Parent may at any time on like notice terminate the
                  combined Canadian Commitments upon payment in full by Parent
                  of all Loans to Parent and all other obligations of Parent
                  hereunder and Cash Collateralization in full, pursuant to
                  documentation in form and substance reasonably satisfactory to
                  the Canadian Lenders, of all obligations (contingent or
                  otherwise) arising with respect to the Letters of Credit
                  issued for the account of Parent and of all obligations of
                  Parent in respect of outstanding Bankers' Acceptances and BA
                  Equivalent Notes.

         1.10     AMENDMENT TO SECTION 2.8.3. Section 2.8.3 is amended by (i)
deleting the reference to "SUBSECTION 2.8.1(b) or 2.8.2(b), respectively"
therein and substituting "SECTION 2.8.2" therefor and (ii) deleting the
reference to "SUBSECTION 2.8.1(a) or 2.8.2(a)" therein and substituting "SECTION
2.8.1" therefor.

         1.11     AMENDMENT TO SECTION 8.1.2. Section 8.1.2 is amended in its
entirety to read as follows:

                  8.1.2    INTERIM REPORTS. (a) Promptly when available and in
         any event within 45 days after the end of each Fiscal Quarter (except
         the last Fiscal Quarter) of each Fiscal Year, unaudited consolidated
         and consolidating balance sheets of Parent and its Subsidiaries as of
         the end of such Fiscal Quarter and unaudited consolidated and
         consolidating statements of earnings and cash flow for such Fiscal
         Quarter and for the period beginning with the first day of such Fiscal
         Year and ending on the last day of such

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<PAGE>

         Fiscal Quarter; (b) promptly when available and in any event within 30
         days after the end of each of the first two months of each Fiscal
         Quarter, unaudited consolidated balance sheets of Parent and its
         Subsidiaries as of the end of such month and unaudited consolidated
         statements of earnings for such month; (c) concurrently with each set
         of financial statements referred to in CLAUSE (a) or (b) above, (i) a
         certificate of the chief executive officer or the chief financial
         officer of Parent certifying that such financial statements (which may
         be prepared by Parent) fairly present the financial condition and
         results of operations of Parent and its Subsidiaries as of the dates
         and periods indicated, subject to changes resulting from normal
         year-end adjustments, (ii) a report from Parent's financial advisor as
         to the status of any potential issuance by Parent of equity or Debt
         which would satisfy the requirements of SUBSECTION 9.1(o), (iii) a
         report (or a column in the applicable financial statements) showing any
         variances from the forecast most recently provided pursuant to CLAUSE
         (d) below and (iv) a detailed report of Capital Expenditures and Asset
         Sales for the period then ended; and (d) concurrently with each set of
         financial statements referred to in CLAUSE (a) above, a copy of the
         forecast (including a projected consolidated and consolidating balance
         sheet, and projected statements of earnings and cash flow and updated
         projections) of Parent and its Subsidiaries for the following four
         Fiscal Quarters.

         1.12     AMENDMENT TO SECTION 8.1.3. Section 8.1.3 is amended by (i)
deleting the word "and" after the reference "SECTION 8.1.1" and inserting a ","
therefor and (ii) inserting the words "and each set of monthly statements"
after the words "quarterly statements" therein.

         1.13     ADDITION OF WEEKLY REPORTS. Section 8.1 is amended by
renumbering the existing Section 8.1.9 as 8.1.10 and inserting the following new
8.1.9:

                  8.1.9    WEEKLY REPORTS. Not later than the second Business
         Day of each week, a report outlining any major business development
         with respect to Parent or any Subsidiary and any significant progress
         made on the potential issuance of equity or Debt which would satisfy
         the requirements of SUBSECTION 9.1(o).

         1.14     AMENDMENT TO SECTION 8.6.2. The chart contained in Section
8.6.2 is amended in its entirety to read as follows:

             -------------------------------------------------
                 Computation                    Interest
                Period Ending:               Coverage Ratio
             -------------------------------------------------
                6/30/00 through 6/30/01       1.75 to 1.00
             -------------------------------------------------
                9/30/01 and thereafter        2.00 to 1.00
             -------------------------------------------------

         1.15     AMENDMENT TO SECTION 8.6.3. The chart contained in Section
8.6.3 is amended in its entirety to read as follows:

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<PAGE>

               -------------------------------------------------
                           Fiscal               Total Debt to
                      Quarter Ending:           EBITDA Ratio
               -------------------------------------------------
                  6/30/00 through 12/31/00      5.25 to 1.00
               -------------------------------------------------
                  3/31/01                       5.15 to 1.00
               -------------------------------------------------
                  6/30/01                       4.75 to 1.00
               -------------------------------------------------
                  9/30/01                       4.35 to 1.00
               -------------------------------------------------
                  12/31/01                      4.25 to 1.00
               -------------------------------------------------
                  3/31/02                       4.15 to 1.00
               -------------------------------------------------
                  6/30/02                       4.05 to 1.00
               -------------------------------------------------
                  9/30/02                       3.95 to 1.00
               -------------------------------------------------

         1.16     AMENDMENT TO SECTION 8.6.4. Section 8.6.4 is amended in its
entirety to read as follows:

                  8.6.4    TOTAL DEBT TO CAPITALIZATION. Not permit the ratio of
         (a) Total Debt to (b) the sum of Total Debt plus Adjusted Net Worth to
         exceed at any time 0.675 to 1.0.

         1.17     AMENDMENT TO SECTION 8.7. Section 8.7(h)(i) is amended by
deleting the reference to "U.S. $15,000,000" and substituting "U.S. $5,000,000"
therefor.

         1.18     AMENDMENT TO SECTION 8.11. Clause (d)(iv) of Section 8.11 is
amended in its entirety to read as follows:

                  (iv)     the Required Lenders have consented in writing to
         such Acquisition;

         1.19     AMENDMENT TO SECTION 8.12. Clause (c) of Section 8.12 is
amended by deleting the amount "U.S.$1,000,000" therein and substituting the
amount "U.S.$500,000" therefor.

         1.20     AMENDMENT TO SECTION 8.22. Section 8.22 is amended in its
entirety to read as follows:

                  8.22     CAPITAL EXPENDITURES. Not permit all Capital
         Expenditures (excluding, to the extent included in Capital
         Expenditures, (a) assets acquired in a Permitted Acquisition and (b) up
         to U.S.$1,000,000 of Capital Expenditures in any Fiscal Year ending
         after December 31, 2000 which Parent demonstrates, to the reasonable
         satisfaction of the Administrative Agent and the Syndication Agent,
         were required in connection with new municipal contracts entered into
         by

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<PAGE>

         Parent or a Subsidiary) during the period beginning June 30, 2000 and
         ending December 31, 2000 to exceed U.S.$5,000,000 and during any Fiscal
         Year thereafter to exceed U.S.$7,500,000.

         1.21     AMENDMENT TO SECTION 8.27. Section 8.27 is deleted in its
entirety.

         1.22     ADDITION TO SECTION 9. 1. Section 9.1 is amended by adding the
following new CLAUSES (o), (p) and (q):

                  (o)      RECAPITALIZATION TRANSACTIONS. (i) Failure by Parent
         to receive, prior to June 1, 2001, Net Cash Proceeds in a Dollar
         Equivalent amount equal to or greater than the Junior Capital Amount
         (as defined below) from the issuance of either (x) equity or (y) Debt
         of the type described in CLAUSE (iii) of the definition of Subordinated
         Debt; or (ii) failure by Parent to deliver to the Lenders, prior to
         March 15, 2001, a binding commitment letter from one or more financing
         sources, reasonably acceptable to the U.S. Agent and the Required
         Lenders, to provide equity or Debt meeting the requirements of the
         foregoing CLAUSE (i). For purposes of the foregoing, "Junior Capital
         Amount" means U.S.$25,000,000 MINUS the lesser of U.S.$5,000,000 and
         50% of the aggregate amount of Net Cash Proceeds received from Asset
         Sales on or prior to January 31, 2001.

                  (p)      FINANCIAL ADVISOR. Failure by Parent to retain prior
         to December 15, 2000, and at all times thereafter (unless the Required
         Lenders otherwise consent or the requirements of SUBSECTION (o) above
         have been satisfied) to continue to retain, a financial advisor
         reasonably acceptable to the Required Lenders for the purpose of
         raising equity or Debt which meets the requirements of SUBSECTION (o)
         above.

                  (q)      REFINANCING. Failure by Parent to deliver to the
         Lenders, prior to August 1, 2002, a binding commitment letter from one
         or more lenders, reasonably acceptable to the U.S. Agent and the
         Required Lenders, in an amount sufficient to repay in full all
         outstanding Loans and other obligations of the Borrowers hereunder.

         1.23     AMENDMENT OF SCHEDULES 1.1.A, 1.1.B and 1.1.C. Schedule 1.1.A,
Schedule 1.1.B and Schedule 1.1C to the Credit Agreement shall each be amended
in its entirety by substituting SCHEDULE 1.1A, SCHEDULE 1.1B and SCHEDULE 1.1C
hereto therefor, respectively.

         SECTION 2. REPRESENTATIONS AND WARRANTIES. Parent and the Company
represent and warrant to each Agent and each Lender that: (a) after giving
effect hereto, the representations and warranties made in Section 7 of the
Credit Agreement are true and correct in all material respects on and as of the
Amendment Effective Date with the same effect as if made on and as of the
Amendment Effective Date; (b) except for any such event which will be cured upon
the effectiveness hereof, no Event of Default or Unmatured Event of Default
exists or will result from the effectiveness of this Amendment; (c) the
execution and delivery by Parent and the Company of this Amendment and the
performance by Parent and the Company of their respective obligations under the
Credit Agreement as amended hereby (as so amended, the

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<PAGE>

"AMENDED CREDIT AMENDMENT") (i) are within such Borrower's power, (ii) have been
duly authorized by all necessary action, (iii) have received all necessary
approval from any governmental agency or authority and (iv) do not and will not
contravene or conflict with any provision of law or of any provision of such
Borrower's Organization Documents or of any agreement or instrument binding on
such Borrower or any court or administrative order or decree applicable to such
Borrower, (e) the Amended Credit Agreement is the legal, valid and binding
obligation of such Borrower, enforceable against such Borrower in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability; and (f)
Parent has previously delivered to each Lender a true and correct copy of the
employment contract between Parent and each of Al Loopstra, David Langille,
George Boothe and Dennis Nolan, and each such contract is in full force and
effect on the date hereof.

         SECTION 3. WAIVER. Subject to the occurrence of the Amendment Effective
Date, the Required Lenders hereby waive Parent's non-compliance with Sections
8.6.2 and 8.6.3 of the Credit Agreement as in effect prior to the Amendment
Effective Date for any period ending prior to the date of this Amendment but not
any non-compliance with such Sections 8.6.2 and 8.6.3 as in effect after the
Amendment Effective Date.

         SECTION 4. EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective on December 4, 2000 (the "AMENDMENT EFFECTIVE DATE") if on or before
such date the U.S. Agent has received (i) counterparts of this Amendment
executed by Parent, the Company, the Required Lenders, the U.S. Agent and the
Canadian Agent, (ii) a Confirmation in the form of EXHIBIT A hereto signed by
Parent, the Company and all of the Parent's other Subsidiaries, (iii) copies of
resolutions of the board of directors (or other appropriate governing body) of
each of Parent and the Company, respectively, authorizing the transactions
contemplated hereby, certified by the Secretary or an Assistant Secretary (or
other appropriate representative) of Parent or the Company, as the case may be,
(iv) an opinion of Hodgson Russ Andrews Woods & Goodyear, LLP, U.S. counsel to
Parent and the Company, substantially in the form of EXHIBIT B hereto, (v) an
opinion of Torys, Ontario counsel to Parent, substantially in the form of
EXHIBIT C hereto, (vi) an amendment fee for each Lender that executes a
counterpart hereof on or before 4:00 p.m. (Chicago time) on December 1, 2000 in
an amount equal to 0.50% of such Lender's Commitment after giving effect hereto
and (vii) any additional amounts payable resulting from the amendment to
Schedule 1.1C set forth herein, it being understood that the amendment to
Schedule 1.1C shall be deemed effective as of August 14, 2000.

         SECTION 5. MISCELLANEOUS.

         5.1      INTEREST PERIODS. Notwithstanding any other provision of the
Amended Credit Agreement, (a) prior to the receipt by Parent of equity or
Subordinated Debt which meets the requirements of subsection 9.1 (o) of the
Amended Credit Agreement, no Interest Period shall extend beyond June 1, 2001,
(b) no Interest Period for any Offshore Rate Loan shall be longer than three
months and (c) no Bankers' Acceptance or BA Equivalent Note shall have a term of
more than three months.

                                      -12-
<PAGE>

         5.2      CAPTIONS. Section captions used in this Amendment are for
convenience only and shall not affect the construction of this Amendment.

         5.3      GOVERNING LAW, SEVERABILITY. THIS AMENDMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE ENTIRELY PERFORMED IN SAID STATE. Wherever possible
each provision of this Amendment shall be interpreted in such manner as to be
effective and valid under applicable laws, but if any provision of this
Amendment shall be prohibited by or invalid under such laws, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment.

         5.4      COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment.

         5.5      SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
the parties hereto and their respective successors and assigns, and shall inure
to the sole benefit of the parties hereto and the successors and assigns of each
Agent and each Lender.

         5.6      CONTINUED EFFECTIVENESS. Except as specifically provided
herein, the Credit Agreement and the other Loan Documents shall remain
unmodified and are specifically confirmed to be in full force and effect. Upon
effectiveness of this Amendment, all references in the Credit Agreement and in
the other Loan Documents to "Credit Agreement" or the like shall refer to the
Credit Agreement as hereby amended.

         5.7      FURTHER ASSURANCES. The Parent agrees to cause the obligations
of the Company and its Subsidiaries under the Loan Documents to be secured by
each motor vehicle owned by Parent and its Subsidiaries, including those motor
vehicles subject to a statute requiring notation on a certificate of title to
perfect a security interest in such vehicle.

                        [SIGNATURES BEGIN ON NEXT PAGE]

                                      -13-
<PAGE>

Delivered at Chicago, Illinois, as of the day and year first above written.

                                   CAPITAL ENVIRONMENTAL RESOURCE,
                                   INC./RESSOURCES ENVIRONNEMENTALES
                                   CAPITAL INC.

                                   By:
                                      ------------------------------------------
                                   Title:
                                         ---------------------------------------

                                   CERI, L.P.
                                   By: 1312654 Ontario Inc., its General Partner

                                   By:
                                      ------------------------------------------
                                   Title:
                                         ---------------------------------------

                                   BANK OF AMERICA, N.A. as U.S. Agent

                                   By:
                                      ------------------------------------------
                                   Title:
                                         ---------------------------------------

                                   BANK OF AMERICA CANADA,
                                   as Canadian Agent

                                   By:
                                      ------------------------------------------
                                   Title:
                                         ---------------------------------------

                                   COMERICA BANK, as a U.S. Lender

                                   By:
                                      ------------------------------------------
                                   Title:
                                         ---------------------------------------

                                       S-1
<PAGE>

                                  LASALLE BANK NATIONAL ASSOCIATION, as
                                  a U.S. Lender

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                  UNION BANK OF CALIFORNIA, as a U.S. Lender

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                  BANK OF AMERICA, N.A., as an Issuing Lender

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                  BANK OF AMERICA CANADA, as a Canadian
                                  Lender and as an Issuing Lender

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                  CANADIAN IMPERIAL BANK OF COMMERCE,
                                  as a Canadian Lender and as Syndication Agent

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                      S-2
<PAGE>

                                  CREDIT SUISSE FIRST BOSTON CANADA, as a
                                  Canadian Lender

                                  By:
                                     ------------------------------------------
                                  Title:
                                        ---------------------------------------

                                      S-3
<PAGE>

                                 SCHEDULE 1.1.A

                       U.S. COMMITMENTS, PRO RATA SHARES
                                AND PERCENTAGES

================================================================================
U.S. LENDER                           U.S. COMMITMENT*       U.S. PRO RATA SHARE
--------------------------------------------------------------------------------
LaSalle Bank National Association     U.S.  $2,407,962.50             12.5%
--------------------------------------------------------------------------------
Union Bank of California              U.S.  $9,631,850.00             50.0%
--------------------------------------------------------------------------------
Comerica Bank                         U.S.  $7,223,887.50             37.5%
--------------------------------------------------------------------------------
TOTALS                                U.S. $19,263,700.00            100.0%
================================================================================

*As in effect after the frst Commitment Reduction Date.

<PAGE>

                                 SCHEDULE 1.1.B

                     CANADIAN COMMITMENTS, PRO RATA SHARES
                                AND PERCENTAGES

================================================================================
                                                                    CANADIAN
         CANADIAN LENDER              CANADIAN COMMITMENT*       PRO RATA SHARE
--------------------------------------------------------------------------------
Bank of America Canada                 U.S.$19,462,335.58         32.69230769%
--------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce     U.S.$26,331,395.19         44.23076923%
--------------------------------------------------------------------------------
Credit Suisse First Boston Canada      U.S.$13,738,119.23         23.07692308%
--------------------------------------------------------------------------------
TOTALS                                 U.S.$59,531,850.00                 100%
================================================================================

*As in effect after the first Commitment Reduction Date.

<PAGE>

                                 SCHEDULE 1.1.C
                                PRICING SCHEDULE

         The Applicable Margin, the Stamping Fee Rate and the rate for Letter of
Credit fees and non-use fees shall be determined based on the applicable Senior
Debt to EBITDA Ratio as set forth below.

<TABLE>
<CAPTION>
=================================================================================================================================
                                            APPLICABLE MARGIN
                                               FOR OFFSHORE
                                            U.S. DOLLAR LOANS
                                               AND OFFSHORE
                                             CANADIAN DOLLAR
                                             LOANS, STAMPING       APPLICABLE
                                                 FEE RATE       MARGIN FOR BASE
                                               AND RATE FOR        RATE LOANS        APPLICABLE       RATE FOR
                                                 FINANCIAL      TO COMPANY AND    MARGIN FOR BASE  NON-FINANCIAL    RATE FOR
             SENIOR DEBT                     LETTER OF CREDIT      PRIME RATE      RATE LOANS TO     LETTER OF      NON-USE
          TO EBITDA RATIO                          FEES              LOANS             PARENT       CREDIT FEES       FEES
---------------------------------------------------------------------------------------------------------------------------------
<S>         <C>                                   <C>               <C>                <C>            <C>            <C>
Level I     less than 3.00 to 1.0                  3.00%             1.50%              2.00%          1.500%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level II    greater than or equal to
            3.00 to 1.0 but less than
            3.25 to 1.0                            3.25%             1.75%              2.25%          1.625%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level III   greater than or equal to
            3.25 to 1.0 but less than
            3.50 to 1.0                            3.50%             2.00%              2.50%          1.750%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level IV    greater than or equal to
            3.50 to 1.0 but less than
            3.75 to 1.0                            3.75%             2.25%              2.75%          1.875%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level V     greater than or equal to
            3.75 to 1.0 but less than
            4.25 to 1.0                            4.00%             2.50%              3.00%          2.000%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level VI    greater than or equal to
            4.25 to 1.0 but less than
            4.75 to 1.0                            4.25%             2.75%              3.25%          2.125%         0.50%
---------------------------------------------------------------------------------------------------------------------------------
Level VII   greater than or equal to
            4.75 to 1.0                            4.50%             3.00%              3.50%          2.250%         0.50%
=================================================================================================================================
</TABLE>

         The Applicable Margin, the Stamping Fee Rate and the rate for Letter of
Credit fees and non-use fees shall be adjusted, to the extent applicable, 45
days (or, in the case of the last Fiscal Quarter of any Fiscal Year, 90 days)
after the end of each Fiscal Quarter based on the Senior Debt to EBITDA Ratio as
of the last day of such Fiscal Quarter; PROVIDED that if Parent fails to deliver
the financial statements required by SECTION 8.1 and the related compliance
certificate in the form of EXHIBIT C by the due date therefor, the Applicable
Margin, the Stamping Fee Rate and the rate for Letter of Credit fees and non-use
fees that would apply at Level VII shall be applicable from such due date until
such financial statements are delivered.

<PAGE>

                                THIRD AMENDMENT

         THIS THIRD AMENDMENT (this "AMENDMENT") dated as of December 4, 2000
amends the Term Loan Agreement dated as of November 26, 1999 (as previously
amended, the ("AGREEMENT") among CAPITAL ENVIRONMENTAL RESOURCE INC./RESSOURCES
ENVIRONNEMENTALES CAPITAL INC., an Ontario corporation (the "BORROWER"), various
financial institutions and BANK OF AMERICA, N.A., as Agent. Capitalized terms
used but not defined herein shall have the meanings given to them in the
Agreement.

         WHEREAS, the Borrower, the Lenders and the Agent have entered into the
Agreement; and

         WHEREAS, the parties hereto desire to amend the Agreement;

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

         SECTION 1. AMENDMENTS. Effective on (and subject to the occurrence of)
the Amendment Effective Date (as defined below), the Agreement shall be amended
as set forth below:

         1.1      ADDITION OF NEW DEFINITIONS. The following new definitions are
added to Section  1.1 in appropriate alphabetical sequence:

                  ADJUSTED WORKING CAPITAL means at any time the excess of:

                  (a) (i) the consolidated current assets of the Borrower and
         its Subsidiaries LESS (ii) the amount of cash and cash equivalents
         included in such consolidated current assets;

         OVER

                  (b) (i) the consolidated current liabilities of the Borrower
         and its Subsidiaries LESS (ii) to the extent included in such
         consolidated current liabilities, all Short-Term Debt of the Borrower
         and its Subsidiaries PLUS any portion of Long-Term Debt of the
         Borrower and its Subsidiaries which is payable within one year from the
         date of determination.

                  ASSET SALE means the sale or other disposition by the Borrower
         or any Subsidiary to any Person (other than the Borrower or any
         Subsidiary) of any asset or rights of the Borrower or such Subsidiary
         (including any sale or other disposition of stock of any Subsidiary,
         whether by merger, consolidation or otherwise, but EXCLUDING (i) sales
         of

<PAGE>

         inventory in the ordinary course of business and (ii) transactions
         governed by SUBSECTION 7.11(a) or (c)).

                  CAPITAL EXPENDITURES means all expenditures which, in
         accordance with GAAP, would be required to be capitalized and shown on
         the consolidated balance sheet of the Borrower and its Subsidiaries,
         but excluding expenditures made in connection with the replacement or
         restoration of assets to the extent financed (i) from insurance
         proceeds (or other similar recoveries) paid on account of the loss of
         or damage to the assets being replaced or restored or (ii) with awards
         of compensation arising from the taking by eminent domain or
         condemnation of the assets being replaced.

                  EXCESS CASH FLOW means, for any period, the remainder of

                  (a) Consolidated Net Income for such period before deducting
         cash Interest Expense, taxes, depreciation, amortization,

                  LESS

                  (b) the total (without duplication) of

                           (i)      regularly scheduled principal payments
                  (including the portion of all payments under capital leases
                  which is attributable to principal) arising with respect to
                  any Long-Term Debt (including this Agreement) of the Borrower
                  and its Subsidiaries made during such period (other than the
                  payment of principal under the Term Loan Agreement on December
                  4, 2000),

                  PLUS

                           (ii)     the amount of any reduction of the
                  commitments made pursuant to Section 2.8.1(a) (other than
                  the reduction on December 4, 2000) or 2.8.2 of the Existing
                  Credit Agreement and the amount of all prepayments made
                  pursuant to SECTION 2.2.4 during such period,

                  PLUS

                           (iii)    all income taxes paid by the Borrower and
                  its Subsidiaries during such period,

                  PLUS

                           (iv)     cash Interest Expense of the Borrower and
                  its Subsidiaries during such period,

                  PLUS

                                      -2-
<PAGE>

                           (v)      all Capital Expenditures made in cash during
                  such period,

                  PLUS

                           (vi)     any increase in Adjusted Working Capital
                  during such period,

                  LESS

                           (vii)    any decrease in Adjusted Working Capital
                  during such period.

                  LONG-TERM DEBT means all Funded Debt which matures more than
         one year after the date of determination or which is renewable or
         extendable at the option of the obligor to a date which is more than
         one year after the date of determination.

                  TRIGGERING EVENT DISPOSITION means an Asset Sale (or series of
         related Asset Sales) which results in the sale or other disposition of
         assets which (i) represent more than 50% of the net book value of all
         assets of the Borrower and its Subsidiaries or (ii) generated more than
         50% of the consolidated revenues of the Borrower and its Subsidiaries
         during the preceding Fiscal Year.

                  TRIGGERING EVENT OFFER - see SUBSECTION 2.2.5(d).

                  NET CASH PROCEEDS means:

                           (a)      with respect to any Asset Sale, the
                  aggregate cash proceeds (including cash proceeds received by
                  way of deferred payment of principal pursuant to a note,
                  installment receivable or otherwise, but only as and when
                  received) received by the Borrower or any Subsidiary pursuant
                  to such Asset Sale, net of (i) the direct costs relating to
                  such Asset Sale (including sales commissions and legal,
                  accounting and investment banking fees), (ii) taxes paid or
                  reasonably estimated by the Borrower to be payable as a result
                  thereof (after taking into account any available tax credits
                  or deductions and any tax sharing arrangements), (iii) amounts
                  required to be applied to the repayment of any Debt secured by
                  a Lien on the asset subject to such Asset Sale (other than
                  Debt hereunder), and (iv) any cash proceeds which the Borrower
                  certifies to the Agent are to be used, and which are used,
                  within 30 days after such Asset Sale to purchase replacement
                  assets which perform the same or a similar function;

                           (b)      with respect to any issuance of equity
                  securities or Subordinated Debt described in CLAUSE (iii) of
                  the definition thereof, the aggregate cash proceeds received
                  by the Borrower or any Subsidiary pursuant to such issuance,
                  net of the direct costs relating to such issuance (including
                  sales and underwriter's

                                      -3-
<PAGE>

                  discounts and commissions, upfront fees and legal, accounting
                  and investment banking fees); and

                           (c)      with respect to the termination of any
                  Hedging Agreement, the aggregate cash proceeds received by the
                  Borrower or any Subsidiary pursuant to such termination, net
                  of any direct costs relating to such termination.

                  SENIOR DEBT TO EBITDA RATIO means as of the last day of any
         Fiscal Quarter, the ratio of: (i) all Funded Debt of the Borrower and
         its Subsidiaries as of such day to (ii) EBITDA for the Computation
         Period ending on such day (other than Debt of the type described in
         CLAUSE (iii) of the definition of Subordinated Debt).

                  SHORT-TERM DEBT means all Funded Debt other than Long-Term
         Debt.

         1.2      AMENDMENT OF DEFINITIONS. The definitions of "EBITDA" and
"Interest Coverage Ratio" set forth in Section 1.1 are amended in their entirety
to read as follows, respectively:

                  EBITDA means, with respect to any Computation Period,
         Consolidated Net Income for such period before deducting Interest
         Expense, taxes, depreciation, amortization and excluding any non-cash
         charges resulting from any write-off of unamortized finance fees during
         such Computation Period, all calculated based on the assumption that
         each Acquisition made during such Computation Period had been made on
         the first day of such Computation Period, but excluding non-recurring
         private company expenses which are discontinued upon any such
         Acquisition, all as certified by the Borrower and agreed to by the
         Required Lenders.

                  INTEREST COVERAGE RATIO means the ratio for any Computation
         Period of (a) Consolidated Net Income before deducting Interest
         Expense, taxes, depreciation and amortization for such period, but
         excluding (i) pooling charges taken during such period and (ii) any
         non-cash charges resulting from any write-off of unamortized finance
         fees during such period, TO (b) Interest Expense for such period.

         1.3      AMENDMENT OF SECTION 2.2.4. The first sentence in Section
2.2.4 is amended in its entirety to read as follows:

         Subject to SECTION 4.4, the Borrower may, from time to time, ratably
         prepay the Loans in whole or in part, in an aggregate amount of
         U.S.$40,000, PROVIDED that concurrently with such prepayment the
         Borrower shall permanently reduce the amount of the commitments under
         the Existing Credit Agreement by an amount equal to the product of (x)
         the amount of such prepayment multiplied by (y) a fraction, the
         numerator of which is 78,795,550 and the denominator of which is
         24,204,450.

                                      -4-
<PAGE>

         1.4      AMENDMENT OF SECTION 2.2.5. Section 2.2.5 is amended in its
entirety to read as follows:

                  2.2.5    REPAYMENT OF LOANS. (a) The Loans of each Lender
         shall be repaid in installments on the dates set forth below, in each
         case in such Lender's Pro Rata Share (as in effect after December 4,
         2000) of the aggregate principal amount of the Loans to be repaid on
         the applicable date.

                  Date                                  Amount
                  ----                                  ------

                  December 4, 2000                U.S.$795,550
                  December 31, 2000                    235,000
                  March 31, 2001                       235,000
                  June 30, 2001                        235,000
                  September 30, 2001                   235,000
                  December 31, 2001                    235,000
                  March 31, 2002                       293,700
                  June 30, 2002                        293,700
                  September 30, 2002                   293,700
                  November 1, 2002                   3,398,350

                  (b)      In addition, the Borrower shall prepay the Loans
         ratably (i) within 90 days after the end of each Fiscal Year, by an
         amount equal to 24,204,450/103,000,000ths of Excess Cash Flow for such
         Fiscal Year; and (ii) concurrently with the receipt by the Borrower or
         any of its Subsidiaries of any Net Cash Proceeds from any Asset Sale,
         any issuance of equity securities or of Debt described in CLAUSE (iii)
         of the definition of Subordinated Debt or any termination of any
         Hedging Agreement, by an amount equal to 24,204,450/103,000,000ths of
         such Net Cash Proceeds. Notwithstanding the foregoing, no prepayment of
         the Loans shall be required to be made pursuant to CLAUSE (ii) above on
         account of the receipt of any Net Cash Proceeds unless and until the
         aggregate amount of the all Net Cash Proceeds which have been received
         since December 4, 2000 which are required to be applied to prepay Loans
         and/or reduce the commitments under the Existing Credit Agreement, less
         the aggregate amount of all Net Cash Proceeds previously applied to
         prepay Loans pursuant to CLAUSE (ii) above PLUS all Net Cash Proceeds
         previously applied to reduce the commitments under the Existing Credit
         Agreement, equals or exceeds U.S.$100,000.

                  (c)      Notwithstanding the foregoing provisions of this
         SECTION 2.2.5, no payment of the Loans shall be required prior to
         November 27, 2004 to the extent that after giving effect to such
         payment the aggregate amount of the Loans required to be prepaid
         pursuant to this SECTION 2.2.5 (excluding any prepayment resulting from

                                      -5-
<PAGE>

         acceptance of a Triggering Event Offer) would be greater than 25% of
         the aggregate original principal amount of the Loans.

                  (d)      Notwithstanding SUBSECTION 2.2.5(c), if a Triggering
         Event Disposition occurs, the Borrower shall promptly (and in any event
         within two Business Days) make an offer in writing to the Agent to
         repay Loans ratably using 24,204,450/103,000,000ths of the Net Cash
         Proceeds of such Triggering Event Disposition (a "TRIGGERING EVENT
         OFFER"). If the Agent (acting with the consent of the Required Lenders)
         notifies the Borrower in writing of its acceptance of a Triggering
         Event Offer within five Business Days after its receipt of such
         Triggering Event Offer, the Borrower shall, within one Business Day of
         the Agent's acceptance of such Triggering Event Offer, use
         24,204,450/103,000,000ths of the Net Cash Proceeds of the applicable
         Triggering Event Disposition to ratably repay Loans. If the Agent does
         not accept a Triggering Event Offer within five Business Days after its
         receipt of a Triggering Event Offer, such Triggering Event Offer shall
         be deemed rejected and the Company shall have no obligation to repay
         Loans with the Net Cash Proceeds of the applicable Triggering Event
         Disposition.

         1.5      AMENDMENT TO SECTION 7.1.2. Section 7.1.2 is amended in its
entirety to read as follows:

                  7.1.2    INTERIM REPORTS. (a) Promptly when available and in
         any event within 45 days after the end of each Fiscal Quarter (except
         the last Fiscal Quarter) of each Fiscal Year, unaudited consolidated
         and consolidating balance sheets of the Borrower and its Subsidiaries
         as of the end of such Fiscal Quarter and unaudited consolidated and
         consolidating statements of earnings and cash flow for such Fiscal
         Quarter and for the period beginning with the first day of such Fiscal
         Year and ending on the last day of such Fiscal Quarter; (b) promptly
         when available and in any event within 30 days after the end of each of
         the first two months of each Fiscal Quarter, unaudited consolidated
         balance sheets of the Borrower and its Subsidiaries as of the end of
         such month and unaudited consolidated statements of earnings for such
         month; (c) concurrently with each set of financial statements referred
         to in CLAUSE (a) or (b) above, (i) a certificate of the chief executive
         officer or the chief financial officer of the Borrower, certifying that
         such financial statements (which may be prepared by the Borrower)
         fairly present the financial condition and results of operations of the
         Borrower and its Subsidiaries as of the dates and periods indicated,
         subject to changes resulting from normal year-end adjustments, (ii) a
         report from the Borrower's financial advisor as to the status of any
         potential issuance by the Borrower of equity or Debt which would
         satisfy the requirements of SUBSECTION 8.1(o), (iii) a report (or a
         column in the applicable financial statements) showing any variances
         from the forecast most recently provided pursuant to CLAUSE (d) below
         and (iv) a detailed report of Capital Expenditures and Asset Sales for
         the period then ended; and (d) concurrently with each set of financial
         statements referred to in CLAUSE (a) above, a copy of the forecast
         (including a projected consolidated and consolidating balance sheet,

                                      -6-
<PAGE>

         and projected statements of earnings and cash flow and updated
         projections) of the Borrower and its Subsidiaries for the following
         four Fiscal Quarters.

         1.6      AMENDMENT TO SECTION 7.1.3. Section 7.1.3 is amended by (i)
deleting the word "and" after the reference "SECTION 7.1.1" and inserting a ","
therefor and (ii) inserting the words "and each set of monthly statements" after
the words "quarterly statements" therein.

         1.7      ADDITION OF WEEKLY REPORTS. Section 7.1 is amended by
renumbering the existing Section 7.1.9 as 7.1.10 and inserting the following new
7.1.9:

                  7.1.9    WEEKLY REPORTS. Not later than the second Business
         Day of each week, a report outlining any major business development
         with respect to the Borrower or any Subsidiary and any significant
         progress made on the potential issuance of equity or Debt which would
         satisfy the requirements of SUBSECTION 8.1(o).

         1.8      AMENDMENT TO SECTION 7.6.2. The chart contained in Section
7.6.2 is amended in its entirety to read as follows:

              ---------------------------------------------------
                COMPUTATION                          INTEREST
               PERIOD ENDING:                     COVERAGE RATIO
              ---------------------------------------------------
               6/30/00 through 6/30/01             1.75 to 1.00
              ---------------------------------------------------
               9/30/01 and thereafter              2.00 to 1.00
              ---------------------------------------------------

         1.9      AMENDMENT TO SECTION 7.6.3. The chart contained in Section
7.6.3 is amended in its entirety to read as follows:

              ---------------------------------------------------
                   FISCAL                          TOTAL DEBT TO
               QUARTER ENDING:                     EBITDA RATIO
              ---------------------------------------------------
               6/30/00 through 12/31/00            5.25 to 1.00
              ---------------------------------------------------
               3/31/01                             5.15 to 1.00
              ---------------------------------------------------
               6/30/01                             4.75 to 1.00
              ---------------------------------------------------
               9/30/01                             4.35 to 1.00
              ---------------------------------------------------
               12/31/01                            4.25 to 1.00
              ---------------------------------------------------
               3/31/02                             4.15 to 1.00
              ---------------------------------------------------
               6/30/02                             4.05 to 1.00
              ---------------------------------------------------
               9/30/02 and thereafter              3.95 to 1.00
              ---------------------------------------------------

                                      -7-
<PAGE>

         1.10     AMENDMENT TO SECTION 7.6.4. Section 7.6.4 is amended in its
entirety to read as follows:

                  7.6.4    TOTAL DEBT TO CAPITALIZATION. Not permit the ratio of
         (a) Total Debt to (b) the sum of Total Debt plus Adjusted Net Worth to
         exceed at any time 0.675 to 1.0.

         1.11     AMENDMENT TO SECTION 7.7. Section 7.7(h)(i) is amended by
deleting the reference to "U.S.$15,000,000" and substituting "U.S.$5,000,000"
therefor.

         1.12     AMENDMENT TO SECTION 7.11. Clause (d)(iv) of Section 7.11 is
amended in its entirety to read as follows:

                  (iv)     the Required Lenders have consented in writing to
         such Acquisition;

         1.13     AMENDMENT TO SECTION 7.12. Clause (c) of Section 7.12 is
amended by deleting the amount "U.S.$1,000,000" therein and substituting the
amount "U.S.$500,000" therefor.

         1.14     AMENDMENT TO SECTION 7.22. Section 7.22 is amended in its
entirety to read as follows:

                  7.22     CAPITAL EXPENDITURES. Not permit all Capital
         Expenditures (excluding, to the extent included in Capital
         Expenditures, (a) assets acquired in a Permitted Acquisition and (b) up
         to U.S.$1,000,000 of Capital Expenditures in any Fiscal Year ending
         after December 31, 2000 which the Borrower demonstrates, to the
         reasonable satisfaction of the Agent, were required in connection with
         new municipal contracts entered into by the Borrower or a Subsidiary)
         during the period beginning June 30, 2000 and ending December 31, 2000
         to exceed U.S.$5,000,000 and during any Fiscal Year thereafter to
         exceed U.S.$7,500,000.

         1.15     AMENDMENT TO SECTION 7.27. Section 7.27 is deleted in its
entirety.

         1.16     ADDITION TO SECTION 8.1. Section 8.1 is amended by adding the
following new clauses (o), (p) and (q):

                  (o)      RECAPITALIZATION TRANSACTIONS. (i) Failure by the
         Borrower to receive, prior to June 1, 2001, Set Cash Proceeds in a
         Dollar Equivalent amount equal to or greater than the Junior Capital
         Amount (as defined below) from the issuance of either (x) equity or (y)
         Debt of the type described in CLAUSE (iii) of the definition of
         Subordinated Debt; or (ii) failure by the Borrower to deliver to the
         Lenders, prior to March 15, 2001, a binding commitment letter from one
         or more financing sources, reasonably acceptable to the Agent and the
         Required Lenders, to provide equity or Debt meeting the requirements of
         the foregoing CLAUSE (i). For purposes of the foregoing, "Junior
         Capital Amount"

                                      -8-
<PAGE>

         means U.S.$25,000,000 MINUS the lesser of U.S.$5,000,000 and 50% of
         the aggregate amount of Net Cash Proceeds received from Asset Sales on
         or prior to January 31, 2001.

                  (p)      FINANCIAL ADVISOR. Failure by the Borrower to retain
         prior to December 15, 2000, and at all times thereafter (unless the
         Required Lenders otherwise consent or the requirements of SUBSECTION
         (o) above have been satisfied) to continue to retain, a financial
         advisor reasonably acceptable to the Required Lenders for the purpose
         of raising equity or Debt which meets the requirements of SUBSECTION
         (o) above.

                  (q)      TRIGGERING EVENT OFFER. Failure by the Borrower to
         make a Triggering Event Offer in accordance with SECTION 2.2.5(d); or
         failure by the Borrower to use 24,204,450/103,000,000ths of the Net
         Cash Proceeds of a Triggering Event Disposition to repay Loans in
         accordance with SECTION 2.2.5(d) if a related Triggering Event Offer
         has been accepted by the Agent.

         1.17     AMENDMENT OF SCHEDULES 1.1A and 1.1B. Schedule 1.1A and
Schedule 1.1B to the Agreement shall each be amended in its entirety by
substituting SCHEDULE 1.1A and SCHEDULE 1.1B hereto therefor, respectively.

         SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Agent and each Lender that: (a) after giving effect hereto, the
representations and warranties made in Section 6 of the Agreement are true and
correct in all material respects on and as of the Amendment Effective Date with
the same effect as if made on and as of the Amendment Effective Date; (b) except
for any such event which will be cured upon the effectiveness hereof, no Event
of Default or Unmatured Event of Default exists or will result from the
effectiveness of this Amendment; (c) the execution and delivery by the Borrower
of this Amendment and the performance by the Borrower of its obligations under
the Agreement as amended hereby (as so amended, the "AMENDED AGREEMENT") (i) are
within such Borrower's power, (ii) have been duly authorized by all necessary
action, (iii) have received all necessary approval from any governmental agency
or authority and (iv) do not and will not contravene or conflict with any
provision of law or of any provision of such Borrower's Organization Documents
or of any agreement or instrument binding on such Borrower or any court or
administrative order or decree applicable to such Borrower; (e) the Amended
Agreement is the legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability and (f) the Borrower has previously
delivered to each Lender a true and correct copy of the employment contract
between the Borrower and each of Al Loopstra, David Langille, George Boothe and
Dennis Nolan, and each such contract is in full force and effect on the date
hereof.

         SECTION 3. WAIVER. Subject to the occurrence of the Amendment Effective
Date, the Required Lenders hereby waive the Borrower's non-compliance with
Sections 7.6.2 and 7.6.3 of the Agreement as in effect prior to the Amendment
Effective Date for any period ending

                                      -9-
<PAGE>

prior to the date of this Amendment but not any non-compliance with such
Sections 7.6.2 and 7.6.3 as in effect after the Amendment Effective Date.

         SECTION 4. EFFECTIVENESS OF AMENDMENT. This Amendment shall become
effective on December 4, 2000 (the "AMENDMENT EFFECTIVE DATE") if on or before
such date the Agent has received (i) counterparts of this Amendment executed by
the Borrower, the Required Lenders, and the Agent, (ii) a Confirmation in the
form of EXHIBIT A hereto signed by the Borrower and its Subsidiaries, (iii)
copies of resolutions of the board of directors of the Borrower authorizing the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the Borrower, (iv) an opinion of Hodgson Russ Andrews Woods &
Goodyear, LLP, U.S. counsel to the Borrower, substantially in the form of
EXHIBIT B hereto, (v) an opinion of Torys, Ontario counsel to the Borrower,
substantially in the form of EXHIBIT C hereto, (vi) an amendment fee for each
Lender that executes a counterpart hereof on or before 4:00 p.m. (Chicago time)
on December 1, 2000 in an amount equal to 0.50% of such Lender's Loan after
giving effect hereto and (vii) any additional amounts payable resulting from the
amendment to Schedule 1.1C set forth herein, it being understood that the
amendment to Schedule 1.1C shall be deemed effective as of August 14, 2000.

         SECTION 5. MISCELLANEOUS.

         5.1      INTEREST PERIODS. Notwithstanding any other provision of the
Amended Agreement, no Interest Period for any Offshore Rate Tranche shall be
longer than three months.

         5.2      CAPTIONS. Section captions used in this Amendment are for
convenience only and shall not affect the construction of this Amendment.

         5.3      GOVERNING LAW, SEVERABILITY. THIS AMENDMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE ENTIRELY PERFORMED IN SAID STATE. Wherever possible
each provision of this Amendment shall be interpreted in such manner as to be
effective and valid under applicable laws, but if any provision of this
Amendment shall be prohibited by or invalid under such laws, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Amendment.

         5.4      COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same Amendment.

         5.5      SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
the parties hereto and their respective successors and assigns, and shall inure
to the sole benefit of the parties hereto and the successors and assigns of each
Agent and each Lender.

                                      -10-
<PAGE>

         5.6      CONTINUED EFFECTIVENESS. Except as specifically provided
herein, the Agreement and the other Loan Documents shall remain unmodified and
are specifically confirmed to be in full force and effect. Upon effectiveness of
this Amendment, all references in the Agreement and in the other Loan Documents
to "Agreement" or the like shall refer to the Agreement as hereby amended.

                        [SIGNATURES BEGIN ON NEXT PAGE]

                                      -11-
<PAGE>

Delivered at Chicago, Illinois, as of the day and year first above written.

                                  CAPITAL ENVIRONMENTAL RESOURCE,
                                  INC./RESSOURCES ENVIRONNEMENTALES
                                  CAPITAL INC.

                                  By:
                                     -------------------------------------------
                                  Title:
                                     -------------------------------------------

                                  BANK OF AMERICA, N.A. as Agent

                                  By:
                                     -------------------------------------------
                                  Title:
                                     -------------------------------------------

                                  BANK OF AMERICA, N.A., as a Lender

                                  By:
                                     -------------------------------------------
                                  Title:
                                     -------------------------------------------

                                  LASALLE BANK NATIONAL ASSOCIATION, as a Lender

                                  By:
                                     -------------------------------------------
                                  Title:
                                     -------------------------------------------

                                  RAYMOND JAMES BANK, F.S.B, as a Lender

                                  By:
                                     -------------------------------------------
                                  Title:
                                     -------------------------------------------

                                       S-1
<PAGE>

                                 SCHEDULE 1.1A

                          LENDERS AND PRO RATA SHARES

--------------------------------------------------------------------------------
LENDER                                   AMOUNT OF LOAN*          PRO RATA SHARE
--------------------------------------------------------------------------------
Bank of America, N.A.                    U.S.$7,261,335                  30%
--------------------------------------------------------------------------------
Raymond James Bank, FSB                  U.S.$4,840,890                  20%
--------------------------------------------------------------------------------
LaSalle Bank National Association        U.S.$12,102,225                 50%
--------------------------------------------------------------------------------
TOTALS                                   U.S.$24,204,450              100.0%
--------------------------------------------------------------------------------

*As in effect after December 4, 2000.

<PAGE>

                                 SCHEDULE 1.1B
                                PRICING SCHEDULE

         The Applicable Margin shall be determined based on the applicable
Senior Debt to EBITDA Ratio as set forth below.

================================================================================
                                                                   APPLICABLE
                                                    APPLICABLE     MARGIN FOR
                                                    MARGIN FOR   BASE RATE LOANS
                 SENIOR DEBT TO EBITDA RATIO      OFFSHORE RATE      TO THE
                                                     TRANCHES       BORROWER
--------------------------------------------------------------------------------
Level I      less than 3.00 to 1.0                     3.00%         1.50%
--------------------------------------------------------------------------------
Level II     greater than or equal to 3.00 to 1.0
             but less than 3.25 to 1.0                 3.25%         1.75%
--------------------------------------------------------------------------------
Level III    greater than or equal to 3.25 to 1.0
             but less than 3.50 to 1.0                 3.50%         2.00%
--------------------------------------------------------------------------------
Level IV     greater than or equal to 3.50 to 1.0
             but less than 3.75 to 1.0                 3.75%         2.25%
--------------------------------------------------------------------------------
Level V      greater than or equal to 3.75 to 1.0
             but less than 4.25 to 1.0                 4.00%         2.50%
--------------------------------------------------------------------------------
Level VI     greater than or equal to 4.25 to 1.0
             but less than 4.75 to 1.0                 4.25%         2.75%
--------------------------------------------------------------------------------
Level VII    greater than or equal to 4.75 to 1.0      4.50%         3.00%
================================================================================

         The Applicable Margin shall be adjusted, to the extent applicable, 45
days (or, in the case of the last Fiscal Quarter of any Fiscal Year, 90 days)
after the end of each Fiscal Quarter based on the Senior Debt to EBITDA Ratio as
of the last day of such Fiscal Quarter; PROVIDED that if the Borrower fails to
deliver the financial statements required by SECTION 7.1 and the related
compliance certificate in the form of EXHIBIT C by the due date therefor, the
Applicable Margin that would apply at Level VII shall be applicable from such
due date until such financial statements are delivered.<PAGE>   1
                                                                   EXHIBIT 10.33

                              EMPLOYMENT AGREEMENT

                  This EMPLOYMENT AGREEMENT, (this "Agreement") is dated as of
July 31, 2000, between Net2Phone, Inc., a Delaware corporation (the "Company")
and Clifford M. Sobel (the "Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS, the Executive is the Chairman of the Board of the
Company;

                  WHEREAS, the Company wishes to assure itself of the continued
services of the Executive and the Executive is willing to enter into an
agreement to that end, upon the terms and conditions hereinafter set forth.

                  NOW, THEREFORE, in consideration of good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereby covenant and agree as follows:

                  1. EMPLOYMENT

                  The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company, on and subject
to the terms and conditions of this Agreement.

                  2. TERM

                  Unless earlier terminated pursuant to Section 5 hereof, the
period of this Agreement and the Executive's employment hereunder (the
"Agreement Term") shall commence as of the date hereof (the "Effective Date"),
and shall expire on the third anniversary of the Effective Date; provided,
however, that the Agreement Term shall be automatically extended for an
additional year on the third anniversary of the Effective Date and on each
anniversary of the Effective Date thereafter (each an "Extension Date"), unless
written notice of non-extension is provided by either party to the other party
at least 90 days prior to such anniversary.

                  3. POSITION, AUTHORITY AND RESPONSIBILITIES

                  (a) The Executive shall serve as, and with the title, office
and authority of, Chairman of the Board of the Company, and shall report
directly to the Board of Directors of the Company (the "Board").
<PAGE>   2
                  (b) The Executive shall have all of the other powers,
authority, duties and responsibilities usually incident to the position and
office of Chairman of the Board and such duties consistent with such position as
may be assigned from time to time by the Board.

                  (c) The Executive agrees to devote substantially all of his
business time, efforts and skills to the performance of his duties and
responsibilities under this Agreement; provided, however, that nothing in this
Agreement shall preclude the Executive from devoting reasonable periods required
for (i) serving on corporate, civic or charitable boards or committees, (ii)
delivering lectures, fulfilling speaking engagements or teaching at educational
institutions and or (iii) managing his personal investments, provided that in
any such case that such activities do not materially interfere with the
Executive's performance of his duties and responsibilities hereunder and do not
violate the provisions of Section 11 hereof.

                  (d) The Executive shall perform his duties at the principal
offices of the Company located in Newark, New Jersey, but from time to time the
Executive may be required to travel to other locations in the proper conduct of
his responsibilities under this Agreement.

                  4. COMPENSATION AND BENEFITS

                  In consideration of the services rendered by the Executive
during the Agreement Term, the Company shall pay or provide the Executive the
amounts and benefits set forth below.

                  (a) Salary. The Company shall pay the Executive an initial
annual base salary (the "Base Salary") of at least $300,000. The Executive's
Base Salary shall be paid in arrears in substantially equal installments at
monthly or more frequent intervals, in accordance with the normal payroll
practices of the Company. The Executive's Base Salary shall be reviewed at least
annually by the Board for consideration of appropriate merit increases and, once
established, the Base Salary shall not be decreased during the Agreement Term.

                  (b) Annual Bonus. The Company shall provide the Executive with
an opportunity to earn an annual bonus (the "Annual Bonus") equal to at least
25% of the Base Salary for each calendar year during the Agreement Term
beginning with the 2000 calendar year pursuant to a bonus plan to be established
by the Company.

                  (c) Equity Incentives. Except as provided in this Agreement,
the treatment of options to purchase shares of the Common Stock of the Company
("Common Stock") granted to the Executive prior to the Effective Date under the
Company's stock incentive plans shall be governed by the applicable stock option
agreements. On the date hereof, the Executive shall be granted an option (the
"Option") to purchase 500,000 shares of the Company's common stock, par value
$.01 per share, pursuant to the Stock Option Agreement attached hereto as
Exhibit A. The Option shall

                                       2
<PAGE>   3
be granted with an exercise price equal to the current fair market value on the
Effective Date. The Executive shall be eligible, from time to time, to receive
awards of stock options or other equity incentives, as determined by the Board.
Except as otherwise provided herein, the Executive's right to exercise the
Option shall become vested as follows, if as of each such date set forth below
the Executive is employed by the Company or any of its subsidiaries:

                  (i) 33-1/3% on the first anniversary of the Effective Date,
         and

                  (ii) the remaining 66-2/3% shall vest equally on the last day
         of each month for the twenty-four months following the first
         anniversary of the Effective Date.

                  (d) Employee Benefits. The Executive shall be entitled to
participate in all employee benefit plans, programs, practices or other
arrangements of the Company in which other senior executives of the Company are
generally eligible to participate from time to time, including, without
limitation, any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, and any medical, dental,
health and welfare plans, except to the extent that a separate arrangement is
implemented for the Executive on terms no less favorable than as provided to the
other senior executives agreed to by the Executive that is intended to replace
any such general arrangement. Without limiting the generality of the foregoing,
(i) the Company shall continue to provide the Executive with life insurance
coverage with a death benefit that is not less than the amount as is in effect
as of the Effective Date and (ii) the Company shall provide the executive with
disability insurance coverage consistent with the disability insurance coverage
provided to senior executives of other companies in the same industry as the
Company.

                  (e) Fringe Benefits and Perquisites. The Executive shall be
entitled to all fringe benefits and perquisites that are generally made
available to senior executives of the Company from time to time on the same
basis as is made available to such other executives. Without limiting the
generality of the foregoing, the Company shall provide the Executive with the
following:

                            (i) executive offices and support staff appropriate
              to the Executive's position;

                            (ii) prompt reimbursement of all reasonable travel
              and other business expenses and disbursements incurred by the
              Executive in the performance of his duties under this Agreement in
              accordance with the Company's normal practices and procedures,
              including professional association dues upon proper accounting
              therefor;

                            (iii) six weeks paid vacation during each calendar
              year, to be taken in accordance with the Company's vacation policy
              for senior executives;

                            (iv) an automobile allowance no less favorable than
              the automobile allowance in effect as of the Effective Date; and

                                       3
<PAGE>   4
                            (v) such other fringe benefits as the Executive and
              the Board may mutually agree from time to time.

                  5. TERMINATION OF EMPLOYMENT

                  The Agreement Term and the Executive's employment hereunder
shall be terminated upon the happening of any of the following events:

                  (a) Termination for Cause. The Company may terminate the
Agreement Term and the Executive's employment hereunder for Cause. For purposes
of this Agreement, "Cause" shall mean:

                  (i) conviction of the Executive, by a court of competent
jurisdiction, of, or Executive's plea of guilty or nolo contendere to, a felony
under the laws of the United States or any state thereof;

                  (ii) misappropriation by the Executive of the Company's funds;
         or

                  (iii) the commission by the Executive of an act of proven
         fraud with respect to the Company.

                  Notwithstanding the foregoing, in no event shall the Company
be considered to have terminated the Executive's employment for "Cause" unless
and until (i) the Executive receives written notice from the Board identifying
in reasonable detail the acts or omissions constituting such "Cause" and the
provision of this Agreement relied upon by the Company for such termination and
(ii) such acts or omissions are not cured by the Executive within 30 days of the
Executive's receipt of such notice.

                  (b) Termination other than for Cause. The Board shall have the
right to terminate the Agreement Term and the Executive's employment hereunder
for any reason at any time, including for any reason that does not constitute
Cause, subject to the consequences of such termination as set forth in this
Agreement.

                  (c) Resignation for Good Reason. The Executive may voluntarily
terminate the Agreement Term and his employment hereunder for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

                            (i) any action by the Company that results in a
              diminution of the Executive's authority or responsibilities;

                            (ii) any adverse modification of the Executive's
              positions, titles or reporting relationships;

                            (iii) any failure by the Company to comply with the
              compensation and benefits provisions of Section 4 hereof or any
              other material breach of this Agreement by the Company;

                                       4
<PAGE>   5
                            (iv) any notice of non-extension of the Agreement
              Term given by the Company to the Executive as set forth in Section
              2 hereof;

                            (v) the relocation, without the Executive's written
              consent, of the Executive's principal office from Newark, New
              Jersey; or

                            (vi) any failure by the Company to obtain an
              assumption of this Agreement by a successor corporation as
              required under Section 13(a) hereof.

                  In no event shall the Executive be considered to have
terminated his employment for "Good Reason" unless and until (i) the Company
receives written notice from the Executive identifying in reasonable detail the
acts or omissions constituting such "Good Reason" and the provision of this
Agreement relied upon by the Executive for such termination, and (ii) such acts
or omissions are not cured by the Company within 30 days of the Company's
receipt of such notice.

                  (d) Resignation other than for Good Reason. The Executive may
voluntarily terminate the Agreement Term and his employment hereunder at any
time for any reason, including for any reason that does not constitute Good
Reason by giving the Company 30-days advance written notice of such termination.

                  (e) Disability. The Company may terminate the Agreement Term
and the Executive's employment hereunder upon the Executive's Disability. For
purposes of this Agreement, "Disability" shall mean the inability of the
Executive to perform his duties to the Company on account of physical or mental
illness for a period of six consecutive full months, or for a period of nine
full months during any 18-month period. The Executive's employment shall
terminate in such case on the last day of the applicable period following
written notice by the Company of the election to terminate the Executive's
employment due to the Executive's Disability. Notwithstanding the foregoing, in
no event shall the Executive be terminated by reason of Disability unless the
Executive is eligible to begin receiving long-term disability benefits from a
Company-sponsored long-term disability plan.

                  (f) Death. The Agreement Term and the Executive's employment
hereunder shall terminate upon his death.

                  6. COMPENSATION UPON TERMINATION OF EMPLOYMENT

                  Notwithstanding any provision of this Agreement to the
contrary, in the event the Agreement Term and the Executive's employment by the
Company is terminated, the Executive shall be entitled to the compensation and
severance benefits set forth below:

                  (a) Resignation for Good Reason; Termination without Cause. In
the event the Agreement Term and the Executive's employment hereunder is
terminated by the Executive for Good Reason or by the Company for any reason
other than for Cause, Disability or death, the Company shall pay to the
Executive and provide him with the following:

                                       5
<PAGE>   6
                            (i) Severance Payment. The Company shall pay the
              Executive, within 10 business days of the date of termination, a
              lump-sum cash amount equal to two times the sum of (A) the
              Executive's then-current Base Salary under Section 4(a) hereof and
              (B) the Executive's then-current Annual Bonus percentage under
              Section 4(b) hereof, multiplied by his then-current Base Salary.

                            (ii) Accrued Rights. The Company shall pay the
              Executive a lump-sum cash amount, within 10 days of the date of
              termination, equal to the sum of (A) his earned but unpaid Base
              Salary through the date of termination, (B) any earned but unpaid
              Annual Bonus for any completed calendar year, and (C) any
              unreimbursed business expenses or other amounts due to the
              Executive from the Company as of the date of termination. In
              addition, the Company shall provide to the Executive all payments,
              rights and benefits due as of the date of termination under the
              terms of the Company's compensation or benefit plans, programs or
              awards (together with the lump-sum payment, the "Accrued Rights").

                            (iii) Bonus Rights. The Company shall pay the
              Executive, within 10 days of the date of termination, a lump-sum
              cash amount equal to a pro rata portion of the Annual Bonus for
              any partial calendar year of service through the date of
              termination (the "Bonus Rights").

                            (iv) Continued Benefits. Subject to Section 8
              hereof, for a two-year period following the date of termination,
              the Company shall continue to provide the Executive and his
              eligible dependents, at its sole cost, with the medical, dental,
              disability and life insurance coverages ("Welfare Benefits") that
              were provided to the Executive immediately prior to termination of
              employment.

                            (v) Stock Options. Notwithstanding the provisions of
              any stock incentive plan or award agreement between the Company
              and the Executive to the contrary, (i) 66-2/3% of the options to
              purchase Common Stock which are not fully vested and exercisable
              as of the date of termination shall become fully vested and
              exercisable and (ii) the period during which options shall remain
              exercisable shall be extended until the second anniversary of the
              date of termination. All such award agreements shall be amended by
              the Company and the Executive to reflect the foregoing provision.

                            (vi) Life and Disability Insurance. The Company
              shall fully fund the life insurance and disability policies
              described in Section 4(d) hereof.

                            (vii) Car Allowance. Until the second anniversary of
              the date of termination, the Company shall continue to provide the
              Executive with the automobile allowance described in Section
              4(e)(iv) hereof.

                  (b) Resignation without Good Reason; Termination for Cause. In
the event the Executive voluntarily terminates the Agreement Term and his
employment hereunder other than for Good Reason, or in the event the Agreement
Term and the

                                       6
<PAGE>   7
Executive's employment hereunder is terminated by the Company for Cause, the
Company shall pay and provide to the Executive all Accrued Rights and Bonus
Rights and the Executive shall retain any rights that he has pursuant to any
stock option agreement with the Company in accordance with the terms thereof.

                  (c) Disability; Death. In the event the Agreement Term and the
Executive's employment hereunder is terminated by reason of the Executive's
Disability or death, the Company shall pay the Executive (or his legal
representative) and provide him with the following:

                            (i) Severance Payment. The Company shall pay the
              Executive, within 10 business days of the date of termination, a
              lump-sum cash amount equal to one times the sum of (A) the
              Executive's then-current Base Salary under Section 4(a) hereof and
              (B) the Executive's then-current Annual Bonus percentage under
              Section 4(b) hereof, multiplied by his then-current Base Salary.

                            (ii) Accrued Rights. The Company shall pay the
              Executive a lump-sum cash amount, within 10 days of the date of
              termination, equal to the Accrued Rights.

                            (iii) Bonus Rights. The Company shall pay the
              Executive, within 10 days of the date of termination, a lump-sum
              cash amount equal to the Bonus Rights.

                            (iv) Continued Benefits. Subject to Section 9
              hereof, for a one-year period following the date of termination,
              the Company shall continue to provide the Executive and his
              eligible dependents, at its sole cost, with the Welfare Benefits
              that were provided to the Executive immediately prior to
              termination of employment.

                            (v) Stock Options. Notwithstanding the provisions of
              any stock incentive plan or award agreement between the Company
              and the Executive to the contrary, (i) all options to purchase
              Common Stock which are not fully vested and exercisable as of the
              date of termination shall become fully vested and exercisable and
              (ii) the period during which such options shall be exercisable
              shall be extended until the first anniversary of the date of
              termination. All such award agreements shall be amended by the
              Company and the Executive to reflect the foregoing provision.

                  7. INDEMNIFICATION

                  The Company agrees to provide to the Executive all rights of
indemnification and all director's and officer's insurance coverage to the
fullest extent permitted by law and by its Certificate of Incorporation and
By-laws.

                  8. NO MITIGATION OR OFFSET

                                       7
<PAGE>   8
                  The Executive shall not be required to seek other employment
or to reduce any severance benefit payable to him under Section 6 hereof, and no
such severance benefit shall be reduced on account of any compensation received
by the Executive from other employment; provided, however, to the extent that
the Executive becomes eligible to receive welfare benefits pursuant to employee
benefit plans of a new employer that are comparable to the Welfare Benefits that
the Company is obligated to provide to the Executive pursuant to Section
6(a)(iv), the Company's obligation to provide such Welfare Benefits shall cease.
The Company's obligations to the Executive under this Agreement, including,
without limitation, any obligation to provide severance benefits, shall not be
subject to set-off or counterclaim in respect of any debts or liabilities of the
Executive to the Company.

                  9. TAX WITHHOLDING; METHOD OF PAYMENT

                  All compensation payable pursuant to this Agreement shall be
subject to reduction by all applicable withholding, social security and other
federal, state and local taxes and deductions for income, employment, excise and
other taxes. Any lump-sum payments provided for in Section 6 hereof shall be
made in a cash payment, net of any required tax withholding, no later than 10
business days following the Executive's date of termination. Any payment
required to be made to the Executive under this Agreement that is not made in a
timely manner shall bear interest at an interest rate equal to 120% of the
monthly compounded applicable federal rate as in effect under Section 1274(d) of
the Code.

                  10. REGISTRATION RIGHTS

                                  As of the Effective Date, the Executive shall
be granted the registration rights set forth in Exhibit A to this Agreement.

                  11. RESTRICTIVE COVENANTS

                  (a) Confidential Information. During the Agreement Term and at
all times thereafter, the Executive agrees that he will not divulge to anyone
(other than the Company or any persons employed or designated by the Company)
any knowledge or information of a confidential or proprietary nature relating to
the business of the Company or any of its subsidiaries or affiliates, including,
without limitation, all trade secrets (unless readily ascertainable from public
or published information or trade sources) and confidential commercial
information, and the Executive further agrees not to disclose, publish or make
use of any such knowledge or information without the consent of the Company.

                  (b) Noncompetition. The Executive acknowledges that (i) the
Company is currently engaged in the business of providing high quality, low-cost
telephone calls over the Internet ("Internet Telephony"), (ii) his work for the
company will give him access to trade secrets of and confidential information
concerning the Company, and (iii) the agreements and covenants contained in this
Agreement are essential to protect the business and goodwill of the Company.
Accordingly, the

                                       8
<PAGE>   9
Executive covenants and agrees that during the Restricted Period (defined
below), the Executive shall not, without the prior written consent of the
Company, (1) engage or participate in the business of developing, managing or
operating any Internet Telephony business (a "Competitive Business") on his own
behalf or on behalf of any person or entity, and the Executive shall not acquire
a financial interest in any Competitive Business (except for publicly traded
equity interests that do not exceed five percent (5%) of such class of equity)
or (2) directly or indirectly solicit or encourage any employee of the Company
or any of its affiliates to leave the employment of the Company or any of its
affiliates. For purposes hereof, the "Restricted Period" shall be the Agreement
Term (as may be terminated pursuant to Section 6 hereof) and, except in the
event of a termination described in Section 6(a) hereof, the 12-month period
following any termination of the Executive's employment hereunder.

                  (c) Enforcement. The Executive acknowledges and agrees that
the Company will have no adequate remedy at law, and could be irreparably
harmed, if the Executive breaches or threatens to breach any of the provisions
of Section 11 of this Agreement. The Executive agrees that the Company shall be
entitled to equitable and/or injunctive relief to prevent any breach or
threatened breach of this Section 11, and to specific performance of each of the
terms of this Section in addition to any other legal or equitable remedies that
the Company may have. The Executive further agrees that he shall not, in any
equity proceeding relating to the enforcement of the terms of this Section 11,
raise the defense that the Company has an adequate remedy at law.

                  12. SUCCESSORS AND ASSIGNS

                  (a) This Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and any person or other entity that
succeeds to all or substantially all of the business, assets or property of the
Company. To the extent not otherwise provided by application of law, the Company
will require any successor (whether direct or indirect, by purchase, merger,
consolidation, transfer or otherwise) to all or substantially all of the
business, assets or property of the Company, to expressly assume and agree to
perform the obligations of the Company under this Agreement in the same manner
and to the same extent that the Company is required to perform hereunder. As
used in this Agreement, the "Company" shall mean the Company as hereinbefore
defined and any successor to its business, assets or property as aforesaid which
executes and delivers an agreement provided for in this Section 12(a) or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Except as provided by the foregoing provisions of this Section
12(a), this Agreement shall not be assignable by the Company without the prior
written consent of the Executive. In the event that this Agreement is assigned
to any person or entity as may be permitted hereunder, the Company shall be
secondarily liable in the event that any such person or entity shall fail to
satisfy its obligations under Section 6 or 7 hereof.

                  (b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts are due and payable to the

                                       9
<PAGE>   10
Executive hereunder, all such amounts, unless otherwise provided herein, shall
be paid to the Executive's designated beneficiary or, if there is no such
designated beneficiary, to the legal representatives of the Executive's estate.
This Agreement is personal in nature and the obligations of the Executive
hereunder are not be assignable to any person.

                  13. ENTIRE AGREEMENT/AMENDMENT

                  This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof and, except as specifically
provided herein, cancels and supersedes any and all other agreements between the
parties with respect to the subject matter hereof. Any amendment or modification
of this Agreement shall not be binding unless in writing and signed by the
parties hereto.

                  14. SEVERABILITY/NO WAIVER

                  (a) In the event that any provision of this Agreement is
determined to be invalid or unenforceable, the remaining terms and conditions of
this Agreement shall be unaffected and shall remain in full force and effect,
and any such determination of invalidity or unenforceability shall not affect
the validity or enforceability of any other provision of this Agreement.

                  (b) The failure of a party to insist upon strict adherence to
any term of this Agreement or any occasion shall not be considered a waiver of
such party's rights or deprive such party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.

                  15. NOTICES

                  All notices which may be necessary or proper for either the
Company or the Executive to give to the other shall be in writing and shall be
delivered by hand or sent by registered or certified mail, return receipt
requested, or by air courier, to the Executive at:

                                    Clifford M. Sobel

                                    40 Dorison Drive

                                    Short Hills, New Jersey 07078

                  with a copy to:

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

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

                                       10
<PAGE>   11
                                    --------------

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

                  ; and shall be sent in the manner described above to the
Secretary of the Company at the Company's principal executives offices at:

                                    Net2Phone, Inc.

                                    171 Main Street

                                    Hackensack, New Jersey  07601

                                    Attn:  General Counsel

                  with a copy to:

                                    Kirkland & Ellis

                                    200 East Randolph Drive

                                    Chicago, Illinois 60601

                                    Attn:  Richard W. Porter, Esq.

                  and shall be deemed given when dispatched, provided that any
notice required under Section 5 hereof or notice given pursuant to Section 2
hereof shall be deemed given only when received. Any party may by like notice to
the other party change the address at which he or they are to receive notices
hereunder.

                  16. GOVERNING LAW

                  This Agreement shall be governed by and enforceable in
accordance with the laws of the State of New Jersey, without giving effect to
the principles of conflict of laws thereof.

                  17. ARBITRATION

                  Except for any action brought under Section 11 which may be
brought by the Company directly in any court of competent jurisdiction, any
controversy or claim arising out of, or related to, this Agreement, or the
breach thereof, shall be settled by binding arbitration in the City of Newark,
New Jersey in accordance with the rules then obtaining of the American
Arbitration Association, and the arbitrator's decision shall be binding and
final, and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.

                  18. LEGAL FEES AND EXPENSES

                  The Company shall pay the legal fees and expenses incurred by
the Executive in connection with the negotiation of this Agreement. To provide
the

                                       11
<PAGE>   12
Executive with reasonable assurance that the purposes of this Agreement will not
be frustrated by the cost of its enforcement, the Company shall pay and be
solely responsible for any attorneys' fees and expenses and any court or
arbitration costs incurred by the Executive as a result of a claim that the
Company has breached or otherwise failed to perform this Agreement or any
provision hereof regardless of which party, if any, prevails in the contest.

                  19. COUNTERPARTS

                  This Agreement may be signed in counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.

                                       12
<PAGE>   13
                  IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.

                                            EXECUTIVE

                                            /s/Clifford M. Sobel
                                            --------------------
                                            Clifford M. Sobel

                                            NET2PHONE, INC.

                                            By: /s/  Howard Balter
                                               -------------------
                                                Name: Howard Balter

                                                Title:Chief Executive Officer

                                       13
<PAGE>   14
                                    EXHIBIT A

                               REGISTRATION RIGHTS

                  SECTION  1.1  Piggyback Registrations.

                  (a) Right to Piggyback Registration. Whenever the Company
proposes to register any of its Common Stock (or securities convertible into or
exchangeable or exercisable for Common Stock) under the Securities Act of 1933,
as amended (the "Securities Act") for its own account or the account of any
stockholder of the Company (other than offerings pursuant to employee benefit
plans, or noncash offerings in connection with a proposed acquisition, exchange
offer, recapitalization or similar transaction) (a "Piggyback Registration"),
the Company will give written notice as promptly as practicable to the Executive
and to all other holders of Common Stock having similar registration rights, of
its intention to effect such a registration and shall include in such
registration all Registrable Shares with respect to which the Company has
received written request for inclusion therein and which have not been reduced
pursuant to Section 1.1(b) or 1.1(c) below within 15 days after receipt of the
Company's notice. Capitalized terms used but not defined in this Exhibit A shall
have the meanings ascribed to such terms in Section 1.11.

                  (b) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in an orderly manner in such offering
within a price range acceptable to the Company, the Company shall include in
such registration (i) first, the securities the Company proposes to sell, (ii)
second, the securities requested to be included in such registration basis held
by any holder exercising piggyback registration rights (other than holders of
Registrable Shares) and (iii) third, the Registrable Shares requested to be
included in such registration, pro rata among the holders of such securities on
the basis of the number of shares requested to be included in such registration
by such holder.

                  (c) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in an orderly manner
in such offering within a price range acceptable to the holders of a majority of
the securities who are demanding the registration in question, the Company shall
include in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration, and the securities
requested to be included in such registration held by any holder exercising
piggyback registration rights (other than holders of Registrable Shares), and
(ii) second, the

                                       1

<PAGE>   15
Registrable Shares requested to be included in such registration, pro rata among
the holders of such securities on the basis of the number of shares requested to
be included in such registration by such holder.

                  SECTION 1.2  Registration Procedures. If and whenever the
Company is required to effect or cause the registration of any Registrable
Shares under the Securities Act as provided in this Agreement, the Company
shall:

                  (a) notify the Executive of any stop order issued or
threatened by the Securities and Exchange Commission ("SEC") and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered;

                  (b) furnish, without charge, to the Executive and each
underwriter, if any, such number of copies of the applicable Registration
Statement, each amendment and supplement thereto (including one signed copy to
the Executive and one signed copy to each managing underwriter and in each case
including all exhibits thereto), and the Prospectus included in such
Registration Statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as the
Executive may reasonably request in order to facilitate the disposition of the
Registrable Shares registered thereunder;

                  (c) use commercially reasonable efforts to register or qualify
such Registrable Shares covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United States of
America as the selling holders, and the managing underwriter, if any, reasonably
request and do any and all other acts and things which may be reasonably
necessary or advisable to enable the selling holders and each underwriter, if
any, to consummate the disposition in such jurisdictions of the Registrable
Shares registered thereunder; provided, however, that the Company shall not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (c), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;

                  (d) as promptly as practicable notify the managing
underwriter, if any, the Executive and the other selling holders, if any, at any
time when a Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event if, as a result of such event, the
Prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company shall as promptly as practicable prepare and furnish to the selling
holders a supplement or amendment to such Prospectus so that, as thereafter
delivered, such Prospectus shall not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading;

                                       2

<PAGE>   16
                  (e) use commercially reasonable efforts to cause all such
securities being registered to be listed on each securities exchange, market
system or interdealer quotation system on which similar securities issued by the
Company are then listed, and enter into such customary agreements including a
listing application and indemnification agreement in customary form, and to
provide a transfer agent and registrar for such Registrable Shares covered by
such Registration Statement no later than the effective date of such
Registration Statement;

                  (f) make available for inspection by the Executive or any
holder of securities covered by such Registration Statement, any underwriter
participating in any distribution pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by such persons (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries (collectively,
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibilities, and cause the Company's and its subsidiaries'
officers, directors and employees to supply all information and respond to all
inquiries reasonably requested by any such Inspector in connection with such
Registration Statement; and

                  (g) otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of at least 12 months, beginning with the first month after
the effective date of the Registration Statement (as the term "effective date"
is defined in Rule 158(c) under the Securities Act), which earnings statement
shall satisfy the provisions of Section 1(a) of the Securities Act and Rule 158
thereunder.

                  SECTION 1.3  Registration Expenses. The Company shall pay for
all costs and expenses with respect to its compliance with its obligations in
connection with a registration hereunder, including, but not limited to: (i) all
registration and filing fees; (ii) fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable Shares);
(iii) printing expenses; (iv) internal expenses (including without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties); (v) the fees and expenses incurred in connection with the
listing of the Registrable Shares on any national securities exchange, market
system or interdealer quotation system; (vi) the fees and disbursements of
counsel for the Company, and the Company's auditors (including the expenses of
any comfort letters or costs associated with the delivery by the Company's
auditors of a comfort letter or comfort letters); (vii) the fees and
disbursements of one legal counsel for all the selling stockholders
participating in such registration; (viii) the fees and expenses of any
registrar and transfer agent or any depository; (ix) the underwriting fees,
discounts and commissions applicable to any Common Stock sold for the account of
the Company; and (x) the cost of preparing all documentation in connection
therewith.

                  SECTION 1.4  Conversion of Other Securities. If the Executive
holds any options, rights, warrants or other securities that are offered with,
convertible

                                       3

<PAGE>   17
into or exercisable or exchangeable for any Registrable Shares, the Registrable
Shares underlying such options, rights, warrants or other securities shall be
eligible for registration pursuant to Section 1.1.

                  SECTION 1.5  Rule 144. If and for so long as the Company is
subject to the reporting requirements of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), the Company shall take such measures and file
such information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 (or any successor provision) under the
Securities Act.

                  SECTION 1.6  Registration Statement Indemnification. (a) The
Company agrees to indemnify and hold harmless the Executive, each Transferee and
each person, if any, who controls any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
(collectively, the "Registration Indemnitee") from and against any and all
Losses arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such Losses arise out
of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with information relating to a Registration
Indemnitee furnished in writing to the Company by or on behalf of such
Registration Indemnitee expressly for use in the Registration Statement or
Prospectus.

                  (b) Each Registration Indemnitee agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its officers
who sign any Registration Statement, and any person who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, to the same extent as the indemnity from the Company to each
Registration Indemnitee provided in Section 1.6(a), but only with respect to
information relating to such Registration Indemnitee furnishing in writing to
the Company by or on behalf of such Registration Indemnitee expressly for use in
the Registration Statement or Prospectus. If any Action shall be brought against
the Company, any of its directors, any such officer, or any such controlling
person based on any Registration Statement or Prospectus and in respect of which
indemnity may be sought against a Registration Indemnitee pursuant to this
Section 1.6(b), such Registration Indemnitee shall have the rights and duties
given to the Company by Sections 1.6 through 1.9 (except that if the Company
shall have assumed the defense thereof such Registration Indemnitee shall not be
required to do so, but may employ separate counsel therein and participate in
the defense thereof, but the fees and expenses of such counsel shall be at such
Registration Indemnitee's expense), and the Company, its directors, any such
officer, and any such controlling person shall have the rights and duties given
to the Registration Indemnitee by Sections 1.6 through 1.9.

                  SECTION 1.7  Contribution. (a) If the indemnification provided
for in this Exhibit A is unavailable to an indemnified party hereunder with
respect to any Losses referred to herein, then an indemnifying party, in lieu of
indemnifying such

                                       4
<PAGE>   18
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the applicable Registration Indemnitee, on the other hand, from the
offering of the securities covered by such Registration Statement and
Prospectus, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, on the one hand, and the applicable Registration
Indemnitee, on the other hand, in connection with the statements or omissions
that result in such Losses, as well as any other relevant equitable
considerations. The relative benefits received by the Company, on the one hand,
and the applicable Registration Indemnitee, on the other hand, shall be deemed
to be in the same proportion as the total net proceeds from the applicable
securities offering (before deducting expenses) received by the Company bear to
the total net proceeds from such offering (before deducting expenses) received
by such Registration Indemnitee. The relative fault of the Company, on the one
hand, and the applicable Registration Indemnitee, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or by such Registration Indemnitee, on the other hand, and the parties relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

                  (b) The Company and each Registration Indemnitee agree that it
would not be just and equitable if contribution pursuant to this Section 1.7
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in Section
1.7(a). The amount paid or payable by an indemnified party as a result of the
Losses referred to in Section 1.7(a) shall be deemed to include, subject to the
limitations set forth herein, any legal or other expenses reasonably incurred by
such party in connection with investigating any claim or defending any such
Action. Notwithstanding the provisions of this Section 1.7(b), a Registration
Indemnitee shall not be required to contribute any amount in excess of the
amount by which the proceeds to such Registration Indemnitee exceed the amount
of any damages that such Registration Indemnitee has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation, within the meaning
of Section 1(f) of the Securities Act, shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

                  SECTION 1.8  Procedure. If any Action shall be brought against
a Registration Indemnitee or any other person entitled to indemnification
(collectively with the Registration Indemnitee, the "Indemnitee") in respect of
which indemnity may be sought against the Company, such Indemnitee shall
promptly notify the Company, and the Company shall assume the defense thereof,
including the employment of counsel and payment of all fees and expenses. Such
Indemnitee shall have the right to employ separate counsel in any such action,
suit or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such person unless (i) the
Company has agreed in writing to pay such fees and expenses, (ii) the

                                       5
<PAGE>   19
Company has failed to assume the defense and employ counsel, or (iii) the named
parties to an Action (including the impleaded parties) include both an
Indemnitee and the Company and such Indemnitee shall have been advised by its
counsel that representation of such indemnified party and the Company by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the Company shall not have the right to assume the defense of such Action
on behalf of such Indemnitee). The Company shall not be liable for any
settlement of any such Action affected without its written consent, which shall
not be unreasonably withheld or delayed, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such Action,
the Company agrees to indemnify and hold harmless each Indemnitee, to the extent
provided herein from and against any Losses by reason of such settlement or
judgment.

                  SECTION 1.9  Other Matters. (a) No indemnifying party shall
without the prior written consent of the indemnified party effect any settlement
of any pending or threatened Action in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such Action, and does not include an admission of fault or culpability
on the part of any Registration Indemnitee.

                  (b) Any Losses for which an indemnified party is entitled to
indemnification or contribution hereunder shall be paid by the indemnifying
party to the indemnified party as such Losses are incurred. The indemnity and
contribution agreements contained in this Exhibit A shall remain operative and
in full force and effect regardless of (i) any investigation made by or on
behalf of any Indemnitee, the Company, its directors or officers, or any person
controlling such Indemnitee and (ii) any termination of this Agreement.

                  SECTION 1.10  Transfer of Registration Rights. The Executive
may transfer all or any portion of his rights under this Exhibit A to any
transferee (each, a "Transferee") of Registrable Shares. Any transfer of
registration rights pursuant to this Section 1.10 shall be effective upon
receipt by the Company of written notice from the Executive stating the name and
address of the Transferee and identifying the amount of Registrable Shares with
respect to which the rights under this Section 1 are being transferred and the
nature of the rights so transferred. In connection with any such transfer, the
term "the Executive" as used in this Agreement shall, where appropriate to
assign each right and obligation to such Transferee, be deemed to refer to the
transferee holder of such Registrable Shares.

                  SECTION  1.11.  Definitions. As used in this Exhibit A:

                  "Action" means any claim, action, cause of action, suit,
proceeding or investigation, whether civil, criminal, administrative,
investigative or other.

                                       6
<PAGE>   20
                  "Common Stock" means the common stock, par value $0.01 per
share, of the Company.

                  "Losses" means costs and expenses (including without
limitation attorneys' fees, interest, penalties and costs of investigation or
preparation for defense), judgments, fines, losses, claims, damages,
liabilities, demands, assessments and amounts paid in settlement.

                  "Prospectus" means the prospectus or prospectuses included in
any Registration Statement, as amended or supplemented by any prospectus
supplement and by all other amendments and supplements to such prospectus,
including post-effective amendments and all material incorporated by reference
in such prospectus or prospectuses.

                  "Registrable Shares" means any shares of Common Stock held by
Clifford M. Sobel or Howard Balter or by any Transferee thereof.

                  "Registration Statement" means any registration statement of
the Company filed with the SEC under the Securities Act, including in each such
case the Prospectus relating thereto, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all materials incorporated by reference in such Registration Statement and
Prospectus.

                                       7

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