Document:

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                              4.2 Stock Option Plan
                                      1998

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                       OFFSHORE SYSTEMS INTERNATIONAL LTD.

SECOND AMENDMENT TO 1998 EMPLOYEE STOCK OPTION PLAN

WHEREAS:

A.   Offshore Systems International Ltd. (the "Company") has implemented a stock
     option plan known as the 1998 Employee Stock Option Plan (the "1998 Plan");

B.   Section 9.1 of the 1998 Plan, as amended, stipulates that the number of
     shares which may be issued under the 1998 Plan shall not exceed in the
     aggregate 4,000,000 common shares; and

C.   The Company wishes to increase the number of shares which may be issued
     under the 1998 Plan from 4,000,000 common shares to 7,000,000 common
     shares;

NOW THEREFORE THIS DOCUMENT WITNESSES THE FOLLOWING:

1.   Amendment

Section 9.1 of the 1998 Plan is hereby amended to read as follows:

     "9.1 The number of shares which may be issued under this Plan shall not
     exceed in the aggregate 7,000,000 common shares."

2.   Plan in Full Force and Effect

The 1998 Plan, as amended hereby, shall remain in full force and effect.

                                *END OF DOCUMENT*

                                       1

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                       OFFSHORE SYSTEMS INTERNATIONAL LTD.

FIRST AMENDMENT TO 1998 EMPLOYEE STOCK OPTION PLAN

WHEREAS:

A.   Offshore Systems International Ltd. (the "Company") has implemented a stock
     option plan known as the 1998 Employee Stock Option Plan (the "1998 Plan");

B.   Section 9.1 of the 1998 Plan stipulates that the number of shares which may
     be issued under the 1998 Plan shall not exceed in the aggregate 2,000,000
     common shares; and

C.   The Company wishes to increase the number of shares which may be issued
     under the 1998 Plan from 2,000,000 common shares to 4,000,000 common
     shares;

NOW THEREFORE THIS DOCUMENT WITNESSES THE FOLLOWING:

1.   Amendment

Section 9.1 of the 1998 Plan is hereby amended to read as follows:

     "9.1 The number of shares which may be issued under this Plan shall not
     exceed in the aggregate 4,000,000 common shares."

2.   Plan in Full Force and Effect

The 1998 Plan, as amended hereby, shall remain in full force and effect.

                                *END OF DOCUMENT*

                                        2

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                       OFFSHORE SYSTEMS INTERNATIONAL LTD.

                     AMENDED 1998 EMPLOYEE STOCK OPTION PLAN

1.        PURPOSE

1.1       Employee Stock Option Plan has been established by the Company to
provide incentives to certain of its employees.

2.        DEFINITIONS

2.1       In this Plan, the following terms have the following meanings:

     (a)  "Balance of Contributions" mean at any time that amount which is the
          sum of the aggregate amount of contributions made by a Participant
          pursuant to Section 5 herein during the Twelve-Month Period current at
          the time of determination;

     (b)  "Company" means Offshore Systems International Ltd. and all of its
          subsidiaries or affiliates, its and their respective successors and
          assigns, and any reference in the Plan to action by the Company means
          action by or under the authority of the Board of Directors of the
          Company or the Option Committee that has been designated for that
          purpose by the Board of Directors of the Company;

     (c)  "Date of Grant" of an Option means the date that the Option is granted
          to a Participant under the Standard Option Plan;

     (d)  "Designated Amount" of a Participant's Option means the maximum number
          of Shares which the Participant may purchase under the Option, as
          designated by the Option Committee at the time the Option is granted
          pursuant to the Standard Option Plan;

     (e)  "Eligible Employee" means a bona fide employee (including, without
          limitation, any director, officer or consultant whether or not such
          director, officer or consultant is an employee) of the Company who has
          been designated an Eligible Employee by the Option Committee;

     (f)  "Option" means a right granted under the Plan to a Participant to
          purchase Shares in accordance with the Plan;

     (g)  "Option Committee" means a committee established by the Board of
          Directors of the Company consisting of any two directors of the
          Company who shall be

                                       3

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          appointed by the Board of Directors of the Company and, if no such
          committee is appointed, the Option Committee shall be deemed to mean
          the Board of Directors of the Company;

     (h)  "Option Price" in respect of a Participant's Option means the price
          designated by the Option Committee at which the Participant may
          purchase Shares under the Option;

     (i)  "Option Year" in respect an Option means a calendar year commencing on
          the Date of Grant of the Option or on any anniversary of the Date of
          Grant;

     (j)  "Participant" means an Eligible Employee who has agreed to participate
          in the Plan on such terms as the Option Committee may specify at the
          time he is designated as an Eligible Employee;

     (k)  "Payroll Deduction Plan" means the Option granted pursuant to Section
          5 herein;

     (l)  "Plan" means this Employee Stock Option Plan, as amended and restated
          from time to time and shall include the Payroll Deduction Plan and
          Standard Option Plan;

     (m)  "Regulatory Authorities" means all stock exchanges and securities
          regulatory authorities having jurisdiction over the affairs of the
          Company;

     (n)  "Salary" means the base salary paid to an Employee by a Participating
          Company for personal services rendered by him as an Employee of such
          Participating Company, including vacation pay, but not including
          bonuses, commissions, overtime pay, living or other allowances,
          reimbursements or special payments, or any contributions or benefits
          under any plan of current or deferred compensation adopted by a
          Participating Company;

     (o)  "Shares" means common shares of the Company;

     (p)  "Twelve-Month Period" means, with respect to the initial Twelve-Month
          Period, the twelve-month period commencing on the first day of a month
          stipulated by the Board for the commencement of the Plan and ending on
          the last day of the eleventh month thereafter, and for each other
          period means the twelve-month period commencing on the day following
          the end of that initial twelve-month period or the subsequent
          last-completed twelve-month period, as the case may be; and

     (q)  "Standard Option Plan" means the Option granted pursuant to Section 4
          herein;

2.2       In this Plan, unless the context requires otherwise, references to the
male gender include the female gender, words importing the singular number may
be construed to extend to and include the plural number, and words importing the
plural number may be construed to extend to and include the singular number.

                                       4

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3.        ADMINISTRATION

3.1       The Plan will be administered by the Option Committee pursuant to
rules of procedure as determined from time to time by the Board of Directors of
the Company.

4.        STANDARD OPTION PLAN

4.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee or any other person or company as permitted by the Regulatory
Authorities) as "Eligible Employees" for the purposes of the Standard Option
Plan.

4.2       An Eligible Employee who is eligible to participate in this Standard
Option Plan may participate in it by executing and delivering to the Company a
written statement on a form to be supplied by the Company to the effect that he:

     (a)  desires to participate in the Standard Option Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Standard
     Option Plan.

4.3       From time to time, the Option Committee may grant an Option to a
Participant to acquire Shares in accordance with the Standard Option Plan and
designate:

          (a)  the maximum number ("Designated Amount") of Shares which the
          Participant may purchase under the Option; and

          (b)  the price ("Option Price") at which the Participant may purchase
          his Shares under the Option, which price shall be determined by the
          Option Committee in accordance with paragraph 4.4 herein.

4.4       The Option Price per Share in respect of an Option shall be a price
equal to the closing price of the shares on the Toronto Stock Exchange on the
date immediately proceeding the date of grant.

4.5       Participation in the Standard Option Plan shall be entirely voluntary
and any decision not to participate shall not affect any Eligible Employee's
employment with the Company or any of its subsidiaries or affiliates.

4.6       Subject to the provisions of the Standard Option Plan, an Option may
be exercised by the Participant from time to time at his discretion to purchase
in the aggregate up to the Designated Amount of Shares.

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4.7 Unless the Option Committee otherwise specifies in writing, a Participant's
Option shall terminate and may not be exercised after the earliest of:

          (a)  three months after the Participants termination of employment
          with the Company by reason of his disability or his retirement or
          early retirement, (as determined by the Company in its sole
          discretion) provided that the Participant has not died prior to the
          expiry of such three month period;

     (b)  twelve months after the Participant's death;

          (c)  thirty (30) days from the date of the Participant's termination
          of employment with the Company, unless such termination occurs by
          reason of the Participant's death, disability, retirement or early
          retirement as contemplated in (a) or (b) above; and

          (d)  such date as may be imposed by any regulatory authority or body
          having jurisdiction over this aspect of the Standard Option Plan.

4.8       The exercise of an Option under the Standard Option Plan shall be made
by notice to the Company in the prescribed form specifying and subscribing for
the number of Shares in respect of which the Option is being exercised at that
time and accompanied by a certified cheque or bank draft payable to the Company
in the amount of the aggregate Option Price for such number of Shares. As of the
day the Company receives such notice and such payment, the Participant (or the
person claiming through him, as the case may be) shall be entitled to be entered
on the share register of the Company as the holder of the number of Shares in
respect of which the Option was exercised and, as promptly as possible
thereafter, shall be delivered a certificate representing that number of Shares.

5.        PAYROLL DEDUCTION PLAN

5.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee) as "Eligible Employees" for the purposes of the Payroll Deduction
Plan. In this Plan, the Payroll Deduction Plan shall be separate and distinct
from the Standard Option Plan but nothing herein shall preclude an Eligible
Employee from participating in both plans.

5.2       An Eligible Employee who is eligible to participate in this Payroll
Deduction Plan may participate in it by executing and delivering to the Company
a written statement on a form to be supplied by the Company to the effect that
he:

     (a)  desires to participate in the Payroll Deduction Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Payroll
Deduction Plan.

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Participation in the Payroll Deduction Plan shall commence upon acceptance of
his application by the Company as of the commencement of the next Twelve-Month
Period.

5.3       A person shall cease to be a Participant upon the happening of any of
the following events: (a) whenever he ceases to be an Eligible Employee for any
reason including his retirement, permanent disability or death;

          (b)  at any time during a Twelve-Month Period in which he is
          participating in the Payroll Deduction Plan by giving 10 days' written
          notice to the Option Committee his intention to withdraw from the
          Payroll Deduction Plan; and

          (c)  this Payroll Deduction Plan terminates or is terminated.

5.4       A Participant whose participation has been terminated pursuant to
Paragraph 5.3 shall receive his Balance of Contributions within ten days of the
date of such termination from the Company, payable by check in accordance with
applicable law.

5.5       Any Participant may contribute on a monthly basis in any Twelve-Month
Period toward the purchase of Shares for his account under the Payroll Deduction
Plan, an amount which shall not exceed 10% of his Salary during each month
provided that:

          (a)  in the case of a Participant whose Salary is paid in Canadian
          currency his contribution shall be not less than $40.00 Canadian
          during such month, or

          (b)  in the case of a Participant whose Salary is paid in any currency
          other than Canadian his contribution during such month shall be not
          less than an amount in the currency in which he is paid approximately
          equivalent to $40.00 Canadian.

5.6       The following rules shall apply to payroll deductions:

     (a)  all contributions to the Payroll Deduction Plan must be made through
monthly payroll deductions;

          (b)  a Participant shall direct such deductions to be made for a given
          Twelve-Month Period by executing and delivering to the Company a
          written notice to make such deductions, on a form to be supplied by
          the Company, but any such notice shall not be effective with respect
          to any Twelve-Month Period unless it is received prior to the
          commencement of such period or such other time as designated by the
          Option Committee;

          (c)  any such direction shall remain in effect for subsequent
          Twelve-Month Periods until it is changed or revoked; and

          (d)  a Participant may direct such deductions to be changed in amount
          prior to the commencement of any Twelve-Month Period by executing and
          delivering to the Company by which he is employed written notice to
          that effect, but any such

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          notice shall not be effective with respect to any Twelve-Month Period
          unless it is received prior to the commencement of such period.

5.7       The Company shall cause to be maintained an account for each
Participant.

5.8       The Company shall cause the account of each Participant to be credited
with the amount of any contributions by such Participant, and debited with the
amount of such contributions applied to purchase Shares.

5.9       The accounts of the Payroll Deduction Plan shall be audited by the
Company's auditors at least annually.

5.10      As soon as practicable after the close of each Twelve-Month Period,
the Company shall cause a statement to be mailed or delivered to each
Participant setting forth the accounts of such Participant as of the close of
the Twelve-Month Period. Such statement shall be deemed to be correct unless the
Company is notified to the contrary within 30 days after it is mailed or
delivered to such Participant.

5.11      The Option Price for each Share to be purchased from Payroll Deduction
Plan contributions in any Twelve-Month Period shall be determined by the Option
Committee on the first day of each Twelve-Month Period and shall be based on a
weighted average trading price for the five trading days on the Toronto Stock
Exchange immediately preceding the date of grant.

5.12      (a)    On or before 4:00 p.m. (Vancouver time) on the last day of any
          Twelve-Month Period each Participant shall file with the Company a
          completed notice, in a form established by the Option Committee
          electing:

                       (i)     to have his Balance of Contributions refunded to
                 him by the Company, in which event the Company shall within 10
                 business days then pay to the Participant his Balance of
                 Contributions (without interest) by check, or

                       (ii)    to have his Balance of Contributions applied to
                 the purchase of the Shares from the treasury of the Company at
                 the Option Price, in which event share certificates evidencing
                 Shares purchased for him shall be issued as soon as
                 the number of practicable,

                 Such notice shall be effective for the Twelve-Month Period
          commencing after the date of filing thereof and for all subsequent
          Twelve-Month Periods until revoked, provided that failure to file such
          notice will constitute the Participant's election to have his Balance
          of Contributions refunded to him by the Company in the manner as set
          out in paragraph 5.12(a)(i) of this Section.

          (b)    A Participant who elects pursuant to clause 5.12(a)(i) to have
          his Balance of Contributions refunded to him shall indicate, in the
          same notice by which such election is exercised, whether or not he
          intends to participate in the next Twelve-Month Period of the Payroll
          Deduction Plan.

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          (c)    A failure to make any specification shall be deemed to be the
          Participant's election not to continue participating and the Company
          shall not continue to make payroll deductions from the Participant's
          salary during the next Twelve-Month Period.

          (d)    A Participant who elects to have his Balance of Contributions
          paid out to him pursuant to clause 5.12(a)(i) of this Section and
          indicates his intention not to participate in the Payroll Deduction
          Plan in the next Twelve-Month Period shall be permitted to apply for
          participation in the Payroll Deduction Plan at the beginning of any
          subsequent Twelve-Month Period.

5.13      Notwithstanding any contribution by a Participant pursuant to the
Payroll Deduction Plan, the Option Committee reserves the right to limit the
amount of his Balance of Contributions that will be applied to the purchase of
Shares in any Twelve-Month Period.

6.        ANTI-DILUTION PROVISIONS

6.1       If the number of outstanding Shares of the Company shall be increased
or decreased as a result of a stock dividend, stock split, consolidation,
recapitalization or other transaction, other than as a result of the issuance of
Shares for additional consideration, the Option Committee shall, except where
the required adjustment would involve less than 1% of the Designated Amount of
any existing Option, make appropriate adjustments to the Designated Amount of
any Option which has previously been granted under the Plan, the maximum number
of Shares which the Participant may thereafter purchase under the Option and the
maximum number of Shares which may be issued under the Plan in accordance with
paragraph 9.1.

6.2       No fractional shares shall be issued upon the exercise of an Option
nor shall any scrip certificates in lieu therefor be issuable at any time.
Accordingly, if as a result of any adjustment under Paragraph 6.1 a Participant
would otherwise have become entitled to a fractional share upon the exercise of
an Option, he shall have the right to purchase only the next higher whole number
of Shares and no payment or other adjustment will be made with respect to the
fractional interests so disregarded.

7.        ACCOUNTS AND STATEMENTS

7.1       The Company shall maintain records of the details of each Option
granted to each Participant under the Plan, including the Date of Grant,
Designated Amount and the Option Price of each Option, the number of Shares in
respect of which the Option has been exercised and the maximum number of Shares
which the Participant may still purchase under the Option.

7.2       Upon receiving a request in writing from a Participant and at such
other times as the Company shall determine, the Company shall furnish the
Participant with a statement setting forth the details of his Options.

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7.3       Any statement shall be deemed to have been accepted by the Participant
as correct unless written notice to the contrary is given to the Company within
30 days after such statement is given to the Participant.

8.        NOTICES

9.

8.1       Any payment, notice, statement, certificate or other instrument
required or permitted to be given to a Participant or any person claiming or
deriving any rights through him shall be given by:

          (a)    delivering it personally to the Participant or to the person
          claiming or deriving rights through him, as the case may be, or

          (b)    mailing it postage paid (provided that the postal service is
          then in operation) or delivering it to the address, which is,
          maintained for the Participant in the Company's personnel records.

8.2       Any payment, notice, statement, certificate or instrument required or
permitted to be given to the Company shall be given by mailing it postage
prepaid (provided that the postal service is then in operation) or delivering it
to the Company at the following address:

          Offshore Systems International Ltd.
          #107 - 930 West 1st Street
          North Vancouver, B.C.
          V7P 3N4

          Attention:  President

or such other address as the Board of Directors of the Company may determine in
writing from time to time.

8.3       Any payment, notice, statement, certificate or other instrument
referred to in paragraphs 8.1 or 8.2 herein, if delivered, shall be deemed to
have been given or delivered on the date on which it was delivered or, if mailed
(provided that the postal service is then in operation), shall be deemed to have
been given or delivered on the second business day following the date on which
it was mailed.

9.        GENERAL

9.1       The number of Shares, which may be issued under this Plan, shall not
exceed in the aggregate of 4,000,000 common shares.

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9.2       If any Option is terminated or expires without being fully exercised,
any unissued Shares which have been reserved to be issued upon the exercise of
the Option shall become available to be issued upon the exercise of the Options
subsequently granted under the Plan.

9.3       The aggregate number of Shares that has been reserved for issuance to
any one Participant shall not exceed 5% of the issued and outstanding common
shares of the Company at the time of granting.

9.4       The Option Committee may, from time to time, add to or amend any of
the provisions of the Plan or terminate the Plan and, unless a Participant
otherwise agrees, any such addition, amendment or termination shall apply only
in respect of Options granted on or after the date of such addition, amendment
or termination provided that any amendment must be accepted for filing by all
regulatory authorities having jurisdiction prior to the amendment becoming
effective.

9.5       The determination by the Option Committee of any questions which may
arise as to the interpretation or implementation of the Plan or any of the
Options granted hereunder shall be final and binding on all Eligible Employees,
Participants and other persons claiming or deriving rights through any of them.

9.6       The Plan shall enure to the benefit of and be binding upon the
Company, its successors and assigns.

9.7       The interest of any Eligible Employees or Participant under the Plan
or in any Option shall not be transferable or alienable by him either by pledge,
assignment or in any other manner whatsoever and, during his lifetime, shall be
vested only in him, but shall thereafter enure to the benefit of and be binding
upon the legal personal representatives of the Eligible Employee or the
Participant, as the case may be as provided for in this Plan.

9.8       The Company's obligation to issue Shares in accordance with the terms
of this Plan and any Options granted hereunder is subject to compliance with the
laws, rules and regulations of all authorities having jurisdiction including,
for greater certainty, rules and policies of any stock exchange upon which
Shares of the Company are listed.

9.9       As a condition of participating in the Plan, each Eligible Employee
agrees to comply with all such laws, rules and regulations of any regulatory
authority having jurisdiction and agrees to furnish to the Company all
information and undertakings as may be required to permit compliance with such
laws, rules and regulations.

9.10      An Eligible Employee shall not have any rights as a shareholder in
respect of Shares subject to an Option until such Shares have been paid for in
full and issued.

9.11      Nothing in this Plan shall prevent the Board of Directors of the
Company from granting such further incentive stock options outside of the Plan
as they deem appropriate.

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9.12      No Options shall have a term greater than ten years.

9.13      This Plan and any Options granted hereunder shall be governed by and
construed in accordance with the laws of the Province of British Columbia.

                      **END OF EMPLOYEE STOCK OPTION PLAN**

                                       12

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                                Stock Option Plan
                                      1996

<PAGE>

                      OFFSHORE SYSTEMS INTERNATIONAL LTD.
                        1996 EMPLOYEE STOCK OPTION PLAN

1.        PURPOSE

1.1       Employee Stock Option Plan has been established by the Company to
provide incentives to certain of its employees.

2.        DEFINITIONS

2.1       In this Plan, the following terms have the following meanings:

     (a)  "Balance of Contributions" mean at any time that amount which is the
          sum of the aggregate amount of contributions made by a Participant
          pursuant to Section 5 herein during the Six-Month Period current at
          the time of determination;

     (b)  "Company" means Offshore Systems International Ltd. and all of its
          subsidiaries or affiliates, its and their respective successors and
          assigns, and any reference in the Plan to action by the Company means
          action by or under the authority of the Board of Directors of the
          Company or the Option Committee that has been designated for that
          purpose by the Board of Directors of the Company;

     (c)  "Date of Grant" of an Option means the date that the Option is granted
          to a Participant under the Standard Option Plan;

     (d)  "Designated Amount" of a Participant's Option means the maximum number
          of Shares which the Participant may purchase under the Option, as
          designated by the Option Committee at the time the Option is granted
          pursuant to the Standard Option Plan;

     (e)  "Eligible Employee" means a bona fide employee (including, without
          limitation, any director, officer or consultant whether or not such
          director, officer or consultant is an employee) of the Company who has
          been designated an Eligible Employee by the Option Committee;

     (f)  "Option" means a right granted under the Plan to a Participant to
          purchase Shares in accordance with the Plan;

     (g)  "Option Committee" means a committee established by the Board of
          Directors of the Company consisting of any two directors of the
          Company who shall be appointed by the Board of Directors of the
          Company and, if no such committee is appointed, the Option Committee
          shall be deemed to mean the Board of Directors of the Company;

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<PAGE>

     (h)  "Option Price" in respect of a Participant's Option means the price
          designated by the Option Committee at which the Participant may
          purchase Shares under the Option;

     (i)  "Option Year" in respect an Option means a calendar year commencing on
          the Date of Grant of the Option or on any anniversary of the Date of
          Grant;

     (j)  "Participant" means an Eligible Employee who has agreed to participate
          in the Plan on such terms as the Option Committee may specify at the
          time he is designated as an Eligible Employee;

     (k)  "Payroll Deduction Plan" means the Option granted pursuant to Section
          5 herein;

     (l)  "Plan" means this Employee Stock Option Plan, as amended and restated
          from time to time and shall include the Payroll Deduction Plan and
          Standard Option Plan;

     (m)  "Regulatory Authorities" means all stock exchanges and securities
          regulatory authorities having jurisdiction over the affairs of the
          Company;

     (n)  "Salary" means the base salary paid to an Employee by a Participating
          Company for personal services rendered by him as an Employee of such
          Participating Company, including vacation pay, but not including
          bonuses, commissions, overtime pay, living or other allowances,
          reimbursements or special payments, or any contributions or benefits
          under any plan of current or deferred compensation adopted by a
          Participating Company;

     (o)  "Shares" means common shares of the Company;

     (p)  "Six-Month Period" means, with respect to the initial Six-Month
          Period, the six-month period commencing on the first day of a month
          stipulated by the Board for the commencement of the Plan and ending on
          the last day of the fifth month thereafter, and for each other period
          means the six-month period commencing on the day following the end of
          that initial six-month period or the subsequent last-completed
          six-month period, as the case may be; and

     (q)  "Standard Option Plan" means the Option granted pursuant to Section 4
          herein;

2.2       In this Plan, unless the context requires otherwise, references to the
male gender include the female gender, words importing the singular number may
be construed to extend to and include the plural number, and words importing the
plural number may be construed to extend to and include the singular number.

3.        ADMINISTRATION

                                       2

<PAGE>

3.1       The Plan will be administered by the Option Committee pursuant to
rules of procedure as determined from time to time by the Board of Directors of
the Company.

4.        STANDARD OPTION PLAN

4.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee or any other person or company as permitted by the Regulatory
Authorities) as "Eligible Employees" for the purposes of the Standard Option
Plan.

4.2       An Eligible Employee who is eligible to participate in this Standard
Option Plan may participate in it by executing and delivering to the Company a
written statement on a form to be supplied by the Company to the effect that he:

     (a)  desires to participate in the Standard Option Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Standard
          Option Plan.

4.3       From time to time, the Option Committee may grant an Option to a
Participant to acquire Shares in accordance with the Standard Option Plan and
designate:

          (a)  the maximum number ("Designated Amount") of Shares which the
          Participant may purchase under the Option; and

          (b)  the price ("Option Price") at which the Participant may purchase
          his Shares under the Option, which price shall be determined by the
          Option Committee in accordance with paragraph 4.4 herein.

4.4       The Option Price per Share in respect of an Option shall be a price
equal to the closing price of the shares on the Toronto Stock Exchange on the
date immediately preceding the date of grant.

4.5       Participation in the Standard Option Plan shall be entirely voluntary
and any decision not to participate shall not affect any Eligible Employee's
employment with the Company or any of its subsidiaries or affiliates.

4.6       Subject to the provisions of the Standard Option Plan, an Option may
be exercised by the Participant from time to time at his discretion to purchase
in the aggregate up to the Designated Amount of Shares.

4.7       Unless the Option Committee otherwise specifies in writing, a
Participant's Option shall terminate and may not be exercised after the earliest
of:

          (a)  three months after the Participants termination of employment
          with the Company by reason of his disability or his retirement or
          early retirement, (as

                                        3

<PAGE>

          determined by the Company in its sole discretion) provided that the
          Participant has not died prior to the expiry of such three month
          period;

     (b)  twelve months after the Participant's death;

          (c) thirty (30) days from the date of the Participant's termination of
          employment with the Company, unless such termination occurs by reason
          of the Participant's death, disability, retirement or early retirement
          as contemplated in (a) or (b) above; and

          (d) such date as may be imposed by any regulatory authority or body
          having jurisdiction over this aspect of the Standard Option Plan.

4.8       The exercise of an Option under the Standard Option Plan shall be made
by notice to the Company in the prescribed form specifying and subscribing for
the number of Shares in respect of which the Option is being exercised at that
time and accompanied by a certified cheque or bank draft payable to the Company
in the amount of the aggregate Option Price for such number of Shares. As of the
day the Company receives such notice and such payment, the Participant (or the
person claiming through him, as the case may be) shall be entitled to be entered
on the share register of the Company as the holder of the number of Shares in
respect of which the Option was exercised and, as promptly as possible
thereafter, shall be delivered a certificate representing that number of Shares.

5.   PAYROLL DEDUCTION PLAN

5.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee) as "Eligible Employees" for the purposes of the Payroll Deduction
Plan. In this Plan, the Payroll Deduction Plan shall be separate and distinct
from the Standard Option Plan but nothing herein shall preclude an Eligible
Employee from participating in both plans.

5.2       An Eligible Employee who is eligible to participate in this Payroll
Deduction Plan may participate in it by executing and delivering to the Company
a written statement on a form to be supplied by the Company to the effect that
he:

     (a)  desires to participate in the Payroll Deduction Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Payroll
          Deduction Plan.

Participation in the Payroll Deduction Plan shall commence upon acceptance of
his application by the Company as of the commencement of the next SIx-Month
Period.

5.3       A person shall cease to be a Participant upon the happening of any of
the following events:

          (a) whenever he ceases to be an Eligible Employee for any reason
          including his retirement, permanent disability or death;

                                       4

<PAGE>

          (b)  at any time during a Six-Month Period in which he is
          participating in the Payroll Deduction Plan by giving 10 days' written
          notice to the Option Committee his intention to withdraw from the
          Payroll Deduction Plan; and

          (c)  this Payroll Deduction Plan terminates or is terminated.

5.4       A Participant whose participation has been terminated pursuant to
Paragraph 5.3 shall receive his Balance of Contributions within ten days of the
date of such termination from the Company, payable by cheque in accordance with
applicable law.

5.5       Any Participant may contribute on a monthly basis in any Six-Month
Period toward the purchase of Shares for his account under the Payroll Deduction
Plan, an amount which shall not exceed 10% of his Salary during each month
provided that:

          (a)  in the case of a Participant whose Salary is paid in Canadian
          currency his contribution shall be not less than $40.00 Canadian
          during such month, or

          (b)  in the case of a Participant whose Salary is paid in any currency
          other than Canadian his contribution during such month shall be not
          less than an amount in the currency in which he is paid approximately
          equivalent to $40.00 Canadian.

5.6       The following rules shall apply to payroll deductions:

          (a)  all contributions to the Payroll Deduction Plan must be made
          through monthly payroll deductions;

          (b)  a Participant shall direct such deductions to be made for a given
          Six-Month Period by executing and delivering to the Company a written
          notice to make such deductions, on a form to be supplied by the
          Company, but any such notice shall not be effective with respect to
          any Twelve-Month Period unless it is received prior to the
          commencement of such period or such other time as designated by the
          Option Committee;

          (c)  any such direction shall remain in effect for subsequent Six-
               Month Periods until it is changed or revoked; and

          (d)  a Participant may direct such deductions to be changed in amount
          prior to the commencement of any Six-Month Period by executing and
          delivering to the Company by which he is employed written notice to
          that effect, but any such notice shall not be effective with respect
          to any Six-Month Period unless it is received prior to the
          commencement of such period.

5.7       The Company shall cause to be maintained an account for each
          Participant.

                                        5

<PAGE>

5.8      The Company shall cause the account of each Participant to be credited
with the amount of any contributions by such Participant, and debited with the
amount of such contributions applied to purchase Shares.

5.9      The accounts of the Payroll Deduction Plan shall be audited by the
Company's auditors at least annually.

5.10     As soon as practicable after the close of each Six-Month Period, the
Company shall cause a statement to be mailed or delivered to each Participant
setting forth the accounts of such Participant as of the close of the Six -Month
Period. Such statement shall be deemed to be correct unless the Company is
notified to the contrary within 30 days after it is mailed or delivered to such
Participant.

5.11     The Option Price for each Share to be purchased from Payroll Deduction
Plan contributions in any Twelve-Month Period shall be determined by the Option
Committee on the first day of each Six-Month Period and shall be based on a
weighted average trading price for the five trading days on the Toronto Stock
Exchange immediately preceding the date of grant.

5.12     (a)   On or before 4:00 p.m. (Vancouver time) on the last day of any
         Six-Month Period each Participant shall file with the Company a
         completed notice, in a form established by the Option Committee
         electing:

                    (i)  to have his Balance of Contributions refunded to him by
               the Company, in which event the Company shall within 10 business
               days then pay to the Participant his Balance of Contributions
               (without interest) by cheque, or

                    (ii) to have his Balance of Contributions applied to the
               purchase of the Shares from the treasury of the Company at the
               Option Price, in which event share certificates evidencing the
               number of Shares purchased for him shall be issued as soon as
               practicable,

               such notice shall be effective for the Six-Month Period
          commencing after the date of filing thereof and for all subsequent
          Six-Month Periods until revoked, provided that failure to file such
          notice will constitute the Participant's election to have his Balance
          of Contributions refunded to him by the Company in the manner as set
          out in paragraph 5.12(a)(i) of this Section.

          (b)  A Participant who elects pursuant to clause 5.12(a)(i) to have
          his Balance of Contributions refunded to him shall indicate, in the
          same notice by which such election is exercised, whether or not he
          intends to participate in the next Six-Month Period of the Payroll
          Deduction Plan.

          (c)  A failure to make any specification shall be deemed to be the
          Participant's election not to continue participating and the Company
          shall not continue to make payroll deductions from the Participant's
          salary during the next Six-Month Period.

                                       6

<PAGE>

          (d) A Participant who elects to have his Balance of Contributions paid
          out to him pursuant to clause 5.12(a)(i) of this Section and indicates
          his intention not to participate in the Payroll Deduction Plan in the
          next Six-Month Period shall be permitted to apply for participation in
          the Payroll Deduction Plan at the beginning of any subsequent
          Six-Month Period.

5.13      Notwithstanding any contribution by a Participant pursuant to the
Payroll Deduction Plan, the Option Committee reserves the right to limit the
amount of his Balance of Contributions that will be applied to the purchase of
Shares in any Six-Month Period.

6.        ANTI-DILUTION PROVISIONS

6.1       If the number of outstanding Shares of the Company shall be increased
or decreased as a result of a stock dividend, stock split, consolidation,
recapitalization or other transaction, other than as a result of the issuance of
Shares for additional consideration, the Option Committee shall, except where
the required adjustment would involve less than 1% of the Designated Amount of
any existing Option, make appropriate adjustments to the Designated Amount of
any Option which has previously been granted under the Plan, the maximum number
of Shares which the Participant may thereafter purchase under the Option and the
maximum number of Shares which may be issued under the Plan in accordance with
paragraph 9.1.

6.2       No fractional shares shall be issued upon the exercise of an Option
nor shall any scrip certificates in lieu therefor be issuable at any time.
Accordingly, if as a result of any adjustment under Paragraph 6.1 a Participant
would otherwise have become entitled to a fractional share upon the exercise of
an Option, he shall have the right to purchase only the next higher whole number
of Shares and no payment or other adjustment will be made with respect to the
fractional interests so disregarded.

7.        ACCOUNTS AND STATEMENTS

7.1       The Company shall maintain records of the details of each Option
granted to each Participant under the Plan, including the Date of Grant,
Designated Amount and the Option Price of each Option, the number of Shares in
respect of which the Option has been exercised and the maximum number of Shares
which the Participant may still purchase under the Option.

7.2       Upon receiving a request in writing from a Participant and at such
other times as the Company shall determine, the Company shall furnish the
Participant with a statement setting forth the details of his Options.

7.3       Any statement shall be deemed to have been accepted by the Participant
as correct unless written notice to the contrary is given to the Company within
30 days after such statement is given to the Participant.

8.        NOTICES

                                       7

<PAGE>

8.1       Any payment, notice, statement, certificate or other instrument
required or permitted to be given to a Participant or any person claiming or
deriving any rights through him shall be given by:

          (a) delivering it personally to the Participant or to the person
          claiming or deriving rights through him, as the case may be, or

          (b) mailing it postage paid (provided that the postal service is then
          in operation) or delivering it to the address which is maintained for
          the Participant in the Company's personnel records.

8.2       Any payment, notice, statement, certificate or instrument required or
permitted to be given to the Company shall be given by mailing it postage
prepaid (provided that the postal service is then in operation) or delivering it
to the Company at the following address:

          Offshore Systems International Ltd.
          #107 - 930 West 1st Street
          North Vancouver, B.C.
          V7P 3N4

          Attention:  President

or such other address as the Board of Directors of the Company may determine in
writing from time to time.

8.3       Any payment, notice, statement, certificate or other instrument
referred to in paragraphs 8.1 or 8.2 herein, if delivered, shall be deemed to
have been given or delivered on the date on which it was delivered or, if mailed
(provided that the postal service is then in operation), shall be deemed to have
been given or delivered on the second business day following the date on which
it was mailed.

9.        GENERAL

9.1       The number of Shares which may be issued under this Plan shall not
exceed in the aggregate of 2,000,000 common shares.

9.2       If any Option is terminated or expires without being fully exercised,
any unissued Shares which have been reserved to be issued upon the exercise of
the Option shall become available to be issued upon the exercise of the Options
subsequently granted under the Plan.

9.3       The aggregate number of Shares that has been reserved for issuance to
any one Participant shall not exceed 5% of the issued and outstanding common
shares of the Company at the time of granting.

9.4       The Option Committee may, from time to time, add to or amend any of
the provisions of the Plan or terminate the Plan and, unless a Participant
otherwise agrees, any such

                                        8

<PAGE>

addition, amendment or termination shall apply only in respect of Options
granted on or after the date of such addition, amendment or termination provided
that any amendment must be accepted for filing by all regulatory authorities
having jurisdiction prior to the amendment becoming effective.

9.5       The determination by the Option Committee of any questions which may
arise as to the interpretation or implementation of the Plan or any of the
Options granted hereunder shall be final and binding on all Eligible Employees,
Participants and other persons claiming or deriving rights through any of them.

9.6       The Plan shall enure to the benefit of and be binding upon the
Company, its successors and assigns.

9.7       The interest of any Eligible Employees or Participant under the Plan
or in any Option shall not be transferable or alienable by him either by pledge,
assignment or in any other manner whatsoever and, during his lifetime, shall be
vested only in him, but shall thereafter enure to the benefit of and be binding
upon the legal personal representatives of the Eligible Employee or the
Participant, as the case may be as provided for in this Plan.

9.8       The Company's obligation to issue Shares in accordance with the terms
of this Plan and any Options granted hereunder is subject to compliance with the
laws, rules and regulations of all authorities having jurisdiction including,
for greater certainty, rules and policies of any stock exchange upon which
Shares of the Company are listed.

9.9       As a condition of participating in the Plan, each Eligible Employee
agrees to comply with all such laws, rules and regulations of any regulatory
authority having jurisdiction and agrees to furnish to the Company all
information and undertakings as may be required to permit compliance with such
laws, rules and regulations.

9.10      An Eligible Employee shall not have any rights as a shareholder in
respect of Shares subject to an Option until such Shares have been paid for in
full and issued.

9.11      Nothing in this Plan shall prevent the Board of Directors of the
Company from granting such further incentive stock options outside of the Plan
as they deem appropriate.

9.12      No Options shall have a term greater than ten years.

9.13      This Plan and any Options granted hereunder shall be governed by and
construed in accordance with the laws of the Province of British Columbia.

                      **END OF EMPLOYEE STOCK OPTION PLAN**

                                       9

<PAGE>

                                Stock Option Plan
                                      1994

<PAGE>

                       OFFSHORE SYSTEMS INTERNATIONAL LTD.

                         1994 EMPLOYEE STOCK OPTION PLAN

1.        PURPOSE

1.1       Employee Stock Option Plan has been established by the Company to
provide incentives to certain of its employees.

2.        DEFINITIONS

2.1       In this Plan, the following terms have the following meanings:

     (a)  "Balance of Contributions" mean at any time that amount which is the
          sum of the aggregate amount of contributions made by a Participant
          pursuant to Section 5 herein during the Six-Month Period current at
          the time of determination;

     (b)  "Company" means Offshore Systems International Ltd. and all of its
          subsidiaries or affiliates, its and their respective successors and
          assigns, and any reference in the Plan to action by the Company means
          action by or under the authority of the Board of Directors of the
          Company or the Option Committee that has been designated for that
          purpose by the Board of Directors of the Company;

     (c)  "Date of Grant" of an Option means the date that the Option is granted
          to a Participant under the Standard Option Plan;

     (d)  "Designated Amount" of a Participant's Option means the maximum number
          of Shares which the Participant may purchase under the Option, as
          designated by the Option Committee at the time the Option is granted
          pursuant to the Standard Option Plan;

     (e)  "Eligible Employee" means a bona fide employee (including, without
          limitation, any director, officer or consultant whether or not such
          director, officer or consultant is an employee) of the Company who has
          been designated an Eligible Employee by the Option Committee;

     (f)  "Option" means a right granted under the Plan to a Participant to
          purchase Shares in accordance with the Plan;

     (g)  "Option Committee" means a committee established by the Board of
          Directors of the Company consisting of any two directors of the
          Company who shall be appointed by the Board of Directors of the
          Company and, if no such committee is appointed, the Option Committee
          shall be deemed to mean the Board of Directors of the Company;

                                        1

<PAGE>

     (h)  "Option Price" in respect of a Participant's Option means the price
          designated by the Option Committee at which the Participant may
          purchase Shares under the Option;

     (i)  "Option Year" in respect an Option means a calendar year commencing on
          the Date of Grant of the Option or on any anniversary of the Date of
          Grant;

     (j)  "Participant" means an Eligible Employee who has agreed to participate
          in the Plan on such terms as the Option Committee may specify at the
          time he is designated as an Eligible Employee;

     (k)  "Payroll Deduction Plan" means the Option granted pursuant to Section
          5 herein;

     (l)  "Plan" means this Employee Stock Option Plan, as amended and restated
          from time to time and shall include the Payroll Deduction Plan and
          Standard Option Plan;

     (m)  "Regulatory Authorities" means all stock exchanges and securities
          regulatory authorities having jurisdiction over the affairs of the
          Company;

     (n)  "Salary" means the base salary paid to an Employee by a Participating
          Company for personal services rendered by him as an Employee of such
          Participating Company, including vacation pay, but not including
          bonuses, commissions, overtime pay, living or other allowances,
          reimbursements or special payments, or any contributions or benefits
          under any plan of current or deferred compensation adopted by a
          Participating Company;

     (o)  "Shares" means common shares of the Company;

     (p)  "Six-Month Period" means, with respect to the initial Six-Month
          Period, the six-month period commencing on the first day of a month
          stipulated by the Board for the commencement of the Plan and ending on
          the last day of the fifth month thereafter, and for each other period
          means the six-month period commencing on the day following the end of
          that initial six-month period or the subsequent last-completed
          six-month period, as the case may be; and

     (q)  "Standard Option Plan" means the Option granted pursuant to Section 4
          herein;

2.2       In this Plan, unless the context requires otherwise, references to the
male gender include the female gender, words importing the singular number may
be construed to extend to and include the plural number, and words importing the
plural number may be construed to extend to and include the singular number.

                                       2

<PAGE>

3.        ADMINISTRATION

3.1       The Plan will be administered by the Option Committee pursuant to
rules of procedure as determined from time to time by the Board of Directors of
the Company.

4.        STANDARD OPTION PLAN

4.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee or any other person or company as permitted by the Regulatory
Authorities) as "Eligible Employees" for the purposes of the Standard Option
Plan.

4.2       An Eligible Employee who is eligible to participate in this Standard
Option Plan may participate in it by executing and delivering to the Company a
written statement on a form to be supplied by the Company to the effect that he:

     (a)  desires to participate in the Standard Option Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Standard
          Option Plan.

4.3       From time to time, the Option Committee may grant an Option to a
Participant to acquire Shares in accordance with the Standard Option Plan and
designate:

          (a)  the maximum number ("Designated Amount") of Shares which the
               Participant may purchase under the Option; and

          (b)  the price ("Option Price") at which the Participant may purchase
               his Shares under the Option, which price shall be determined by
               the Option Committee in accordance with paragraph 4.4 herein.

4.4       The Option Price per Share in respect of an Option shall be a price
equal to the closing price of the shares on the Toronto Stock Exchange on the
date immediately preceding the date of grant.

4.5       Participation in the Standard Option Plan shall be entirely voluntary
and any decision not to participate shall not affect any Eligible Employee's
employment with the Company or any of its subsidiaries or affiliates.

4.6       Subject to the provisions of the Standard Option Plan, an Option may
be exercised by the Participant from time to time at his discretion to purchase
in the aggregate up to the Designated Amount of Shares.

4.7       Unless the Option Committee otherwise specifies in writing, a
Participant's Option shall terminate and may not be exercised after the earliest
of:

                                        3

<PAGE>

          (a) three months after the Participants termination of employment with
          the Company by reason of his disability or his retirement or early
          retirement, (as determined by the Company in its sole discretion)
          provided that the Participant has not died prior to the expiry of such
          three month period;

     (b)  twelve months after the Participant's death;

          (c) thirty (30) days from the date of the Participant's termination of
          employment with the Company, unless such termination occurs by reason
          of the Participant's death, disability, retirement or early retirement
          as contemplated in (a) or (b) above; and

          (d) such date as may be imposed by any regulatory authority or body
          having jurisdiction over this aspect of the Standard Option Plan.

4.8       The exercise of an Option under the Standard Option Plan shall be made
by notice to the Company in the prescribed form specifying and subscribing for
the number of Shares in respect of which the Option is being exercised at that
time and accompanied by a certified cheque or bank draft payable to the Company
in the amount of the aggregate Option Price for such number of Shares. As of the
day the Company receives such notice and such payment, the Participant (or the
person claiming through him, as the case may be) shall be entitled to be entered
on the share register of the Company as the holder of the number of Shares in
respect of which the Option was exercised and, as promptly as possible
thereafter, shall be delivered a certificate representing that number of Shares.

5.   PAYROLL DEDUCTION PLAN

5.1       From time to time, the Option Committee may designate one or more bona
fide employees of the Company (including, without limitation, any director,
officer or consultant whether or not such director, officer or consultant is an
employee) as "Eligible Employees" for the purposes of the Payroll Deduction
Plan. In this Plan, the Payroll Deduction Plan shall be separate and distinct
from the Standard Option Plan but nothing herein shall preclude an Eligible
Employee from participating in both plans.

5.2       An Eligible Employee who is eligible to participate in this Payroll
Deduction Plan may participate in it by executing and delivering to the Company
a written statement on a form to be supplied by the Company to the effect that
he:

     (a)  desires to participate in the Payroll Deduction Plan; and

     (b)  agrees to be bound by all the terms and conditions of the Payroll
Deduction Plan.

Participation in the Payroll Deduction Plan shall commence upon acceptance of
his application by the Company as of the commencement of the next SIx-Month
Period.

5.3       A person shall cease to be a Participant upon the happening of any of
the following events:

                                       4

<PAGE>

          (a)  whenever he ceases to be an Eligible Employee for any reason
               including his retirement, permanent disability or death;

          (b)  at any time during a Six-Month Period in which he is
               participating in the Payroll Deduction Plan by giving 10 days'
               written notice to the Option Committee his intention to withdraw
               from the Payroll Deduction Plan; and

          (c)  this Payroll Deduction Plan terminates or is terminated.

5.4       A Participant whose participation has been terminated pursuant to
Paragraph 5.3 shall receive his Balance of Contributions within ten days of the
date of such termination from the Company, payable by cheque in accordance with
applicable law.

5.5       Any Participant may contribute on a monthly basis in any Six-Month
Period toward the purchase of Shares for his account under the Payroll Deduction
Plan, an amount which shall not exceed 10% of his Salary during each month
provided that:

          (a)  in the case of a Participant whose Salary is paid in Canadian
          currency his contribution shall be not less than $40.00 Canadian
          during such month, or

          (b)  in the case of a Participant whose Salary is paid in any currency
          other than Canadian his contribution during such month shall be not
          less than an amount in the currency in which he is paid approximately
          equivalent to $40.00 Canadian.

5.6       The following rules shall apply to payroll deductions:

     (a)  all contributions to the Payroll Deduction Plan must be made through
monthly payroll deductions;

          (b)  a Participant shall direct such deductions to be made for a given
          Six-Month Period by executing and delivering to the Company a written
          notice to make such deductions, on a form to be supplied by the
          Company, but any such notice shall not be effective with respect to
          any Twelve-Month Period unless it is received prior to the
          commencement of such period or such other time as designated by the
          Option Committee;

          (c)  any such direction shall remain in effect for subsequent
          Six-Month Periods until it is changed or revoked; and

          (d)  a Participant may direct such deductions to be changed in amount
          prior to the commencement of any Six-Month Period by executing and
          delivering to the Company by which he is employed written notice to
          that effect, but any such notice shall not be effective with respect
          to any Six-Month Period unless it is received prior to the
          commencement of such period.

                                       5

<PAGE>

5.7       The Company shall cause to be maintained an account for each
Participant.

5.8       The Company shall cause the account of each Participant to be credited
with the amount of any contributions by such Participant, and debited with the
amount of such contributions applied to purchase Shares.

5.9       The accounts of the Payroll Deduction Plan shall be audited by the
Company's auditors at least annually.

5.10      As soon as practicable after the close of each Six-Month Period, the
Company shall cause a statement to be mailed or delivered to each Participant
setting forth the accounts of such Participant as of the close of the Six -Month
Period. Such statement shall be deemed to be correct unless the Company is
notified to the contrary within 30 days after it is mailed or delivered to such
Participant.

5.11      The Option Price for each Share to be purchased from Payroll Deduction
Plan contributions in any Twelve-Month Period shall be determined by the Option
Committee on the first day of each Six-Month Period and shall be based on a
weighted average trading price for the five trading days on the Toronto Stock
Exchange immediately preceding the date of grant.

5.12      (a)  On or before 4:00 p.m. (Vancouver time) on the last day of any
          Six-Month Period each Participant shall file with the Company a
          completed notice, in a form established by the Option Committee
          electing:

                    (i)  to have his Balance of Contributions refunded to him by
               the Company, in which event the Company shall within 10 business
               days then pay to the Participant his Balance of Contributions
               (without interest) by cheque, or

                    (ii) to have his Balance of Contributions applied to the
               purchase of the Shares from the treasury of the Company at the
               Option Price, in which event share certificates evidencing the
               number of Shares purchased for him shall be issued as soon as
               practicable,

               such notice shall be effective for the Six-Month Period
          commencing after the date of filing thereof and for all subsequent
          Six-Month Periods until revoked, provided that failure to file such
          notice will constitute the Participant's election to have his Balance
          of Contributions refunded to him by the Company in the manner as set
          out in paragraph 5.12(a)(i) of this Section.

          (b)  A Participant who elects pursuant to clause 5.12(a)(i) to have
          his Balance of Contributions refunded to him shall indicate, in the
          same notice by which such election is exercised, whether or not he
          intends to participate in the next Six-Month Period of the Payroll
          Deduction Plan.

                                       6

<PAGE>

          (c)  A failure to make any specification shall be deemed to be the
               Participant's election not to continue participating and the
               Company shall not continue to make payroll deductions from the
               Participant's salary during the next Six-Month Period

          (d)  A Participant who elects to have his Balance of Contributions
          paid out to him pursuant to clause 5.12(a)(i) of this Section and
          indicates his intention not to participate in the Payroll Deduction
          Plan in the next Six-Month Period shall be permitted to apply for
          participation in the Payroll Deduction Plan at the beginning of any
          subsequent Six-Month Period.

5.13      Notwithstanding any contribution by a Participant pursuant to the
Payroll Deduction Plan, the Option Committee reserves the right to limit the
amount of his Balance of Contributions that will be applied to the purchase of
Shares in any Six-Month Period.

6.        ANTI-DILUTION PROVISIONS

6.1       If the number of outstanding Shares of the Company shall be increased
or decreased as a result of a stock dividend, stock split, consolidation,
recapitalization or other transaction, other than as a result of the issuance of
Shares for additional consideration, the Option Committee shall, except where
the required adjustment would involve less than 1% of the Designated Amount of
any existing Option, make appropriate adjustments to the Designated Amount of
any Option which has previously been granted under the Plan, the maximum number
of Shares which the Participant may thereafter purchase under the Option and the
maximum number of Shares which may be issued under the Plan in accordance with
paragraph 9.1.

6.2       No fractional shares shall be issued upon the exercise of an Option
nor shall any scrip certificates in lieu therefor be issuable at any time.
Accordingly, if as a result of any adjustment under Paragraph 6.1 a Participant
would otherwise have become entitled to a fractional share upon the exercise of
an Option, he shall have the right to purchase only the next higher whole number
of Shares and no payment or other adjustment will be made with respect to the
fractional interests so disregarded.

7.        ACCOUNTS AND STATEMENTS

7.1       The Company shall maintain records of the details of each Option
granted to each Participant under the Plan, including the Date of Grant,
Designated Amount and the Option Price of each Option, the number of Shares in
respect of which the Option has been exercised and the maximum number of Shares
which the Participant may still purchase under the Option.

7.2       Upon receiving a request in writing from a Participant and at such
other times as the Company shall determine, the Company shall furnish the
Participant with a statement setting forth the details of his Options.

                                       7

<PAGE>

7.3       Any statement shall be deemed to have been accepted by the Participant
as correct unless written notice to the contrary is given to the Company within
30 days after such statement is given to the Participant.

8.        NOTICES

8.1       Any payment, notice, statement, certificate or other instrument
required or permitted to be given to a Participant or any person claiming or
deriving any rights through him shall be given by:

          (a)  delivering it personally to the Participant or to the person
          claiming or deriving rights through him, as the case may be, or

          (b)  mailing it postage paid (provided that the postal service is then
          in operation) or delivering it to the address which is maintained for
          the Participant in the Company's personnel records.

8.2       Any payment, notice, statement, certificate or instrument required or
permitted to be given to the Company shall be given by mailing it postage
prepaid (provided that the postal service is then in operation) or delivering it
to the Company at the following address:

          Offshore Systems International Ltd.
          #107 - 930 West 1st Street
          North Vancouver, B.C.
          V7P 3N4

          Attention:  President

or such other address as the Board of Directors of the Company may determine in
writing from time to time.

8.3       Any payment, notice, statement, certificate or other instrument
referred to in paragraphs 8.1 or 8.2 herein, if delivered, shall be deemed to
have been given or delivered on the date on which it was delivered or, if mailed
(provided that the postal service is then in operation), shall be deemed to have
been given or delivered on the second business day following the date on which
it was mailed.

9.        GENERAL

9.1       The number of Shares which may be issued under this Plan shall not
exceed in the aggregate of 1,930,732 common shares.

9.2       If any Option is terminated or expires without being fully exercised,
any unissued Shares which have been reserved to be issued upon the exercise of
the Option shall become available to be issued upon the exercise of the Options
subsequently granted under the Plan.

                                       8

<PAGE>

9.3       The aggregate number of Shares that has been reserved for issuance to
any one Participant shall not exceed 5% of the issued and outstanding common
shares of the Company at the time of granting.

9.4       The Option Committee may, from time to time, add to or amend any of
the provisions of the Plan or terminate the Plan and, unless a Participant
otherwise agrees, any such addition, amendment or termination shall apply only
in respect of Options granted on or after the date of such addition, amendment
or termination provided that any amendment must be accepted for filing by all
regulatory authorities having jurisdiction prior to the amendment becoming
effective.

9.5       The determination by the Option Committee of any questions which may
arise as to the interpretation or implementation of the Plan or any of the
Options granted hereunder shall be final and binding on all Eligible Employees,
Participants and other persons claiming or deriving rights through any of them.

9.6       The Plan shall enure to the benefit of and be binding upon the
Company, its successors and assigns.

9.7       The interest of any Eligible Employees or Participant under the Plan
or in any Option shall not be transferable or alienable by him either by pledge,
assignment or in any other manner whatsoever and, during his lifetime, shall be
vested only in him, but shall thereafter enure to the benefit of and be binding
upon the legal personal representatives of the Eligible Employee or the
Participant, as the case may be as provided for in this Plan.

9.8       The Company's obligation to issue Shares in accordance with the terms
of this Plan and any Options granted hereunder is subject to compliance with the
laws, rules and regulations of all authorities having jurisdiction including,
for greater certainty, rules and policies of any stock exchange upon which
Shares of the Company are listed.

9.9       As a condition of participating in the Plan, each Eligible Employee
agrees to comply with all such laws, rules and regulations of any regulatory
authority having jurisdiction and agrees to furnish to the Company all
information and undertakings as may be required to permit compliance with such
laws, rules and regulations.

9.10      An Eligible Employee shall not have any rights as a shareholder in
respect of Shares subject to an Option until such Shares have been paid for in
full and issued.

9.11      Nothing in this Plan shall prevent the Board of Directors of the
Company from granting such further incentive stock options outside of the Plan
as they deem appropriate.

9.12      No Options shall have a term greater than ten years.

                                       9

<PAGE>

9.13      This Plan and any Options granted hereunder shall be governed by and
          construed in

                      **END OF EMPLOYEE STOCK OPTION PLAN**

                                       10<PAGE>

                           4.3 Shareholder Rights Plan

<PAGE>

                        SHAREHOLDER RIGHTS PLAN AGREEMENT

                                     BETWEEN

                       OFFSHORE SYSTEMS INTERNATIONAL LTD.

                                       AND

                      COMPUTERSHARE TRUST COMPANY OF CANADA

                           DATED AS OF APRIL 19, 2001

                                       1

<PAGE>

     TABLE OF CONTENTS

<TABLE>
<S>                                                                            <C>
     ARTICLE 1

                                 INTERPRETATION

1.1    Certain Definitions ...................................................    2
1.2    Currency ..............................................................   11
1.3    Number and Gender .....................................................   11
1.4    Sections and Headings .................................................   11
1.5    Statutory References ..................................................   11
1.6    Determination of Percentage Ownership .................................   11
1.7    Acting Jointly or in Concert ..........................................   12
1.8    Generally Accepted Accounting Principles ..............................   12

     ARTICLE 2

                                   THE RIGHTS

2.1    Legend on Common Share Certificates ...................................   12
2.2    Initial Exercise Price; Exercise of Rights; Detachment of Rights ......   13
2.3    Adjustments to Exercise Price; Number of Rights .......................   15
2.4    Date on Which Exercise is Effective ...................................   20
2.5    Execution, Authentication, Delivery and Dating of Rights
        Certificateses .......................................................   20
2.6    Registration, Transfer and Exchange ...................................   20
2.7    Mutilated, Lost, Stolen and Destroyed Rights Certificates .............   21
2.8    Persons Deemed Owners .................................................   21
2.9    Delivery and Cancellation of Certificates .............................   22
2.10   Agreement of Rights Holders ...........................................   22

     ARTICLE 3

                            ADJUSTMENTS TO THE RIGHTS

3.1    Flip-in Event .........................................................   22
3.2    Fiduciary Duties of the Board of Directors of the Corporation .........   24

     ARTICLE 4

                                THE RIGHTS AGENT

4.1    General ...............................................................   24
4.2    Merger, Amalgamation, Consolidation or Change of Name of
        Rights Agent .........................................................   25
4.3    Duties of Rights Agent ................................................   25
4.4    Change of Rights Agent ................................................   27
</TABLE>

                                       2

<PAGE>

<TABLE>
<S>                                                                          <C>
     ARTICLE 5

                                  MISCELLANEOUS

5.1    Redemption, Waiver and Termination ................................   27
5.2    Expiration ........................................................   29
5.3    Issuance of New Rights Certificates ...............................   29
5.4    Supplements and Amendments ........................................   29
5.5    Fractional Rights and Fractional Shares ...........................   30
5.6    Rights of Action ..................................................   31
5.7    Holder of Rights Not Deemed a Shareholder .........................   31
5.8    Notice of Proposed Actions ........................................   31
5.9    Notices ...........................................................   31
5.10   Costs of Enforcement ..............................................   32
5.11   Regulatory Approva1s ..............................................   32
5.12   Declaration as to Non-Canadian and Non-U.S. Holders ...............   32
5.13   Successors ........................................................   32
5.14   Benefits of this Agreement ........................................   33
5.15   Shareholder Review ................................................   33
5.16   Determinations and Actions by the Board of Directors ..............   33
5.17   Governing Law .....................................................   33
5.18   Language ..........................................................   33
5.19   Counterparts ......................................................   33
5.20   Severability ......................................................   33
5.21   Effective Date ....................................................   34
5.22   Time of the Essence ...............................................   34

  EXHIBIT A

       Rights Certificate ................................................   A-1

       FORM OF ELECTION TO EXERCISE ......................................   A-3

       FORM OF ASSIGNMENT ................................................   A-5
</TABLE>

                                       3

<PAGE>

SHAREHOLDER RIGHTS PLAN AGREEMENT

THIS AGREEMENT dated as of April 19, 2001.

BETWEEN:

                       OFFSHORE SYSTEMS INTERNATIONAL LTD.
                               (the "Corporation")

                                OF THE FIRST PART

                                     -and -

COMPUTERSHARE TRUST COMPANY OF CANADA
                              (the "Rights Agent")

                               OF THE SECOND PART

WHEREAS:

A.   The Board of Directors has determined that it is advisable to adopt a
     shareholder rights plan (the "Rights Plan") to ensure, to the extent
     possible, that all shareholders of the Corporation are treated fairly in
     connection with any takeover offer for the Corporation or other acquisition
     of control of the Corporation.

B.   In order to implement the Rights Plan, the Board of Directors has:

               (a)       authorized and declared a distribution of one right (a
          "Right") effective at the Close of Business at the Record Time in
          respect of each Common Share outstanding at the Close of Business at
          the Record Time;

     (b)  authorized the issuance of one Right in respect of each Common Share
          issued after the Record Time and prior to the earlier of the
          Separation Time and the Expiration Time; and

     (c)  authorized the issuance of Rights Certificates to holders of Rights
          pursuant to the terms and subject to the conditions set forth herein.

C.   Each Right entitles the holder thereof, after the Separation Time, to
     purchase securities of the Corporation pursuant to the terms and subject to
     the conditions set forth herein.

D.   The Corporation desires to appoint the Rights Agent to act on behalf of the
     Corporation, and the Rights Agent is willing to so act, in connection with
     the issuance, transfer, exchange and replacement of Rights Certificates,
     the exercise of Rights and other matters referred to herein-

NOW THEREFORE in consideration of the premises and respective agreements set
forth herein, the parties hereby agree as follows:

                                       4

<PAGE>

ARTICLE I

                                 INTERPRETATION

1.1  Certain Definitions

For the purposes of this Agreement, including the recitals hereto, the following
terms have the meanings indicated:

     (a)  "Acquiring Person" shall mean any Person who is at any time after the
          date hereof the Beneficial Owner of 20% or more of the outstanding
          Voting Shares of the Corporation; provided, however, that the term
          "Acquiring Person" shall not include:

          (i)     the Corporation or any corporation controlled by the
                  Corporation;

          (ii)    any Person who becomes the Beneficial Owner of 20% or more of
                  the outstanding Voting Shares as a result of one or any
                  combination of:

                  (A)  a Voting Share Reduction;

                  (B)  a Permitted Bid Acquisition;

                  (C)  an Exempt Acquisition; and

                  (D)  a Pro Rata Acquisition;

                  provided, however, that if a Person shall become the
                  Beneficial Owner of 20% or more of the outstanding Voting
                  Shares by reason of one or any combination of a Voting Share
                  Reduction, a Permitted Bid Acquisition, an Exempt Acquisition
                  or a Pro Rata Acquisition, and thereafter becomes the
                  Beneficial Owner of an additional one per cent of the Voting
                  Shares then outstanding (otherwise than pursuant to a Voting
                  Share Reduction, a Permitted Bid Acquisition, an Exempt
                  Acquisition or a Pro Rata Acquisition), then, as of the date
                  that such Person becomes a Beneficial Owner of such additional
                  Voting Shares, such Person shall become an "Acquiring Person"`

          (iii)   for the period of 10 days after the Disqualification Date (as
                  hereinafter defined), any Person who becomes the Beneficial
                  Owner of 20% or more of the outstanding Voting Shares as a
                  result of such Person becoming disqualified from relying on
                  subclause 1.1(d)(v) hereof where such disqualification results
                  solely because such Person is making or has announced a
                  current intention to make a Take-over Bid, either alone or by
                  acting jointly or in concert with any other Person. For the
                  purposes of this definition, "Disqualification Date" means the
                  first date of public announcement that such Person is making
                  or has announced a current intention to make a Take-over Bid,
                  alone or by acting jointly or in concert with another Person;
                  or

          (iv)    an underwriter that becomes the Beneficial Owner of 20% or
                  more of the Voting Shares in connection with a distribution of
                  securities pursuant to an underwriting agreement with the
                  Corporation.

                                       5

<PAGE>

     (b)   "Affiliate", when used to indicate a relationship with a specified
           Person, means a Person that directly or indirectly controls, or is
           controlled by, or is under common control with, such specified
           Person,

           (c)          "Associate" means, when used to indicate a relationship
with a specified Person:

           (i)    a corporation of which that Person Beneficially Owns shares or
                  securities currently convertible into shares carrying more
                  than 10 per cent of the voting rights exercisable with respect
                  to the election of directors under all circumstances or by
                  reason of the occurrence of an event that has occurred and is
                  continuing, or a currently exercisable option or right to
                  purchase such shares or such convertible securities;

           (ii)         a partner of that Person;

           (iii)  a trust or estate in which that Person has a substantial
                  beneficial interest or in respect of which he serves as a
                  trustee or in a similar capacity provided, however, that a
                  Person shall not be an Associate of a trust by reason only of
                  the fact that such Person serves as trustee or in a similar
                  capacity in relation to such trust if such person is duly
                  licensed to carry on the business of a trust company under the
                  laws of Canada or any province thereof or if a substantial
                  portion of the ordinary business of such Person is the
                  management of investment funds for unaffiliated investors and
                  such Person acts as trustee or in a similar capacity in
                  relation to such trust in the ordinary course of such
                  business;

           (iv)   a spouse of that Person or any Person of the opposite sex with
                  whom that Person is living in a conjugal relationship outside
                  marriage or a child of that Person; and

           (v)    a relative of a Person mentioned in Clause 1.1(c)(iv) if that
                  relative has the same residence as that Person;

     (d)   A Person shall be deemed the "Beneficial Owner" of, and to have
           "Beneficial Ownership" of, and to "Beneficially Own":

           (i)    any securities of which such Person or any of such Person's
                  Affiliates or Associates is owner at law or in equity;

           (ii)   any securities which the Person or any of such Person's
                  Affiliates or Associates has the right to acquire, within 60
                  days (whether such right is exercisable immediately or after
                  the passage of not more than 60 days thereafter or upon the
                  occurrence of a contingency or the making of a payment)
                  pursuant to any Convertible Security, agreement, arrangement,
                  pledge or understanding, whether or not in writing (other than
                  (A) customary agreements with and between underwriters and/or
                  banking group and/or selling group shareholders with respect
                  to a distribution of securities and (B) pledges of securities
                  in the ordinary course of the pledgee's business); and

           (iii)  any securities that are Beneficially Owned within the meaning
                  of clauses (i) or (ii) of this Subsection 1.1(b) by any other
                  Person with which such Person is acting jointly or in concert;

                                        6

<PAGE>

           provided, however, that a Person shall not be deemed the "Beneficial
           Owner" of, or to have "Beneficial Ownership" of, or to "Beneficially
           Own", any security:

           (iv)   because such security has been deposited or tendered pursuant
                  to a Take-over Bid made by such Person or any of such Person's
                  Affiliates or Associates or any other person acting jointly or
                  in concert with such Person until the earlier of such tendered
                  security being (A) accepted unconditionally for payment or
                  exchange and (B) taken up and paid for;

           (v)    because (A) such Person or any of the Affiliates or Associates
                  of such Person or any other Person acting jointly or in
                  concert with such Person, holds such security provided that
                  the ordinary business of any such Person (the "Fund Manager")
                  includes the management of investment funds for others and
                  such security is held by the Fund Manager in the ordinary
                  course of such business in the performance of such Fund
                  Manager's duties for the account of any other Person (a
                  "Client"), (B) such Person (the "Trust Company") is licensed
                  to carry on the business of a trust company under applicable
                  laws and, as such, acts as trustee or administrator or in a
                  similar capacity in relation to the estates of deceased or
                  incompetent Persons (each an "Estate Account") or in relation
                  to other accounts (each an "Other Account") and holds such
                  security in the ordinary course of such duties for such Estate
                  Accounts or for such Other Accounts, (C) such Person (the
                  "Administrator") is the administrator or the trustee of one or
                  more pension funds or plans (a "Plan") registered under the
                  laws of Canada or any province thereof or the laws of the
                  United States of America or any state thereof, (D) such Person
                  (the "Crown Agent") is established by statute for purposes
                  that include, and the ordinary business or activity of such
                  Person includes, the management of investment funds for
                  employee benefit plans, pension plans, insurance plans, or
                  various public bodies, or (E) such Person is a Plan; provided,
                  however, that in any of the foregoing cases the Fund Manager,
                  the Trust Company, the Plan Administrator, the Crown Agent or
                  the Plan, as the case may be, is not then making or has not
                  then announced an intention to make a Take-over Bid, alone or
                  by acting jointly or in concert with any other Person, other
                  than an Offer to Acquire Voting Shares or other securities (X)
                  pursuant to a distribution by the Corporation or (Y) by means
                  of a Permitted Bid, or (Z) by means of market transactions
                  made in the ordinary course of the business of such Person
                  (including pre-arranged trades entered into the ordinary
                  course of business of such Person) executed through the
                  facilities of a stock exchange or organized over-the-counter
                  market;

           (vi)   because such Person is a Client of the same Fund Manager as
                  another Person on whose account the Fund Manager holds such
                  security, or because such Person is an Estate Account or an
                  Other Account of the same Trust Company as another Person on
                  whose account the Trust Company holds such security, or
                  because such Person is a Plan with the same Plan Administrator
                  as another Plan on whose account the Plan Administrator holds
                  such securities;

           (vii)  because such Person is a Client of a Fund Manager and such
                  security is owned at law or in equity by the Fund Manager or
                  because such Person is an Estate Account or an Other Account
                  of a Trust Company and such security is owned at law or in
                  equity by the Trust Company or such Person is a Plan and such
                  security is owned at law or in equity by the Plan
                  Administrator; or

                                        7

<PAGE>

         (viii)      because such Person is the registered holder of securities
                     as a result of carrying on the business of or acting as a
                     nominee of a securities depositary.

         For purposes of this Agreement in determining the percentage of the
         outstanding Voting Shares with respect to which a Person is or is
         deemed to be the Beneficial Owner, any unissued Voting Shares as to
         which such Person is deemed the Beneficial Owner pursuant to this
         Subsection 1.1(d) shall be deemed outstanding.

(e)      "Board of Directors" shall mean the board of directors of the
         Corporation or any duly constituted and empowered committee thereof.

(f)      "Business Day" shall mean any day, other than a Saturday or Sunday or a
         day on which banking institutions in the City of Vancouver are
         authorized or obligated by law to close.

(g)      "Canadian Dollar Equivalent" of any amount which is expressed in United
         States dollars shall mean on any day the Canadian dollar equivalent of
         such amount determined by reference to the Canadian-U.S. Exchange Rate
         in effect on such date.

(h)      "Close of Business" on any given date shall mean the time on such date
         (or, if such date is not a Business Day, the time on the next Business
         Day) at which the principal office of the transfer agent for the Common
         Shares in Vancouver, British Columbia (or after the Separation Time,
         the principal office of the Rights Agent in Vancouver, British
         Columbia) is closed to the public.

(i)      "Closing Price" per security of any securities on any date of
         determination shall mean:

         (i)   the closing board lot sale price or, if such price is not
               available, the average of the closing bid and asked prices, for
               such securities as reported by the stock exchange or national
               securities quotation system on which such securities are listed
               or admitted to trading (provided that, if at the date of
               determination such securities are listed or admitted to trading
               on more than one stock exchange or national securities quotation
               system, such price or prices shall be determined based on the
               stock exchange or quotation system on which such securities are
               then listed or admitted to trading on which the largest number of
               such securities were traded during the most recently completed
               calendar year); or

         (ii)  if for any reason none of such prices is available on such day or
               the securities are not listed or admitted to trading on a stock
               exchange or a national securities quotation system, the last sale
               price, or in case no sale takes place on such date, the average
               of the high bid and low asked prices for each of such securities
               in the over-the-counter market;

         provided, however, that (A) if for any reason none of such prices are
         available on such date, the "Closing Price" per security of such
         securities on such date shall mean the fair value per security of the
         securities on such date as determined by a nationally or
         internationally recognized investment dealer or investment banker with
         respect to the fair value per security of such securities and (B) if
         the Closing Price so determined is expressed in United States dollars,
         such amount shall be converted to the Canadian Dollar Equivalent.

                                        8

<PAGE>

(j)       "Common Shares" shall mean the common shares in the share capital of
          the Corporation as presently constituted, as such shares may be
          subdivided, consolidated, reclassified or otherwise changed from time
          to time, and "common shares" when used with reference to any Person
          other than the Corporation means the class or classes of shares (or
          similar equity interest) with the greatest per share voting power
          entitled to vote generally in the election of all directors of such
          other Person or the equity securities or other equity interest having
          power (whether or not exercised) to control or direct the management
          of such other Person or, if such other Person is a corporation
          controlled by another Person, the Person (other than an individual)
          which ultimately controls such first mentioned other Person.

(k)       "Company Act" means the Company Act (British Columbia), R.S.B.C. 1996,
          Chapter 62, as amended, and the regulations thereunder, and any
          comparable or successor laws or regulations thereto.

(l)       "Competing Permitted Bid" means a Take-over Bid that:

          (i)    is made after a Permitted Bid has been made and prior to the
                 expiry of the Permitted Bid;

                      (ii)        satisfies all components of the definition of
                 a Permitted Bid other than the requirement in Clause (ii)(A)(x)
                 thereof; and

          (iii)  contains, and the take-up and payment for securities tendered
                 or deposited is subject to, irrevocable and unqualified
                 provisions that no Voting Shares shall be taken up or paid for
                 pursuant to the Takeover Bid prior to the Close of Business on
                 a date that is no earlier than the later of: (i) 21 days after
                 the date of the Take-over Bid, and (ii) the 60/th/ day after
                 the earliest date on which any other Permitted Bid that is then
                 in existence was made.

(m)       "controlled" a body corporate is "controlled" by another Person if and
          only if:

          (i)    securities entitled to vote in the election of directors
                 carrying more than 50% of the votes for the election of
                 directors are held, directly or indirectly, by or for the
                 benefit of the other Person; and

          (ii)   the votes carried by such securities are entitled, if
                 exercised, to elect a majority of the Board of Directors of
                 such body corporate;

          and "controls", "controlling" and "under common control"; shall be
          interpreted accordingly.

(n)       "Convertible Security" means, with respect to any security, a security
          convertible into or exchangeable for the first-mentioned security.

(o)       "Co-Rights Agents" shall have the meaning ascribed thereto in
          Subsection 4.1(a).

(p)       "Disposition Date" has the meaning ascribed thereto in Subsection
          5.1(b).

(q)       "Disqualification Date" has the meaning ascribed thereto in Clause 1.1
          (a)(iii) hereof.

(r)       "Effective Date" shall mean the later of the Close of Business on: (i)
          May 28, 2001 and (ii) the date of the Corporation being advised by
          counsel that all appropriate regulatory approvals have been obtained
          by the Corporation.

(s)       "Election to Exercise" has the meaning ascribed thereto in Subsection
          2.2(d).

                                        9

<PAGE>

(t)     "Exempt Acquisition" means an acquisition of Voting Shares: (i) a share
        acquisition in respect of which the Board of Directors has waived the
        application of Section 3.1 pursuant to Subsection 5.1(b), 5.1(d) or
        5.1(e); (ii) which was made on or prior to the date of this Agreement;
        and (iii) by way of private placement or other distribution exempt from
        the prospectus requirements of applicable law and which was approved by
        the Board of Directors.

(u)     "Exercise Price" shall mean, as of any date, the price at which a holder
        of a Right may purchase the securities issuable upon exercise of one
        whole Right and, until adjustment thereof in accordance with the terms
        hereof, the Exercise Price shall be $30.00.

(v)     "Expansion Factor" has the meaning ascribed thereto in subclause
        2.3(b)(iv)(A)(1).

(w)     "Expiration Time" shall mean the earlier of (i) the Termination Time;
        and (ii) the Close of Business on the date on which the first annual
        meeting of shareholders of the Corporation following the third
        anniversary of the date of this Agreement is held; provided, however,
        that if the resolution referred to in Section 5.15 is approved by the
        Independent Shareholders in accordance with Section 5.15 at or prior to
        such annual meeting, "Expiration Time" means the earlier of (i) the
        Termination Time; and (ii) the Close of Business on the sixth
        anniversary of the date of this Agreement.

(x)     "Fiduciary" shall mean a trust company registered under the trust
        company legislation of Canada or any province thereof, a trust company
        organized under the laws of any state of the United States, a portfolio
        manager registered under the securities legislation of one or more
        provinces of Canada or an investment adviser registered under the United
        States Investment Advisers Act of 1940 or any other securities
        legislation of the United States or any state, of the United States.

(y)     "Flip-in Event" shall mean a transaction or event in or pursuant to
        which any Person becomes an Acquiring Person.

(z)     "holder" shall have the meaning ascribed thereto in Section 2.8.

(aa)    "Independent Shareholders" shall mean holders of outstanding Voting
        Shares, other than Voting Shares Beneficially Owned by (i) any Acquiring
        Person; (ii) any Offeror other than a Person who at the relevant time is
        deemed not to Beneficially Own such Voting Shares by reason of Clause
        1.1(d)(v) hereof; (iii) any Person acting jointly or in concert with
        such Acquiring Person or Offeror referred to in (ii); (iv) any Associate
        or Affiliate of such Acquiring Person or Offeror referred to in (ii);
        and (v) any employee benefit plan, deferred profit sharing plan and any
        similar plan or trust for the benefit of employees of the Corporation
        unless the beneficiaries of the plan or trust direct the manner in which
        the Voting Shares are to be voted or withheld from voting or direct
        whether the Voting Shares are to be tendered to a Take-over Bid.

(ab)    "Market Price" per security of any securities on any date of
        determination shall mean the average of the daily Closing Prices per
        security of such securities on each of the 20 consecutive Trading Days
        through and including the Trading Day immediately preceding such date of
        determination; provided, however, that if an event of a type analogous
        to any of the events described in Section 2.3 hereof shall have caused
        any Closing Price used to determine the Market Price on any Trading Day
        not to be fully comparable with the Closing Price on the Trading Day
        immediately preceding such date of determination, each such

                                       10

<PAGE>

              Closing Price so used shall be appropriately adjusted in a manner
              analogous to the applicable adjustment provided for in Section 2.3
              hereof in order to make it fully comparable with the Closing Price
              on the Trading Day immediately preceding such date of
              determination.

       (ac)   "Nominee" has the meaning ascribed thereto in Subsection 2.2(c).

       (ad)   "Offer to Acquire" shall include:

              (i)    an offer to purchase or a solicitation of an offer to sell
                     Voting Shares, or a public announcement of an intention to
                     make such an offer or solicitation; and

              (ii)   an acceptance of an offer to sell Voting Shares, whether or
                     not such offer to sell has been solicited;

              or any combination thereof, and the Person accepting an offer to
              sell shall be deemed to be making an Offer to Acquire to the
              Person that made the offer to sell.

       (ae)   "Offerer" shall mean a Person who has announced a current
              intention to make, or who is making, a Take-over Bid.

       (af)   "Offerer's Securities" shall mean the Voting Shares Beneficially
              Owned on the date of a Take-over Bid by an Offerer.

       (ag)   "Permitted Bid" means a Take-over Bid made by way of a Take-over
              Bid circular which also complies with the following additional
              provisions:

              (i)    the Take-over Bid is made to all holders of record of
                     Voting Shares wherever resident as registered on the books
                     of the Corporation, other than the Offerer;

              (ii)   the Take-over Bid contains, and the take-up and payment for
                     securities tendered or deposited thereunder is subject to
                     irrevocable and unqualified conditions that:

                  (A)     no Voting Shares shall be taken up or paid for
                          pursuant to the Take-over Bid (x) prior to the Close
                          of Business on a date which is not less than 60 days
                          following the date of the Take-over Bid and (y)
                          unless, at the Close of Business on that date, the
                          Voting Shares deposited or tendered pursuant to the
                          Take-over Bid and not withdrawn constitute more than
                          50% of the Voting Shares outstanding which are held by
                          Independent Shareholders;

                  (B)     unless the Take-over Bid is withdrawn, Voting Shares
                          may be deposited pursuant to such Take-over Bid at any
                          time prior to the Close of Business on the date of the
                          first take-up of or payment for Voting Shares;

                  (C)     any Voting Shares deposited pursuant to the Take-over
                          Bid may be withdrawn until taken up and paid for; and

                  (D)     in the event that the requirement set forth in
                          subclause (A)(y) of this clause 1.1(ag)(ii) is
                          satisfied, the Offeror will make a public announcement
                          of that fact and the Take-over Bid will remain open
                          for deposits and tenders of Voting Shares for not less
                          than 10 Business Days from the date of such public
                          announcement.

<PAGE>

              For purposes of this Agreement, (A) should a Take-over Bid which
              qualified as a Permitted Bid when made cease to be a Permitted Bid
              because it ceases to meet any or all of the requirements mentioned
              above prior to the time it expires (after giving effect to any
              extension) or is withdrawn, any acquisition of Voting Shares made
              pursuant to such Take-over Bid shall not be a Permitted Bid
              Acquisition and (B) the term "Permitted Bid" shall include a
              Competing Permitted Bid.

       (ah)   "Permitted Bid Acquisition" means an acquisition of Voting Shares
              made pursuant to a Permitted Bid or a Competing Permitted Bid.

       (ai)   "Person" includes any individual, firm, partnership, association,
              trust, trustee, executor, administrator, legal personal
              representative, government, governmental body or authority,
              corporation, or other incorporated or unincorporated organization,
              syndicate or other entity.

       (aj)   "Pro Rata Acquisition" means an acquisition by a Person of Voting
              Shares pursuant to (i) any dividend reinvestment plan or share
              purchase plan of the Corporation made available to all holders of
              Voting Shares (other than holders resident in any jurisdiction
              where participation in any such plan is restricted or impractical
              as a result of applicable law), (ii) a stock dividend, a stock
              split or other event pursuant to which such Person becomes the
              Beneficial Owner of Voting Shares on the same pro rata basis as
              all other holders of Voting Shares of the same class or series,
              (iii) the acquisition or exercise of rights to purchase Voting
              Shares distributed to all holders of Voting Shares (other than
              holders resident in any jurisdiction where such distribution is
              restricted or impractical as a result of applicable law) by the
              Corporation pursuant to a rights offering (but only if such rights
              are acquired directly from the Corporation) or (iv) a distribution
              of Voting Shares or Convertible Securities in respect thereof
              offered pursuant to a prospectus or by way of a private placement
              or a conversion or exchange of any such Convertible Security,
              provided such Person does not thereby acquire a greater percentage
              of Voting Shares or Convertible Securities so offered than the
              Person's percentage of Voting Shares Beneficially Owned
              immediately prior to such acquisition.

       (ak)   "Record Time" means the Close of Business on the Effective Date.

       (al)   "Redemption Price" shall have the meaning attributed thereto in
              Subsection 5.1(a).

       (am)   "Regular Periodic Cash Dividend" means cash dividends paid on the
              Common Shares at regular intervals in any fiscal year of the
              Corporation to the extent that such cash dividends do not exceed
              in the aggregate in any fiscal year, on a per share basis, the
              greatest of:

              (i)    200% of the aggregate amount of cash dividends declared
                     payable by the Corporation on its Common Shares in its
                     immediately preceding fiscal year divided by the number of
                     Common Shares outstanding as at the end of such fiscal
                     year;

              (ii)   300% of the arithmetic mean of the aggregate amounts of
                     cash dividends declared payable by the Corporation on its
                     Common Shares in its three immediately preceding fiscal
                     years divided by the arithmetic mean of the number of
                     Common Shares outstanding as at the end of each of such
                     fiscal years; and

              (iii)  100% of the aggregate consolidated net income of the
                     Corporation, before extraordinary items, for its
                     immediately preceding fiscal year divided by the number of
                     Common Shares outstanding as at the end of such fiscal
                     year.

<PAGE>

       (an)   "Right" shall mean the herein described rights to purchase
              securities pursuant to the terms and subject to the conditions set
              forth herein.

       (ao)   "Rights Certificate" shall mean the certificates representing the
              Rights after the Separation Time which shall be substantially in
              the form attached hereto as Exhibit A.

       (ap)   "Rights Register" and "Rights Registrar" shall have the respective
              meanings ascribed thereto in Subsection 2.6(a).

       (aq)   "Securities Act (British Columbia)" shall mean the Securities Act
              (British Columbia), R.S.B.C 1996, c.418, as amended and the
              regulations and rules made thereunder, as now in effect or as the
              same may from time to time be amended, re-enacted or replaced.

       (ar)   "Separation Time" means the Close of Business on the eighth
              Business Day after the earlier of:

              (i)    the Stock Acquisition Date; and
              (ii)   the date of the commencement of, or first public
                     announcement or disclosure of the intent of any Person
                     (other than the Corporation or any corporation controlled
                     by the Corporation) to commence, a Take-over Bid (other
                     than a Permitted Bid, so long as such Take-over Bid
                     continues to satisfy the requirements of a Permitted Bid)
                     or such later Business Day as may be determined at any time
                     or from time to time by the Board of Directors;

              provided, however, that if any such Take-over Bid expires, is
              cancelled, is terminated or is otherwise withdrawn prior to the
              Separation Time, such Take-over Bid shall be deemed, for purposes
              of this Subsection 1.1(ar) never to have been made, and, provided
              further, that if the Board of Directors determines, pursuant to
              Section 5.1, to waive the application of Section 3.1 to a Flip-In
              Event, the Separation Time in respect of such Flip-In Event shall
              be deemed never to have occurred.

       (as)   "Stock Acquisition Date" shall mean the first date of public
              announcement or disclosure by the Corporation or an Acquiring
              Person of facts indicating that a Person has become an Acquiring
              Person (which, for the purposes of this definition, shall include,
              without limitation, a report filed pursuant to Section 141 of the
              Securities Act (Alberta), Section 101 of the Securities Act
              (British Columbia) or Section 13(d) of the U.S. Exchange Act
              disclosing such information).

       (at)   "Take-over Bid" means an Offer to Acquire Voting Shares of any
              class, or Convertible Securities with respect thereto, where the
              Voting Shares subject to the Offer to Acquire, together with the
              Voting Shares into or for which the securities subject to the
              Offer to Acquire are convertible or exchangeable and the Offerer's
              Securities constitute in the aggregate 20% or more of the
              outstanding Voting Shares at the date of the Offer to Acquire.

       (au)   "Termination Time" means the time at which the right to exercise
              Rights shall terminate pursuant to Section 5.1 hereof.

       (av)   "Trading Day" when used with respect to any securities, means the
              day on which the principal Canadian or United States securities
              exchange (as determined by the Board of Directors) on which such
              securities are listed or admitted to trading is open for the
              transaction

<PAGE>

              of business or, if the securities are not listed or admitted to
              trading on any Canadian or United States securities exchange, a
              Business Day.

       (aw)   "U.S. - Canadian Exchange Rate" on any date shall mean:

              (i)    if on such date the Bank of Canada sets an average noon
                     spot rate of exchange for the conversion of one United
                     States dollar into Canadian dollars, such rate; and

              (ii)   in any other case, the rate for such date for the
                     conversion of one United States dollar into Canadian
                     dollars which is calculated in the manner which shall be
                     determined by the Board of Directors from time to time
                     acting in good faith;

       (ax)   "U.S. Exchange Act" means the United States Securities Exchange
              Act of 1934, as amended, and the rules and regulations thereunder
              as from time to time in effect.

       (ay)   "Voting Share Reduction" means an acquisition or redemption by the
              Corporation of Voting Shares which, by reducing the number of
              Voting Shares outstanding, increases the percentage of Voting
              Shares Beneficially Owned by any Person to 20% or more of the
              Voting Shares then outstanding.

       (az)   "Voting Shares" shall mean the Common Shares and any other
              securities the holders of which are entitled to vote generally on
              the election of directors of the Corporation, and "voting shares",
              when used with reference to any Person other than the Corporation,
              means common shares of such other Person and any other securities
              the holders of which are entitled to vote generally in the
              election of the directors of such other Person.

1.2       Currency

All sums of money which are referred to in this Agreement are expressed in
lawful money of Canada, unless otherwise specified.

1.3       Number and Gender

Wherever the context will require, terms (including defined terms) used herein
importing the singular number only include the plural and vice versa and words
importing anyone gender shall include all others.

1.4       Sections and Headings

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

1.5       Statutory References

Unless the context otherwise requires, any reference to a specific Section,
Subsection, Clause or Rule of any statute or regulation shall be deemed to refer
to the same as it may be amended, re-enacted or

<PAGE>

replaced or, if repealed and there shall be no replacement therefor, to the same
as it is in effect on the date of this Agreement.

1.6     Determination of Percentage Ownership

The percentage of Voting Shares Beneficially Owned by any Person, shall, for the
purposes of this Agreement, be and be deemed to be the product determined by the
formula:

                     A
              100 x
                     B

              where:

              A =  the aggregate number of votes for the election of all
                   directors generally attaching to the Voting Shares
                   Beneficially Owned by such Person; and

              B =  the aggregate number of votes for the election of all
                   directors generally attaching to all outstanding Voting
                   Shares.

              Where any person is deemed to Beneficially Own unissued Voting
              Shares pursuant to Subsection 1.1(d), such Voting Shares shall be
              deemed to be outstanding for the purpose of both A and B in the
              formula above.

<PAGE>

1.7  Acting Jointly or in Concert

For the purposes of this Agreement, a Person is acting jointly or in concert
with every Person who is a party to an agreement, commitment or understanding,
whether formal or informal, with the first Person for the purpose of acquiring
or offering to acquire Voting Shares or Convertible Securities in respect
thereof (other than customary agreements with and between underwriters and
banking group or selling group shareholders with respect to a distribution of
securities; or pursuant to a pledge of securities in the ordinary course of the
pledgee's business).

1.8  Generally Accepted Accounting Principles

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

   ARTICLE 2

                                   THE RIGHTS

2.1  Legend on Common Share Certificates

     (a)      Certificates representing the Common Shares, including without
              limitation Common Shares issued upon the conversion of Convertible
              Securities, issued after the Record Time but prior to the Close of
              Business on the earlier of the Separation Time and the Expiration
              Time, shall also evidence one Right for each Common Share
              represented thereby and shall have impressed on, printed on,
              written on or otherwise affixed to them the following legend:

              "Until the Separation Time (as defined in the Rights Agreement
              referred to below), this certificate also evidences and entitles
              the holder hereof to certain Rights as set forth in a Shareholder
              Rights Plan Agreement, dated as of April 19, 2001 (the "Rights
              Agreement"), between the Corporation and Computershare Trust
              Company of Canada, as Rights Agent, the terms of which are hereby
              incorporated herein by reference and a copy of which is on file at
              the registered office of the Corporation. Under certain
              circumstances, as set forth in the Rights Agreement, such Rights
              may be amended or redeemed, may expire, may become void (if, in
              certain cases, they are "Beneficially Owned" by an "Acquiring
              Person", as such terms are defined in the Rights Agreement, or a
              transferee thereof) or may be evidenced by separate certificates
              and may no longer be evidenced by this certificate. The
              Corporation will mail or arrange for the mailing of a copy of the
              Rights Agreement to the holder of this certificate without charge
              as soon as practicable after the receipt of a written request
              therefor."

     (b)      Certificates representing Common Shares that are issued and
              outstanding at the Record Time shall evidence one Right for each
              Common Share evidenced thereby, notwithstanding the

                                       16

<PAGE>

              absence of the foregoing legend, until the earlier of the
              Separation Time and the Expiration Time.

2.2    Initial Exercise Price; Exercise of Rights; Detachment of Rights

       (a)    Subject to adjustment as herein set forth, including without
              limitation as set forth in Article 3, each Right will entitle the
              holder thereof, from and after the Separation Time and prior to
              the Expiration Time, to purchase one Common Share for the Exercise
              Price as at the Business Day immediately preceding Separation Time
              (which Exercise Price and number of Common Shares are subject to
              adjustment as set forth below). Notwithstanding any other
              provision of this Agreement, any Rights held by the Corporation or
              any of its Subsidiaries shall be void.

       (b)    Until the Separation Time, (i) the Rights shall not be exercisable
              and no Right may be exercised; and (ii) for administrative
              purposes, each Right will be evidenced by the certificate for the
              associated Common Share registered in the name of the holder
              thereof (which certificate shall be deemed to represent a Rights
              Certificate) and will be transferable only together with, and will
              be transferred by a transfer of, such associated Common Share.

       (c)    From and after the Separation Time and prior to the Expiration
              Time, the Rights may be exercised, and the registration and
              transfer of the Rights shall be separate from and independent of
              Common Shares. Promptly following the Separation Time, the
              Corporation will prepare or cause to be prepared and the Rights
              Agent will mail to each holder of record of Common Shares as of
              the Separation Time and, in respect of each Convertible Security
              converted into Common Shares after the Separation Time and prior
              to the Expiration Time, promptly after such conversion, the
              Corporation will prepare or cause to be prepared and the Rights
              Agent will mail to the holder so converting (other than an
              Acquiring Person and in respect of any Rights Beneficially Owned
              by such Acquiring Person which are not held of record by such
              Acquiring Person, the holder of record of such rights (a
              "Nominee")) at such holder's address as shown by the records of
              the Corporation (the Corporation hereby agreeing to furnish copies
              of such record to the Rights Agent for this purpose):

              (i)    a Rights Certificate in substantially the form of Exhibit A
                     hereto appropriately completed, representing the number of
                     Rights held by such holder at the Separation Time and
                     having such marks of identification or designation and such
                     legends, summaries or endorsements printed thereon as the
                     Corporation may deem appropriate and as are not
                     inconsistent with the provisions of this Agreement, or as
                     may be required to comply with any law, rule or regulation
                     or judicial or administrative order, or with any article or
                     regulation of any stock exchange or quotation system on
                     which the Rights may from time to time be listed or traded,
                     or to conform to usage; and

              (ii)   a disclosure statement prepared by the Corporation
                     describing the Rights,

              provided that a Nominee shall be sent the materials provided for
              in (i) and (ii) only in respect of all Common Shares held of
              record by it which are not Beneficially Owned by an Acquiring
              Person and the Corporation may require any Nominee or suspected
              Nominee to provide such information and documentation as the
              Corporation may reasonably require for such purpose.

                                       17

<PAGE>

              (d)    Rights may be exercised in whole or in part on any Business
                     Day after the Separation Time and prior to the Expiration
                     Time by submitting to the Rights Agent, at its principal
                     office in Vancouver, Calgary, Toronto, or Montreal:

                     (i)    the Rights Certificate evidencing such Rights;

                     (ii)   an election to exercise (an "Election to Exercise")
                            substantially in the form attached to the Rights
                            Certificate duly completed, and executed in a manner
                            acceptable to the Rights Agent; and

                     (iii)  payment in cash, or by certified check, banker's
                            draft or money order payable to the order of the
                            Corporation, of a sum equal to the Exercise Price
                            multiplied by the number of Rights being exercised
                            and a sum sufficient to cover any transfer tax or
                            charge which may be payable in respect of any
                            transfer involved in the transfer or delivery of
                            Rights Certificates or the issuance or delivery of
                            certificates for Common Shares in a name other than
                            that of the holder of the Rights being exercised.

              (e)    Upon receipt of a Rights Certificate, which is accompanied
                     by an appropriately completed and duly executed Election to
                     Exercise (which does not indicate that such Right is null
                     and void as provided by Subsection 3.1(b) and payment as
                     set forth in Subsection 2.2(d), the Rights Agent (unless
                     otherwise instructed by the Corporation) will thereupon
                     promptly:

                     (i)    requisition from the transfer agent of the Common
                            Shares certificates representing the number of
                            Common Shares to be purchased (the Corporation
                            hereby irrevocably authorizing its transfer agent to
                            comply with all such requisitions);

                     (ii)   after receipt of such Common Share certificates,
                            deliver such certificates to, or to the order of,
                            the registered holder of such Rights Certificate,
                            registered in such name or names as may be
                            designated by such holder;

                     (iii)  when appropriate, requisition from the Corporation
                            the amount of cash, if any, to be paid in lieu of
                            issuing fractional Common Shares;

                     (iv)   when appropriate, after receipt of such cash,
                            deliver such cash to, or to the order of, the
                            registered holder of the Rights Certificate; and

                     (v)    tender to the Corporation all payments received on
                            exercise of the Rights.

              (f)    If the holder of any Rights shall exercise less than all
                     the Rights evidenced by such holder's Rights Certificate, a
                     new Rights Certificate evidencing the Rights remaining
                     unexercised will be issued by the Rights Agent to such
                     holder or to such holder's duly authorized assigns.

              (g)    The Corporation shall:

                                       18

<PAGE>

              (i)    take all such action as may be necessary and within its
                     power to ensure, that all Common Shares delivered upon the
                     exercise of Rights shall, at the time of delivery of the
                     certificates for such Common Shares (subject to payment of
                     the Exercise Price), be duly and validly authorized,
                     executed, issued and delivered as fully paid and
                     non-assessable;

              (ii)   take all such action as may reasonably be considered to be
                     necessary and within its power to comply with any
                     applicable requirements of the Company Act, the Securities
                     Act (British Columbia), the U.S. Exchange Act, the United
                     States Securities Act of 1933, as amended, and comparable
                     legislation of each of the provinces and territories of
                     Canada and states of the United States of America, or the
                     rules and regulations thereunder or any other applicable
                     law, rule or regulation, in connection with the issuance
                     and delivery of the Rights, the Rights Certificates and the
                     issuance of any Common Shares upon exercise of the Rights;

              (iii)  use reasonable efforts to cause all Common Shares issued
                     upon exercise of the Rights to be listed on the stock
                     exchanges on which the Common Shares are listed at that
                     time;

              (iv)   cause to be reserved and kept available out of its
                     authorized and unissued Common Shares, the number of Common
                     Shares that, as provided in this Agreement, will from time
                     to time be sufficient to permit the exercise in full of all
                     outstanding Rights;

              (v)    pay when due and payable, if applicable, any and all
                     federal, provincial, state and municipal taxes (not in the
                     nature of income, capital gains or withholding taxes) and
                     charges which may be payable in respect of the original
                     issuance or delivery of the Rights Certificates or
                     certificates for Common Shares issued upon the exercise of
                     Rights, provided that the Corporation shall not be required
                     to pay any transfer tax or charge which may be payable in
                     respect of any transfer of Rights or the issuance or
                     delivery of certificates for Common Shares issued upon the
                     exercise of Rights, in a name other than that of the holder
                     of the Rights being transferred or exercised; and

              (vi)   after the Separation Time, except as permitted by Section
                     5.1 or Section 5.4 hereof, not take (or permit any
                     corporation it controls to take) any action if at the time
                     such action is taken it is reasonably foreseeable that such
                     action will diminish substantially or otherwise eliminate
                     the benefits intended to be afforded by the Rights.

2.3    Adjustments to Exercise Price; Number of Rights

       (a)    The Exercise Price, the number and kind of securities subject to
              purchase upon exercise of each Right and the number of Rights
              outstanding are subject to adjustment from time to time as
              provided in this Section 2.3 and in Article 3.

       (b)    In the event that the Corporation shall at any time after the
              Record Time and prior to the Expiration Time:

                                       19

<PAGE>

              (i)    declare or pay a dividend on the Common Shares payable in
                     Voting Shares or Convertible Securities in respect thereof
                     other than pursuant to any dividend reinvestment plan;

              (ii)   subdivide or change the then outstanding Common Shares into
                     a greater number of Common Shares;

              (iii)  consolidate or change the then outstanding Common Shares
                     into a smaller number of Common Shares; or

              (iv)   issue any Voting Shares (or Convertible Securities in
                     respect thereof) in respect of, in lieu of or in exchange
                     for existing Common Shares, whether in a reclassification,
                     amalgamation, statutory arrangement, consolidation or
                     otherwise;

              the Exercise Price and the number of Rights outstanding (or, if
              the payment or effective date therefor shall occur after the
              Separation Time, the securities purchasable upon the exercise of
              Rights) shall be adjusted as follows:
                     (A)    If the Exercise Price and number of Rights
                            outstanding are to be adjusted:

                            1)     the Exercise Price in effect after such
                                   adjustment will be equal to the Exercise
                                   Price in effect immediately prior to such
                                   adjustment divided by the number of Common
                                   Shares (or other securities of the
                                   Corporation) (the "Expansion Factor") that a
                                   holder of one Common Share immediately prior
                                   to such dividend, subdivision, change,
                                   combination or issuance would hold thereafter
                                   as a result thereof; and

                            2)     each Right held prior to such adjustment will
                                   become that number of Rights equal to the
                                   Expansion Factor, and the adjusted number of
                                   Rights will be deemed to be allocated among
                                   the Common Shares with respect to which the
                                   original Rights were associated (if they
                                   remain outstanding) and the securities of the
                                   Corporation issued in respect of such
                                   dividend, subdivision, change, consolidation
                                   or issuance, so that each such Common Share
                                   (or other security of the Corporation) will
                                   have exactly one Right associated with it.

                     (B)    If the securities purchasable upon exercise of
                            Rights are to be adjusted, the securities
                            purchasable upon exercise of each Right after such
                            adjustment will be the securities that a holder of
                            the securities purchasable upon exercise of one
                            Right immediately prior to such dividend,
                            subdivision, change, consolidation or issuance would
                            hold thereafter as a result thereof.

       (c)    Adjustments pursuant to Subsection 2.3(b) shall be made
              successively, whenever an event referred to in Subsection 2.3(b)
              occurs.

       (d)    If an event occurs which would require an adjustment under both
              this Section 2.3 and Section 3.1 hereof, the adjustment provided
              for in this Section 2.3 shall be in addition to, and shall be made
              prior to, any adjustment required pursuant to Section 3.1
              hereof.

                                       20

<PAGE>

               (e)  In the event the Corporation shall at any time after the
                    Record Time and prior to the Separation Time issue any
                    Common Shares otherwise than in a transaction referred to in
                    Subsection 2.3(b), each such Common Share so issued shall
                    automatically have one new Right associated with it, which
                    Right shall be evidenced by the certificate representing
                    such Common Share.

               (f)  In the event the Corporation shall, at any time after the
                    Record Time and prior to the Expiration Time, fix a record
                    date for the making of a distribution to all holders of
                    Common Shares of rights or warrants entitling them (for a
                    period expiring within 45 calendar days after such record
                    date) to subscribe for or purchase Common Shares (or
                    Convertible Securities in respect of Common Shares) at a
                    price per Common Share (or, in the case of such a
                    Convertible Security, having a conversion, exchange or
                    exercise price per share (including the price required to be
                    paid to purchase such Convertible Security)) that is 1ess
                    than 90% of the Market Price per Common Share on such record
                    date, the Exercise Price in effect after such record date
                    will equal the Exercise Price in effect immediately prior to
                    such record date multiplied by a fraction;

                    (i)    of which the numerator shall be the number of Common
                           Shares outstanding on such record date plus the
                           number of Common Shares which the aggregate offering
                           price of the total number of Common Shares so to be
                           offered (and/or the aggregate initial conversion,
                           exchange or exercise price of the Convertible
                           Securities so to be offered (including the price
                           required to be paid to purchase such Convertible
                           Securities)) would purchase at such Market Price per
                           Common Share; and

                    (ii)   of which the denominator shall be the number of
                           Common Shares outstanding on such record date plus
                           the number of additional Common Shares to be offered
                           for subscription or purchase (or into which the
                           Convertible Securities so to be offered are initially
                           convertible, exchangeable or exercisable).

               In case such subscription price is satisfied, in whole or in
               part, by consideration other than cash, the value of such
               consideration shall be as determined in good faith by the Board
               of Directors. Such adjustment shall be made successively whenever
               such a record date is fixed. To the extent that such rights or
               warrants are not exercised prior to the expiration thereof, the
               Exercise Price shall be readjusted in the manner contemplated
               above based on the number of Common Shares (or securities
               convertible into or exchangeable for Common Shares) actually
               issued on the exercise of such rights or warrants.

               For purposes of this Agreement, the granting of the right to
               purchase Common Shares (whether from treasury or otherwise)
               pursuant to any dividend or interest reinvestment plan or any
               share purchase plan providing for the reinvestment of dividends
               or interest payable on securities of the Corporation or the
               investment of periodic optional payments or employee benefit or
               similar plans (so long as such right to purchase is in no case
               evidenced by the delivery of rights or warrants by the
               Corporation) shall not be deemed to constitute an issue of rights
               or warrants by the Corporation; provided, however, that in the
               case of any dividend or interest reinvestment or share purchase
               plan, the right to purchase Common Shares is at a price per share
               of not less than 90% of the current market price per share
               (determined as provided in such plans) of the Common Shares.

                                       21

<PAGE>

               (g)  In the event the Corporation shall at any time after the
                    Record Time and prior to the Expiration Time fix a record
                    date for the making of a distribution to all holders of
                    Common Shares of (i) evidences of indebtedness or assets
                    (other than a Regular Periodic Cash Dividend or a dividend
                    paid in Common Shares, but including any dividend payable in
                    securities other than Common Shares), (ii) rights or
                    warrants entitling them to subscribe for or purchase Voting
                    Shares (or Convertible Securities in respect of Voting
                    Shares), at a price per Voting Share (or, in the case of a
                    Convertible Security in respect of Voting Shares, having a
                    conversion, exchange or exercise price per share (including
                    the price required to be paid to purchase such Convertible
                    Security)) less than 90% of the Market Price per Common
                    Share on such record date (excluding rights or warrants
                    referred to in Subsection 2.3(f)) or (iii) other securities
                    of the Corporation, the Exercise Price in effect after such
                    record date shall be equal to the Exercise Price in effect
                    immediately prior to such record date less the fair market
                    value (as determined in good faith by the Board of
                    Directors) of the portion of the assets, evidences of
                    indebtedness, rights or warrants or other securities so to
                    be distributed applicable to each of the securities
                    purchasable upon exercise of one Right. Such adjustment
                    shall be made successively whenever such a record date is
                    fixed.

               (h)  Each adjustment made pursuant to Section 2.3 shall be made
                    as of:

                    (i)  the payment or effective date for the applicable
                         dividend, subdivision, change, combination or issuance,
                         in the case of an adjustment made pursuant to
                         Subsection 2.3(b) above; and

                    (ii) the record date for the applicable dividend or
                         distribution, in the case of an adjustment made
                         pursuant to Subsections 2.3(f) or 2.3(g) above, subject
                         to readjustment to reverse the same if such
                         distribution shall not be made.

               (i)  In the event the Corporation shall at any time after the
                    Record Time and prior to the Expiration Time issue any
                    shares (other than Common Shares), or rights or warrants to
                    subscribe for or purchase any such shares, or Convertible
                    Securities in respect of any such shares, in a transaction
                    referred to in any of subclauses 2.3(b)(i) to (iv) above, if
                    the Board of Directors acting in good faith determines that
                    the adjustments contemplated by Subsections 2.3(b), 2.3(f)
                    and 2.3(g) above in connection with such transaction will
                    not appropriately protect the interests of the holders of
                    Rights, the Board of Directors may from time to time, but
                    subject to obtaining the prior approval of the holders of
                    the Rights obtained as set forth in Subsection 5.4(b),
                    determine what other adjustments to the Exercise Price,
                    number of Rights or securities purchasable upon exercise of
                    Rights would be appropriate and, notwithstanding Subsections
                    2.3(b), 2.3(f) and 2.3(g) above, such adjustments, rather
                    than the adjustments contemplated by Subsections 2.3(b),
                    2.3(f) and 2.3(g) above, shall be made upon the Board of
                    Directors providing written certification thereof to the
                    Rights Agent pursuant to Subsection 2.3(q).

               (j)  Notwithstanding anything herein to the contrary, no
                    adjustment of the Exercise Price shall be required unless
                    such adjustment would require an increase or decrease of at
                    least 1% in such Exercise Price; provided, however, that any
                    adjustments which by reason of this Subsection 2.3(j) are
                    not required to be made shall be carried forward and taken
                    into account in any subsequent adjustment. All adjustments
                    to the Exercise Price made pursuant to this Section 2.3
                    shall be calculated to the nearest cent.

               (k)  All Rights originally issued by the Corporation subsequent
                    to any adjustment made to an Exercise Price hereunder shall
                    evidence the right to purchase, at the adjusted Exercise
                    Price,

                                       22

<PAGE>

               the number of Common Shares purchasable from time to time
               hereunder upon exercise of the Rights, all subject to further
               adjustment as provided herein.

      (l)      Unless the Corporation shall have exercised its election, as
               provided in Subsection 2.3(m), upon each adjustment of an
               Exercise Price as a result of the calculations made in
               Subsections 2.3(f) and 2.3(g), each Right outstanding immediately
               prior to the making of such adjustment shall thereafter evidence
               the right to purchase, at the adjusted Exercise Price, that
               number of Common Shares obtained by:

               (i)   multiplying (A) the number of Common Shares covered by a
                     Right immediately prior to such adjustment, by (B) the
                     Exercise Price in effect immediately prior to such
                     adjustment; and

               (ii)  dividing the product so obtained by the Exercise Price in
                     effect immediately after such adjustment.

      (m)      The Corporation may elect on or after the date of any adjustment
               of an Exercise Price to adjust the number of Rights, in lieu of
               any adjustment in the number of Common Shares purchasable upon
               the exercise of a Right. Each of the Rights outstanding after the
               adjustment in the number of Rights shall be exercisable for the
               number of Common Shares for which a Right was exercisable
               immediately prior to such adjustment. Each Right held of record
               prior to such adjustment of the number of Rights shall become the
               number of Rights obtained by dividing the relevant Exercise Price
               in effect immediately prior to adjustment of the relevant
               Exercise Price by the relevant Exercise Price in effect
               immediately after adjustment of the relevant Exercise Price. The
               Corporation shall make a public announcement of its election to
               adjust the number of Rights, indicating the record date for the
               adjustment, and, if known at the time, the amount of the
               adjustment to be made. This record date may be the date on which
               the relevant Exercise Price is adjusted or any day thereafter,
               but, if the Rights Certificates have been issued, shall be at
               least 10 calendar days later than the date of the public
               announcement. If Rights Certificates have been issued, upon each
               adjustment of the number of Rights pursuant to this Subsection
               2.3(m), the Corporation shall, as promptly as practicable, cause
               to be distributed to holders of record of Rights Certificates on
               such record date, Rights Certificates evidencing, subject to
               Section 5.5, the additional Rights to which such holders shall be
               entitled as a result of such adjustment, or, at the option of the
               Corporation, shall cause to be distributed to such holders of
               record in substitution and replacement for the Rights
               Certificates held by such holders prior to the date of
               adjustment, and upon surrender thereof, if required by the
               Corporation, new Rights Certificates evidencing all the Rights to
               which such holders shall be entitled after such adjustment.
               Rights Certificates so to be distributed shall be issued,
               executed and countersigned in the manner provided for herein and
               may bear, at the option of the Corporation, the relevant adjusted
               Exercise Price and shall be registered in the names of holders of
               record of Rights Certificates on the record date specified in the
               public announcement.

      (n)      In any case in which this Section 2.3 shall require that an
               adjustment in an Exercise Price be made effective as of a record
               date for a specified event, the Corporation may elect to defer
               until the occurrence of such event the issuance to the holder of
               any Right exercised after such record date of the number of
               Common Shares and other securities of the Corporation, if any,
               issuable upon such exercise over and above the number of Common
               Shares and other securities of the Corporation, if any, issuable
               upon such exercise on the basis of the relevant Exercise Price in
               effect prior to such adjustment; provided, however, that the
               Corporation shall deliver to such holder an appropriate
               instrument evidencing such holder's right to

                                       23

<PAGE>

               receive such additional Common Shares (fractional or otherwise)
               or other securities upon the occurrence of the event requiring
               such adjustment.

          (o)  Notwithstanding anything in this Section 2.3 to the contrary, the
               Corporation shall be entitled to make such adjustments in the
               Exercise Price, in addition to those adjustments expressly
               required by this Section 2.3, as and to the extent that in its
               good faith judgment the Board of Directors shall determine to be
               advisable in order that any (i) subdivision or consolidation of
               the Common Shares, (ii) issuance wholly for cash of any Common
               Shares at less than the applicable Market Price, (iii) issuance
               wholly for cash of any Common Shares or securities that by their
               terms are exchangeable for or convertible into or give a right to
               acquire Common Shares, (iv) stock dividends, or (v) issuance of
               rights, options or warrants referred to in this Section 2.3,
               hereafter made by the Corporation to holders of its Common
               Shares, shall not be taxable to such shareholders.

          (p)  Irrespective of any adjustment or change in the securities
               purchasable upon exercise of the Rights, the Rights Certificates
               theretofore and thereafter issued may continue to represent the
               securities so purchasable which were represented in the initial
               Rights Certificates issued hereunder.

          (q)  Whenever an adjustment to the Exercise Price is made pursuant to
               this Section 2.3, the Corporation shall:

               (i)  promptly prepare a certificate setting forth such adjustment
                    and a brief statement of the facts accounting for such
                    adjustment; and

               (ii) promptly file with the Rights Agent and with each transfer
                    agent for the Common Shares a copy of such certificate and
                    mail a brief summary thereof to each holder of Rights who
                    requests a copy.

               Failure to file such certificate or to cause such notice to be
               given as aforesaid, or any defect therein, shall not affect the
               validity of any such adjustment or change.

2.4       Date on Which Exercise is Effective

Each Person in whose name any certificate for Common Shares is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Common Shares represented thereby on, and such certificate shall
be dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered (together with a duly completed Election to Exercise) and
payment of the Exercise Price for such Rights (and any applicable transfer taxes
and other governmental charges payable by the exercising Person hereunder) was
made; provided, however, that if the date of such surrender and payment is a
date upon which the Common Share transfer books of the Corporation are closed,
such Person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next Business Day on which the Common
Share transfer books of the Corporation are open.

2.5       Execution, Authentication, Delivery and Dating of Rights Certificates

          (a)  The Rights Certificates shall be executed on behalf of the
               Corporation by its Chief Executive Officer, its Chief Financial
               Officer or its Secretary. The signature of any of these officers
               on the Rights Certificates may be manual or facsimile. Rights
               Certificates bearing the manual or facsimile signatures of
               individuals who were at any time the proper officers of the
               Corporation shall bind the Corporation, notwithstanding that such

                                       24

<PAGE>

                  individuals or any of them have ceased to hold such offices
                  prior to the countersignature and delivery of such Rights
                  Certificates.

         (b)      Promptly following the Separation Time, the Corporation will
                  notify the Rights Agent of such Separation Time and will
                  deliver Rights Certificates executed by the Corporation to the
                  Rights Agent for countersignature, and the Rights Agent shall
                  countersign (manually or by facsimile signature in a manner
                  satisfactory to the Corporation) and deliver such Rights
                  Certificates to the holders of the Rights pursuant to Section
                  2.2 hereof. No Rights Certificate shall be valid for any
                  purpose until countersigned by the Rights Agent as aforesaid.

         (c)      Each Rights Certificate shall be dated the date of
                  countersignature thereof.

2.6      Registration, Transfer and Exchange

         (a)      After the Separation Time, the Corporation shall cause to be
                  kept a register (the "Rights Register") in which, subject to
                  such reasonable regulations as it may prescribe, the
                  Corporation will provide for the registration and transfer of
                  Rights. The Rights Agent is hereby appointed "Rights
                  Registrar" for the purpose of maintaining the Rights Register
                  for the Corporation and registering Rights and transfers of
                  Rights as herein provided and the Rights Agent hereby accepts
                  such appointment. In the event that the Rights Agent shall
                  cease to be the Rights Registrar, the Rights Agent will have
                  the right to examine the Rights Register at all reasonable
                  times.

         (b)      After the Separation Time and prior to the Expiration Time,
                  upon surrender for registration of transfer or exchange of any
                  Rights Certificate, and subject to the provisions of
                  Subsections 2.6(d) and 3.1(b) below, the Corporation will
                  execute, and the Rights Agent will countersign, deliver and
                  register, in the name of the holder or the designated
                  transferee or transferees, as required pursuant to the
                  holder's instructions, one or more new Rights Certificates
                  evidencing the same aggregate number of Rights as did the
                  Rights Certificates so surrendered.

         (c)      All Rights issued upon any registration of transfer or
                  exchange of Rights Certificates shall be valid obligations of
                  the Corporation, and such Rights shall be entitled to the same
                  benefits under this Agreement as the Rights surrendered upon
                  such registration of transfer or exchange.

         (d)      Every Rights Certificate surrendered for registration of
                  transfer or exchange shall be duly endorsed, or be accompanied
                  by a written instrument of transfer in form satisfactory to
                  the Corporation or the Rights Agent, as the case may be, duly
                  executed by the holder thereof or such holder's attorney duly
                  authorized in writing. As a condition to the issuance of any
                  new Rights Certificate under this Section 2.6, the Corporation
                  may require the payment of a sum sufficient to cover any tax
                  or other governmental charge that may be imposed in relation
                  thereto and any other expenses (including the fees and
                  expenses of the Rights Agent) in connection therewith.

2.7      Mutilated, Lost, Stolen and Destroyed Rights Certificates

         (a)      If any mutilated Rights Certificate is surrendered to the
                  Rights Agent prior to the Expiration Time, the Corporation
                  shall execute and the Rights Agent shall countersign and
                  deliver in exchange therefor a new Rights Certificate
                  evidencing the same number of Rights as did the Rights
                  Certificate so surrendered.

                                       25

<PAGE>

         (b)      If there shall be delivered to the Corporation and the
                  Rights Agent prior to the Expiration Time: (i) evidence to
                  their reasonable satisfaction of the destruction, loss or
                  theft of any Rights Certificate; and (ii) such security or
                  indemnity as may be reasonably required by them to save each
                  of them and any of their agents harmless, then, in the absence
                  of notice to the Corporation or the Rights Agent that such
                  Rights Certificate has been acquired by a bona fide purchaser,
                  the Corporation shall execute and, upon the Corporation's
                  request the Rights Agent shall countersign and deliver, in
                  lieu of any such destroyed, lost or stolen Rights Certificate,
                  a new Rights Certificate evidencing the same number of Rights
                  as did the Rights Certificate so destroyed, lost or stolen.

         (c)      As a condition to the issuance of any new Rights
                  Certificate under this Section 2.7, the Corporation may
                  require the payment of a sum sufficient to cover any tax or
                  other governmental charge that may be imposed in relation
                  thereto and any other expenses (including the fees and
                  expenses of the Rights Agent) connected therewith.

         (d)      Every new Rights Certificate issued pursuant to this
                  Section 2.7 in lieu of any destroyed, lost or stolen Rights
                  Certificate shall evidence a contractual obligation of the
                  Corporation, whether or not the destroyed, lost or stolen
                  Rights Certificate shall be at any time enforceable by anyone,
                  and shall be entitled to all the benefits of this Agreement
                  equally and proportionately with any and all other Rights duly
                  issued hereunder.

2.8      Persons Deemed Owners

The Corporation, the Rights Agent and any agent of the Corporation or the Rights
Agent may deem and treat the person in whose name a Rights Certificate (or,
prior to the Separation Time, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever. As used in this Agreement, unless the context otherwise
requires, the term "holder" of any Rights shall mean the registered holder of
such Rights (or, prior to the Separation Time, the associated Common Shares).

2.9      Delivery and Cancellation of Certificates

All Rights Certificates surrendered upon exercise or for redemption, for
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9 except as expressly permitted by this Agreement.
The Rights Agent shall, subject to applicable law, destroy all cancelled Rights
Certificates and deliver a certificate of destruction to the Corporation.

2.10     Agreement of Rights Holders

Every holder of Rights, by accepting such Rights, consents and agrees with the
Corporation and the Rights Agent and with every other holder of Rights:

         (a)      to be bound by and subject to the provisions of this
                  Agreement, as amended from time to time in accordance with the
                  terms hereof, in respect of all Rights held;

                                       26

<PAGE>

         (b)      that, prior to the Separation Time, each Right will be
                  transferable only together with, and will be transferred by a
                  transfer of, the associated Common Share;

         (c)      that, after the Separation Time, the Rights will be
                  transferable only on the Rights Register as provided herein;

         (d)      that, prior to due presentment of a Rights Certificate (or,
                  prior to the Separation Time, the associated Common Share
                  certificate) for registration of transfer, the Corporation,
                  the Rights Agent and any agent of the Corporation or the
                  Rights Agent may deem and treat the Person in whose name the
                  Rights Certificate (or, prior to the Separation Time, the
                  associated Common Share certificate) is registered as the
                  absolute owner thereof and of the Rights evidenced thereby
                  (notwithstanding any notations of ownership or writing on such
                  Rights Certificate or the associated Common Share certificate
                  made by anyone other than the Corporation or the Rights Agent)
                  for all purposes whatsoever, and neither the Corporation nor
                  the Rights Agent shall be affected by any notice to the
                  contrary;

         (e)      that such holder of Rights has waived its right to receive any
                  fractional Rights or any fractional Common Shares or other
                  securities upon exercise of a Right (except as provided
                  herein); and

         (f)      that, without the approval of any holder of Rights or Voting
                  Shares and upon the sole authority of the Board of Directors
                  acting in good faith, this Agreement may be supplemented or
                  amended from time to time as provided herein.

                                    ARTICLE 3
                            ADJUSTMENTS TO THE RIGHTS

3.1      Flip-in Event

         (a)      Subject to Sections 3.1(b) and 5.1, in the event that prior to
                  the Expiration Time a Flip-in Event occurs, each Right shall
                  thereafter constitute the right to purchase from the
                  Corporation, upon exercise thereof in accordance with the
                  terms hereof, that number of Common Shares of the Corporation
                  having an aggregate Market Price on the date of consummation
                  or occurrence of such Flip-in Event equal to twice the
                  Exercise Price for an amount in cash equal to the Exercise
                  Price (such right to be appropriately adjusted in a manner
                  analogous to the applicable adjustment provided for in Section
                  2.3 in the event that, after such date of consummation or
                  occurrence, an event of a type analogous to any of the events
                  described in Section 2.3 shall have occurred with respect to
                  such Common Shares).

         (b)      Notwithstanding anything in this Agreement to the contrary,
                  upon the occurrence of any Flip-in Event, any Rights that are
                  or were Beneficially Owned on or after the earlier of the
                  Separation Time and the Stock Acquisition Date, or which may
                  thereafter be Beneficially Owned, by:

                  (i)      an Acquiring Person (or any Affiliate or Associate of
                           an Acquiring Person or any other Person acting
                           jointly or in concert with an Acquiring Person or any
                           Associate or Affiliate of such other Person); or

                                       27

<PAGE>

                  (ii)     a transferee, direct or indirect, of an Acquiring
                           Person (or any Affiliate or Associate of an Acquiring
                           Person or any Person acting jointly or in concert
                           with an Acquiring Person or any Associate or
                           Affiliate thereon in a transfer of Rights occurring
                           subsequent to the Acquiring Person becoming such;

                  shall become null and void without any further action and any
                  holder of such Rights (including any transferee of, or other
                  successor entitled to, such Rights, whether directly or
                  indirectly) shall thereafter have no right to exercise such
                  Rights under any provisions of this Agreement and further
                  shall thereafter not have any rights whatsoever with respect
                  to such Rights, whether under any provision of this Agreement
                  or otherwise. The holder of any Rights represented by a Rights
                  Certificate which is submitted to the Rights Agent upon
                  exercise or for registration of transfer or exchange which
                  does not contain the necessary certifications set forth in the
                  Rights Certificate establishing that such Rights are not void
                  under this Subsection 3.1(b) shall be deemed to be an
                  Acquiring Person for the purposes of this Subsection 3.1(b)
                  and such Rights shall become null and void.

         (c)      Any Rights Certificate that represents Rights Beneficially
                  Owned by a Person described in either of subclauses 3.1(b)(i)
                  or 3.1(b)(ii) or transferred to any Nominee of any such
                  Person, and any Rights Certificate issued upon transfer,
                  exchange, replacement or adjustment of any other Rights
                  Certificate, referred to in this sentence, shall contain or
                  will be deemed to contain the following legend:

                  "The Rights represented by this Rights Certificate were issued
                  to a Person who was an Acquiring Person or an Affiliate or an
                  Associate of an Acquiring Person (as such terms are defined in
                  the Rights Agreement) or acting jointly or in concert with any
                  of them. This Rights Certificate and the Rights represented
                  hereby shall be void in the circumstances specified in
                  Subsection 3.1(b) of the Rights Agreement."

                  The Rights Agent shall not be under any responsibility to
                  ascertain the existence of facts that would require the
                  imposition of such legend but shall be required to impose such
                  legend only if instructed to do so by the Corporation or if a
                  holder fails to certify upon transfer or exchange in the space
                  provided to do so.

         (d)      After the Separation Time, the Corporation shall do all such
                  acts and things necessary and within its power to ensure
                  compliance with the provisions of this Section 3.1 including,
                  without limitation, all such acts and things as may be
                  required to satisfy the requirements of the Company Act, the
                  Securities Act (British Columbia) and the securities laws or
                  comparable legislation in each of the provinces of Canada and
                  in any other jurisdiction where the Corporation is subject to
                  such laws and the rules of the stock exchanges where the
                  Common Shares are listed at such time in respect of the issue
                  of Common Shares upon the exercise of Rights in accordance
                  with this Agreement.

3.2      Fiduciary Duties of the Board of Directors of the Corporation

For clarification it is understood that nothing contained in this Article 3
shall be considered to affect the obligations of the Board of Directors to
exercise its fiduciary duties. Without limiting the generality of the foregoing,
nothing contained herein shall be construed to suggest or imply that the Board
of Directors shall not be entitled to recommend that holders of the Voting
Shares reject or accept any Take-over Bid or take any other action including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alterative Take-over Bids or
other proposals to the shareholders of the Corporation with respect to any
Takeover Bid or otherwise that the Board of Directors believes is necessary or
appropriate in the exercise of its fiduciary duties.

                                       28

<PAGE>

                                    ARTICLE 4
                                THE RIGHTS AGENT

4.1      General

         (a)      The Corporation hereby appoints the Rights Agent to act as
                  agent for the Corporation and the holders of the Rights in
                  accordance with the terms and conditions hereof, and the
                  Rights Agent hereby accepts such appointment. The Corporation
                  may from time to time appoint such co-rights agents
                  ("Co-Rights Agents") as it may deem necessary or desirable. In
                  the event the Corporation appoints one or more Co-Rights
                  Agents, the respective duties of the Rights Agent and
                  Co-Rights Agents shall be as the Corporation may determine.
                  The Corporation agrees to pay to the Rights Agent reasonable
                  compensation for all services rendered by it hereunder and,
                  from time to time, on demand of the Rights Agent, its
                  reasonable expenses and other disbursements reasonably
                  incurred in the administration and execution of this Agreement
                  and the exercise and performance of its duties hereunder,
                  including the reasonable fees and disbursements of counsel and
                  other experts consulted by the Rights Agent pursuant to
                  Subsection 4.3(a). The Corporation also agrees to indemnify
                  the Rights Agent for, and to hold it harmless against, any
                  loss, liability, or expense, incurred without negligence, bad
                  faith or wilful misconduct on the part of the Rights Agent,
                  for anything done or omitted by the Rights Agent in connection
                  with the acceptance and administration of this Agreement,
                  including the costs and expenses of defending against any
                  claim of liability, which right to indemnification will
                  survive the termination of this Agreement.

         (b)      The Rights Agent shall be protected and shall incur no
                  liability for or in respect of any action taken, suffered or
                  omitted by it in connection with its administration of this
                  Agreement in reliance upon any certificate for Common Shares,
                  Rights Certificate, certificate for other securities of the
                  Corporation, instrument of assignment or transfer, power of
                  attorney, endorsement, affidavit, letter, notice, direction,
                  consent, certificate, statement, or other paper or document
                  believed by it to be genuine and to be signed, executed and,
                  where necessary, verified or acknowledged, by the proper
                  Person or Persons.

         (c)      The Corporation shall inform the Rights Agent in a reasonably
                  timely manner of events which may materially affect the
                  administration of this Agreement by the Rights Agent and, at
                  any time upon request, shall provide to the Rights Agent an
                  incumbency certificate certifying the then current officers of
                  the Corporation.

4.2      Merger, Amalgamation, Consolidation or Change of Name of Rights Agent

         (a)      Any corporation into which the Rights Agent or any successor
                  Rights Agent may be merged or amalgamated or with which it may
                  be consolidated, or any corporation resulting from any merger,
                  amalgamation or consolidation to which the Rights Agent or any
                  successor Rights Agent is a party, or any corporation
                  succeeding to the shareholder services business of the Rights
                  Agent or any successor Rights Agent, will be the successor to
                  the Rights Agent under this Agreement without the execution or
                  filing of any document or any further act on the part of any
                  of the parties hereto, provided that such

                                       29

<PAGE>
                  corporation would be eligible for appointment as a successor
                  Rights Agent under the provisions of Section 4.4 hereof. In
                  case at the time such successor Rights Agent succeeds to the
                  agency created by this Agreement any of the Rights
                  Certificates have been countersigned but not delivered any
                  such successor Rights Agent may adopt the countersignature of
                  the predecessor Rights Agent and deliver such Rights
                  Certificates so countersigned; and in case at that time any of
                  the Rights Certificates have not been countersigned, any
                  successor Rights Agent may countersign such Rights
                  Certificates either in the name of the predecessor Rights
                  Agent or in the name of the successor Rights Agent; and in all
                  such cases such Rights Certificates will have the full force
                  provided in the Rights Certificates and in this Agreement.

         (b)      In case at any time the name of the Rights Agent is changed
                  and at such time any of the Rights Certificates shall have
                  been countersigned but not delivered, the Rights Agent may
                  adopt the countersignature under its prior name and deliver
                  Rights Certificates so countersigned; and in case at that time
                  any of the Rights Certificates shall not have been
                  countersigned, the Rights Agent may countersign such Rights
                  Certificates either in its prior name or in its changed name;
                  and in all such cases such Rights Certificates shall have the
                  full force provided in the Rights Certificates and in this
                  Agreement.

4.3      Duties of Rights Agent

The Rights Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the Corporation and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:

         (a)      The Rights Agent may consult with legal counsel (who may be
                  legal counsel for the Corporation) and the opinion of such
                  counsel will be full and complete authorization and protection
                  to the Rights Agent as to any action taken or omitted by it in
                  good faith and in accordance with such opinion; the Rights
                  Agent may also, with the approval of the Corporation (such
                  approval not to be unreasonably withheld), consult with such
                  other experts as the Rights Agent shall consider necessary or
                  appropriate to properly carry out the duties and obligations
                  imposed under this Agreement and the Rights Agent shall be
                  entitled to rely in good faith on the advice of any such
                  expert.

         (b)      Whenever in the performance of its duties under this
                  Agreement the Rights Agent deems it necessary or desirable
                  that any fact or matter be proved or established by the
                  Corporation prior to taking or suffering any action hereunder,
                  such fact or matter (unless other evidence in respect thereof
                  be herein specifically prescribed) may be deemed to be
                  conclusively proved and established by a certificate signed by
                  a person believed by the Rights Agent to be the Chief
                  Executive Officer, Chief Financial Officer or the Secretary or
                  Assistant Secretary of the Corporation and delivered to the
                  Rights Agent; and such certificate will be full authorization
                  to the Rights Agent for any action taken or suffered in good
                  faith by it under the provisions of this Agreement in reliance
                  upon such certificate.

         (c)      The Rights Agent will be liable hereunder only for its own
                  negligence, bad faith or wilful misconduct.

         (d)      The Rights Agent will not be liable for or by reason of any of
                  the statements of fact or recitals contained in this Agreement
                  or in the certificates for Common Shares, or the Rights
                  Certificates (except its countersignature thereof) or be
                  required to verify the same,

                                       30

<PAGE>

          and all such statements and recitals are and will be deemed to have
          been made by the Corporation only.

     (e)  The Rights Agent will not be under any responsibility in respect of
          the validity of this Agreement or the execution and delivery hereof
          (except the due authorization, execution and delivery hereof by the
          Rights Agent) or in respect of the validity or execution of any Common
          Share certificate, or Rights Certificate (except its countersignature
          thereon) nor will it be responsible for any breach by the Corporation
          of any covenant or condition contained in this Agreement or in any
          Rights Certificate; nor will it be responsible for any change in the
          exercisability of the Rights (including the Rights becoming void
          pursuant to Subsection 3.1(b) hereof or any adjustment required under
          the provisions of Section 2.3) hereof or responsible for the manner,
          method or amount of any such adjustment or the ascertaining of the
          existence of facts that would require any such adjustment (except with
          respect to the exercise of Rights after receipt of the certificate
          contemplated by Section 2.3 describing any such adjustment or any
          written notice from the Corporation or any holder that a Person has
          become an Acquiring Person); nor will it by any act hereunder be
          deemed to make any representation or warranty as to the authorization
          of any Common Shares to be issued pursuant to this Agreement or any
          Rights or as to any Common Shares, when issued, being duly and validly
          authorized, issued and delivered as fully paid and non-assessable.

     (f)  The Corporation agrees that it will perform, execute, acknowledge and
          deliver or cause to be performed, executed, acknowledged and delivered
          all such further and other acts, instruments and assurances as may
          reasonably be required by the Rights Agent for the carrying out or
          performing by the Rights Agent of the provisions of this Agreement.

     (g)  The Rights Agent is hereby authorized and directed to accept
          instructions with respect to the performance of its duties hereunder
          from any individual believed by the Rights Agent to be the Chief
          Executive Officer, Chief Financial Officer or the Secretary or
          Assistant Secretary of the Corporation, and to apply to such
          individuals for advice or instructions in connection with its duties,
          and it shall not be liable for any action taken or suffered by it in
          good faith in accordance with instructions of any such individual. It
          is understood that instructions to the Rights Agent shall, except
          where circumstances make it impractical or the Rights Agent otherwise
          agrees, be given in writing and, where not in writing, such
          instructions shall be confirmed in writing as soon as reasonably
          practicable after the giving of such instructions.

     (h)  Subject to applicable law, the Rights Agent and any shareholder or
          director, officer or employee of the Rights Agent may buy, sell or
          deal in Common Shares, Rights or other securities of the Corporation
          or become pecuniarily interested in any transaction in which the
          Corporation may be interested, or contract with or lend money to the
          Corporation or otherwise act as fully and freely as though it were not
          the Rights Agent under this Agreement. Nothing herein shall preclude
          the Rights Agent from acting in any other capacity for the Corporation
          or for any other legal entity.

4.4  Change of Rights Agent

The Rights Agent may resign and be discharged from its duties under this
Agreement by giving 60 days' prior written notice (or such lesser notice as is
acceptable to the Corporation) to the Corporation, to each transfer agent of
Common Shares and to the holders of the Rights, all in accordance with Section
5.9 and at the expense of the Corporation. The Corporation may remove the Rights
Agent by giving 30 days' prior written notice to the Rights Agent, to each
transfer agent of the Common Shares and to the holders of the Rights in
accordance with Section 5.9.

                                       31

<PAGE>

If the Rights Agent should resign or be removed or otherwise become incapable of
acting, the Corporation will appoint a successor to the Rights Agent. If the
Corporation fails to make such appointment within a period of 30 days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of
any Rights (which holder shall, with such notice, submit such holder's Rights
Certificate for inspection of the Corporation), then the holder of any Rights
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Corporation
or by such a court, must be a corporation incorporated under the laws of Canada
or a province thereof and authorized to carry on the business of a trust company
in the Province of British Columbia. After appointment, the successor Rights
Agent will be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Corporation will file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares and mail a notice thereof in
writing to the holders of the Rights in accordance with Section 5.9. Failure to
give any notice provided for in this Section 4.4, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor Rights Agent, as the
case may be.

                                    ARTICLE 5
                                  MISCELLANEOUS

5.1  Redemption, Waiver and Termination

     (a)  The Board of Directors acting in good faith may, after having obtained
          the approval of the holders of Voting Shares or Rights as set forth in
          Section 5.4, at any time prior to the later of the Stock Acquisition
          Date and the Separation Time, elect to redeem all but not less than
          all of the then outstanding Rights at a redemption price of $0.001 per
          Right appropriately adjusted in a manner analogous to the applicable
          adjustments provided for in Section 2.3 in the event that an event of
          the type analogous to any of the events described in Section 2.3 shall
          have occurred (such redemption price being herein referred to as the
          "Redemption Price").

     (b)  The Board of Directors  shall waive the  application of Section 3.1 in
          respect of the occurrence of any Flip-in Event if the Board of
          Directors has determined, following the Stock Acquisition Date and
          prior to the Separation Time, that a Person became an Acquiring Person
          by inadvertence and without any intention to become, or knowledge that
          it would become, an Acquiring Person under this Agreement and, in the
          event that such a waiver is granted by the Board of Directors, such
          Stock Acquisition Date shall be deemed not to have occurred. Any such
          waiver pursuant to this Subsection 5.1(b) may only be given on the
          condition that such Person, within 10 days after the foregoing
          determination by the Board of Directors or such later date as the
          Board of Directors may determine (the "Disposition Date"), has reduced
          its Beneficial Ownership of Voting Shares such that the Person is no
          longer an Acquiring Person. If the Person remains an Acquiring Person
          at the Close of Business on the Disposition Date, the Disposition Date
          shall be deemed to be the date of occurrence of a further Stock
          Acquisition Date and Section 3.1 shall apply thereto.

     (c)  In the event that a Person acquires Voting Shares pursuant to a
          Permitted Bid or an Exempt Acquisition referred to in Subsection
          5.1(d), then the Board of Directors of the Corporation shall,
          immediately upon the consummation of such acquisition and without
          further formality, be deemed to have elected to redeem the Rights at
          the Redemption Price.

                                       32

<PAGE>

     (d)  The Board of Directors acting in good faith may, prior to the
          occurrence of the relevant Flip-in Event, upon prior written notice
          delivered to the Rights Agent, determine to waive the application of
          Section 3.1 to a Flip-in Event that may occur by reason of a Take-over
          Bid made by means of a Take-over Bid circular to all holders of record
          of Voting Shares provided that if the Board of Directors waives the
          application of Section 3.1 in respect of a Take-over Bid pursuant to
          this Subsection 5.1(d), the Board of Directors shall also be deemed to
          have waived the application of Section 3.1 in respect of any other
          Take-over Bid made by means of a circular to all holders of record of
          Voting Shares prior to the expiry of any Take-over Bid in respect of
          which a waiver is, or is deemed to have been, granted under this
          Subsection 5.1(d).

     (e)  The Board of Directors may, prior to the Close of Business on the
          eighth Business Day following a Stock Acquisition Date or such later
          Business Day as they may from time to time determine, upon prior
          written notice delivered to the Rights Agent, waive the application of
          Section 3.1 to the related Flip-in Event, provided that the Acquiring
          Person has reduced its Beneficial Ownership of Voting Shares (or has
          entered into a contractual arrangement with the Corporation,
          acceptable to the Board of Directors, to do so within 10 days of the
          date on which such contractual arrangement is entered into or such
          later date as the Board of Directors may determine) such that at the
          time the waiver becomes effective pursuant to this Subsection 5.1(e)
          such Person is no longer an Acquiring Person. In the event of such a
          waiver becoming effective prior to the Separation Time, for the
          purposes of this Agreement, such Flip-in Event shall be deemed not to
          have occurred.

     (f)  Where a Take-over Bid that is not a Permitted Bid Acquisition is
          withdrawn or otherwise terminated after the Separation Time has
          occurred and prior to the occurrence of a Flip-in Event, or if the
          Board of Directors grants a waiver under Subsection 5.1(e) after the
          Separation Time, the Board of Directors may elect to redeem all the
          outstanding Rights at the Redemption Price. Upon the Rights being
          redeemed pursuant to this Subsection 5.1(f), all the provisions of
          this Agreement shall continue to apply as if the Separation Time had
          not occurred and Rights Certificates representing the number of Rights
          held by each holder of record of Common Shares at the Separation Time
          had not been mailed to each such holder, for all purposes of this
          Agreement the Separation Time shall be deemed not to have occurred and
          the Corporation shall be deemed to have issued replacement Rights to
          the holders of its then outstanding Common Shares.

     (g)  If the Board of Directors is deemed under Subsection 5.1(c) to have
          elected or elects under Subsection 5.1(a) to redeem the Rights, the
          right to exercise the Rights will thereupon, without further action
          and without notice, terminate and the only right thereafter of the
          holders of Rights shall be to receive the Redemption Price.

     (h)  Within 10 days after the Board of Directors is deemed under Subsection
          5.1(c) to have elected or elects under Subsection 5.1(a) or (f) to
          redeem the Rights, the Corporation shall give notice of redemption to
          the holders of the then outstanding Rights by mailing such notice to
          each such holder at his last address as it appears upon the registry
          books of the Rights Agent or, prior to the Separation Time, on the
          registry books of the transfer agent for the Voting Shares. Any
          notice, which is mailed in the manner herein provided, shall be deemed
          given, whether or not the holder receives the notice. Each such notice
          of redemption will state the method by which the payment of the
          Redemption Price will be made.

                                       33

<PAGE>

5.2  Expiration

No person will have any rights pursuant to this Agreement or in respect of any
Right after the Expiration Time, except in respect of any right to receive cash,
securities or other property which has accrued at the Expiration Time and except
as specified in Subsections 4.1(a) and 4.1(b) hereof.

5.3  Issuance of New Rights Certificates

Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Corporation may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the number or kind or class of shares
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.

5.4  Supplements and Amendments

     (a)  Subject to Subsections 5.4(b) and (c) and this Subsection 5.4(a), the
          Corporation may from time to time amend, vary or delete any of the
          provisions of this Agreement and the Rights provided that no
          amendment, variation or deletion made on or after the date of the
          meeting of Shareholders at which the resolution referred to in Section
          5.21 is to be considered shall be made without the prior consent of
          the holders of the Rights, given as provided in Subsection 5.4(b)
          below, except that amendments, variations or deletions made for any of
          the following purposes shall not require such prior approval but shall
          be subject to subsequent ratification in accordance with Subsection
          5.4(b):

          (i)    in order to make such changes as are necessary in order to
                 maintain the validity of this Agreement and the Rights as a
                 result of any change in any applicable legislation, regulations
                 or rules;

          (ii)   in order to make such changes as are necessary in order to cure
                 any clerical or typographical error.

     (b)  Any amendment, variation or deletion made by the Board of Directors
          pursuant to Subsection 5.4(a) shall:

          (i)    if made prior to the Separation Time, be submitted to the
                 shareholders of the Corporation at the next meeting of
                 shareholders and the shareholders may, by resolution passed by
                 a majority of the votes cast by Independent Shareholders who
                 vote in respect of such amendment, variation or deletion,
                 confirm or reject such amendment or supplement; or

          (ii)   if made after the Separation Time, be submitted to the holders
                 of Rights at a meeting to be held on a date not later than the
                 date of the next meeting of shareholders of the Corporation and
                 the holders of Rights may, by resolution passed by a majority
                 of the votes cast by the holders of Rights which have not
                 become void pursuant to Subsection 3.1(b) who vote in respect
                 of such amendment, variation or deletion, confirm or reject
                 such amendment or supplement.

          Any amendment, variation or deletion pursuant to Subsection 5.4(a)
          shall be effective only when so consented to by the holders of Voting
          Shares or Rights, as applicable

                                       34

<PAGE>

               (except in the case of an amendment, variation or deletion
               referred to in any of Clauses 5.4(a)(i) or (ii), which shall be
               effective from the date of the resolution of the Board of
               Directors adopting such amendment, variation or deletion and
               shall continue in effect until it ceases to be effective (as in
               this paragraph described) and, where such amendment, variation or
               deletion is confirmed, it shall continue in effect in the form so
               confirmed). If an amendment, variation or deletion pursuant to
               Clause 5.4(a)(i) or (ii) is rejected by the shareholders or the
               holders of Rights or is not submitted to the shareholders or
               holders of Rights as required, then such amendment, variation or
               deletion shall cease to be effective from and after the
               termination of the meeting at which it was rejected or to which
               it should have been but was not submitted or from and after the
               date of the meeting of holders of Rights that should have been
               but was not held, and no subsequent resolution of the Board of
               Directors to amend, vary or delete any provision of this
               Agreement to substantially the same effect shall be effective
               until confirmed by the shareholders or holders of Rights, as the
               case may be.

      (c)      For greater certainty, (i) no amendment, variation or deletion to
               the provisions of Article 4 shall be made except with the
               concurrence of the Rights Agent thereto, and (ii) neither the
               exercise by the Board of Directors of any power or discretion
               conferred on it hereunder nor the making by the Board of
               Directors of any determination or the granting of any waiver it
               is permitted to make or give hereunder shall constitute an
               amendment, variation or deletion of the provisions of this
               Agreement or the Rights, for purposes of this Section 5.4 or
               otherwise.

      (d)      The approval, confirmation or consent of the holders of Rights
               with respect to any matter arising hereunder shall be deemed to
               have been given if the action requiring such approval,
               confirmation or consent is authorized by the affirmative votes of
               the holders of Rights present or represented at and entitled to
               be voted at a meeting of the holders of Rights and representing a
               majority of the votes cast in respect thereof. For the purposes
               hereof, each outstanding Right (other than Rights which are void
               pursuant to the provisions hereof or which, prior to the
               Separation Time, are held otherwise than by Independent
               Shareholders) shall be entitled to one vote, and the procedures
               for the calling, holding and conduct of the meeting shall be
               those, as nearly as may be, which are provided in the
               Corporation's by-laws and the Company Act with respect to
               meetings of shareholders of the Corporation.

5.5   Fractional Rights and Fractional Shares

      (a)      The Corporation will not be required to issue fractions of Rights
               or to distribute Rights Certificates, which evidence fractional
               Rights. After the Separation Time there shall be paid, in lieu of
               such fractional Rights, to the registered holders of the Rights
               Certificates with regard to which fractional Rights would
               otherwise be issuable, an amount in cash equal to the same
               fraction of the Market Price of a whole Right.

      (b)      The Corporation shall not be required to issue fractional Common
               Shares upon exercise of the Rights or to distribute certificates
               that evidence fractional Common Shares. In lieu of issuing
               fractional Common Shares, the Corporation shall pay to the
               registered holder of Rights Certificates at the time such Rights
               are exercised as herein provided, an amount in cash equal to the
               same fraction of the Market Price of one Common Share at the date
               of such exercise.

                                       35

<PAGE>

5.6   Rights of Action

Subject to the terms of this Agreement, rights of action in respect of this
Agreement, other than rights of action vested solely in the Rights Agent, are
vested in the respective holders of the Rights; and any holder of any Rights,
without the consent of the Rights Agent or of the holder of any other Rights
may, on such holder's own behalf and for such holder's own benefit and the
benefit of other holders of Rights, enforce, and may institute and maintain any
suit, action or proceeding against the Corporation to enforce, or otherwise act
in respect of, such holder's right to exercise such holder's Rights in the
manner provided in this Agreement and in such holder's Rights Certificate.
Without limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of, the obligations of any Person
subject to this Agreement.

5.7   Holder of Rights Not Deemed a Shareholder

No holder, as such, of any Rights shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of Common Shares or any other securities
which may at any time be issuable on the exercise of Rights, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights, as such, any of the rights of a shareholder of the
Corporation or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 5.8 hereof) or to
receive dividends or subscription rights or otherwise, until such Rights shall
have been exercised in accordance with the provisions hereof.

5.8   Notice of Proposed Actions

In case the Corporation proposes after the Separation Time and prior to the
Expiration Time to effect the liquidation, dissolution or winding up of the
Corporation or the sale of all or substantially all of the Corporation's assets,
then, in each such case, the Corporation shall give to each holder of a Right,
in accordance with Section 5.9 hereof, a notice of such proposed action, which
shall specify the date on which such liquidation, dissolution, or winding up is
to take place, and such notice shall be so given at least 20 Business Days prior
to the date of the taking of such proposed action by the Corporation.

5.9   Notices

Notices or demands authorized or required by this Agreement to be given or made
to or by the Rights Agent, the holder of any Rights or the Corporation will be
sufficiently given or made and shall be deemed to be received if delivered or
sent by first-class mail, postage prepaid, or by fax machine or other means of
printed telecommunication, charges prepaid and confirmed in writing by mail or
delivery, addressed (until another address is filed in writing with the Rights
Agent or the Corporation, as applicable), as follows:

      (a)               if to the Corporation:

                107 - 930 West 1/st/ Street
                North Vancouver, British Columbia
                V7P 3N4

                Attention: President

                                       36

<PAGE>

                  Facsimile No. (604) 987-2555

         (b)      if  to the Rights Agent:

                  4/th/ Floor, 510 Burrard Street
                  Vancouver, British Columbia
                  V6C 3B9

                  Attention: Corporate Services Department
                  Facsimile No. (604) 683-3694

         (c)      if to the holder of any Rights, to the address of such holder
                  as it appears on the registry books of the Rights Agent or,
                  prior to the Separation Time, on the registry books of the
                  Corporation for the Common Shares.

5.10     Costs of Enforcement

The Corporation agrees that if the Corporation or any other Person the
securities of which are purchasable upon exercise of Rights fails to fulfil any
of its obligations pursuant to this Agreement, then the Corporation or such
Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce his rights
pursuant to any Rights or this Agreement.

5.11     Regulatory Approvals

Any obligation of the Corporation or action or event contemplated by this
Agreement, shall be subject to applicable law and to the receipt of any
requisite approval or consent from any governmental or regulatory authority.
Without limiting the generality of the foregoing, any issuance or delivery of
debt or equity securities (other than non-convertible debt securities) of the
Corporation upon the exercise of Rights and any amendment to this Agreement
shall be subject to the prior consent of the stock exchanges on which the
Corporation is from time to time listed or has been listed during the six months
prior to such amendment.

5.12     Declaration as to Non-Canadian and Non-U.S. Holders

If in the opinion of the Board of Directors (who may rely upon the advice of
counsel), any action or event contemplated by this Agreement would require
compliance with the securities laws or comparable legislation of a jurisdiction
outside Canada and the United States of America, its territories and
possessions, the Board of Directors acting in good faith may take such actions
as it may deem appropriate to ensure that such compliance is not required,
including without limitation establishing procedures for the issuance to a
Canadian resident Fiduciary of Rights or securities issuable on exercise of
Rights, the holding thereof in trust for the Persons entitled thereto (but
reserving to the Fiduciary or to the Fiduciary and the Corporation, as the
Corporation may determine, absolute discretion with respect thereto) and the
sale thereof and remittance of the proceeds of such sale, if any, to the Persons
entitled thereto. In no event shall the Corporation or the Rights Agent be
required to issue or deliver Rights or securities issuable on exercise of Rights
to Persons who are citizens, residents or nationals of any jurisdiction other
than Canada and a province or territory thereof and the United States of America
and any state thereof in

                                       37

<PAGE>

which such issue or delivery would be unlawful without registration of the
relevant Persons or securities for such purposes.

5.13     Successors

All the covenants and provisions of this Agreement by or for the benefit of the
Corporation or the Rights Agent shall bind and enure to the benefit of their
respective successors and assigns hereunder.

5.14     Benefits of this Agreement

Nothing in this Agreement shall be construed to give to any Person other than
the Corporation, the Rights Agent and the holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; this Agreement shall be
for the sole and exclusive benefit of the Corporation, the Rights Agent and the
holders of the Rights.

5.15     Shareholder Review

At or prior to the first annual meeting of shareholders of the Corporation
following the third anniversary of the date of this Agreement, provided that a
Flip-in Event has not occurred prior to such time, the Board of Directors shall
submit a resolution ratifying the continued existence of this Agreement to the
Independent Shareholders for their consideration and, if thought advisable,
approval. Unless a majority of the votes cast by Independent Shareholders who
vote in respect of such resolution are voted in favor of the continued existence
of this Agreement, the Board of Directors shall, immediately upon the
confirmation by the chairman of such shareholders' meeting of the result of the
vote on such resolution and without further formality, be deemed to have elected
to redeem the Rights at the Redemption Price.

5.16     Determination and Actions by the Board of Directors

The Board of Directors shall have the authority to administer and, subject to
Section 5.4, amend this Agreement and to exercise all rights and powers
specifically granted to the Board or the Corporation hereunder or as may be
necessary or advisable in the administration of this Agreement.

All such actions, calculations, interpretations and determinations (including
all omissions with respect to the foregoing) which are done or made by the Board
of Directors, in good faith, (x) may be relied on by the Rights Agent, and (y)
shall not subject the Board of Directors to any liability to the holders of the
Rights or to any other parties.

5.17     Governing Law

This Agreement and the Rights issued hereunder shall be deemed to be a contract
made under the laws of the Province of British Columbia and for all purposes
will be governed by and construed in accordance with the laws of such province
applicable to contracts to be made and performed entirely within such province.

5.18     Language

Les parties aux presentes ont exige que la presente convention ainsi que tous
les documents et avis qui s'y rattachent et/ou qui en coulent soient redieds en
langue anglaise. The parties hereto have required that

                                       38

<PAGE>

this Agreement and all documents and notices related thereto and/or resulting
therefrom be drawn up in English.

5.19     Counterparts

This Agreement may be executed in any number of counterparts and each of such
counterparts will for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.

5.20     Severability

If any term or provision hereof or the application thereof to any circumstance
is, in any jurisdiction and to any extent, invalid or unenforceable, such term
or provision will be ineffective only to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
terms and provisions hereof or the application of such term or provision to
circumstances other than those as to which it is held invalid or unenforceable.

5.21     Effective Date

This Agreement is effective as of the Effective Date. If the Rights Plan is not
confirmed by resolution passed by a majority of the votes cast by Independent
Shareholders who vote in respect of such Rights Plan at a meeting to be held not
later than August 31, 2001 then this Agreement and any outstanding Rights shall
be of no further force and effect from the earlier of (a) the date of the
meeting, and (b) August 31, 2001.

5.22     Time of the Essence

Time shall be of the essence hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed effective as of the day first above written.

OFFSHORE SYSTEMS INTERNATIONAL LTD.

Per:

         __________________________________________
         John A. Jacobson
         President and Chief Executive Officer

COMPUTERSHARE TRUST COMPANY OF CANADA

                                       39

<PAGE>

Per:

         ____________________________________________
         Authorized Signatory

EXHIBIT A

     [Form of Rights Certificate]

Certificate No.
Rights

         THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION,
         ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN AGREEMENT. UNDER
         CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF SUCH
         AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON, CERTAIN
         RELATED PARTIES OF AN ACQUIRING PERSON OR A TRANSFEREE OF AN ACQUIRING
         PERSON OR ANY SUCH RELATED PARTIES WILL BECOME VOID WITHOUT FURTHER
         ACTION.

                               Rights Certificate

         This certifies that __________________ is the registered holder of the
number of Rights set forth above, each of which entitles the registered holder
thereof, subject to the terms, provisions and conditions of the Shareholder
Rights Plan Agreement made as of April 19, 2001 (the "Rights Agreement") between
Offshore Systems International Ltd., a corporation subsisting under the laws of
the Province of British Columbia (the "Corporation") and Computershare Trust
Company of Canada, a trust company incorporated under the laws of Canada, as
Rights Agent (the "Rights Agent"), which term shall include any successor Rights
Agent under the Rights Agreement, to purchase from the Corporation, at any time
after the Separation Time and prior to the Expiration Time (as such terms are
defined in the Rights Agreement), one fully paid common share of the Corporation
(a "Common Share") at the Exercise Price referred to below, upon presentation
and surrender of this Rights Certificate, together with the Form of Election to
Exercise appropriately completed and duly executed, to the Rights Agent at its
principal office in each of (Vancouver, Calgary, Toronto and Montreal). Until
adjustment thereof in certain events as provided in the Rights Agreement, the
Exercise Price shall be $30 per Right (payable in cash, certified check or money
order payable to the order of the Corporation). The number of Common Shares
which may be purchased for the Exercise Price is subject to adjustment as set
forth in the Rights Agreement.

         This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated by reference and made a part hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holder of the Rights Certificates. Copies
of the Rights Agreement are on file at the registered office of the Corporation
and are available upon written request.

         This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent in (Vancouver,
Calgary, Toronto and Montreal), may be exchanged for another Rights Certificate
or Rights Certificates of like tenor evidencing an aggregate number of Rights
equal to the aggregate number of Rights evidenced by the Rights Certificate or
Rights Certificates surrendered. If

                                       40

<PAGE>

this Rights Certificate shall be exercised in part, the registered holder shall
be entitled to receive, upon surrender hereof, another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.

         Subject to the provisions of the Rights Agreement the Rights evidenced
by this Certificate may be redeemed by the Corporation at a redemption price of
$0.001 per Right subject to adjustment in certain events.

                                       41

<PAGE>

         No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.

         No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Common
Shares or any other securities which may at any time be issuable upon the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
any meeting or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights or otherwise,
until the Rights evidenced by this Rights Certificate shall have been exercised
as provided in the Rights Agreement.

         This Rights Certificate shall not be valid for any purpose until it
shall have been countersigned by the Rights Agent.

WITNESS the facsimile signature of the proper officers of the Corporation.

Date: ____________________

                                             OFFSHORE SYSTEMS INTERNATIONAL LTD.

                                                 Per:

                                                 _____________________________

                                                 Authorized Signatory

Countersigned:

COMPUTERSHARE TRUST COMPANY OF CANADA

Per:

Authorised Signatory _________________________________________________________

FORM OF ELECTION TO EXERCISE

OFFSHORE SYSTEMS INTERNATIONAL LTD.

         The undersigned hereby irrevocably elects to exercise whole Rights
represented by this Rights Certificate to purchase the Common Shares issuable
upon the exercise of such Rights and requests that certificates for such Common
Shares be issued in the name of and delivered to:

                                                  Rights Certificate No. _______
______________________________________________
Name

                                       42

<PAGE>

__________________________________________________
Address

__________________________________________________
City and Province

__________________________________________________
Social Insurance No. or other taxpayer
identification number

         If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

__________________________________________________
Name

__________________________________________________
Address

__________________________________________________
City and Province

__________________________________________________
Social Insurance No. or other taxpayer
identification number

Date: __________________________________________________________________________
                                               Signature
Signature Guaranteed

                     (Signature must correspond to name as written upon the face
                     of this Rights Certificate in every particular, without
                     alteration or enlargement or any change whatsoever)

         Signature must be guaranteed by a Canadian chartered bank or trust
company, a shareholders of a recognized stock exchange in Canada or a member of
the Securities Transfer Association Medallion Program (Stamp).

                                       43

<PAGE>

                    (To be completed by the holder if true)

         The undersigned hereby represents, for the benefit of the Corporation
and all holders of Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or by an Affiliate or Associate
of an Acquiring Person, any other Person acting jointly or in concert with an
Acquiring Person or any Affiliate or Associate of any such other Person (as such
terms are defined in the Rights Agreement).

                           ___________________________
                                    Signature

NOTICE

         In the event that the certifications set forth above in the Form of
Election to Exercise and Assignment are not completed, the Corporation shall
deem the Beneficial Owner of the Rights represented by this Rights Certificate
to be an Acquiring Person (as defined in the Rights Agreement) and, accordingly,
such Rights shall be null and void.

                                       44

<PAGE>

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

__________________________________________________
(Please print name and address of transferee)

the Rights represented by this Rights Certificate, together with all right,
title and interest therein.

Date:  ______________________________
     ________________________________

         Signature

(Signature Guaranteed)                        (Signature must correspond to name
                                               as written upon the face of this
                                               Rights Certificate in every
                                               particular, without alteration or
                                               enlargement or any change
                                               whatsoever)

         Signature must be guaranteed by a Canadian chartered bank or trust
company, a member of a recognized stock exchange in Canada or a member of the
Securities Transfer Association Medallion Program (Stamp).

                    (To be completed by the assignor if true)

         The undersigned hereby represents, for the benefit of the Corporation
and all holders of Rights and Common Shares, that the Rights evidenced by this
Rights Certificate are not and, to the knowledge of the undersigned have never
been, Beneficially Owned by an Acquiring Person or by an Affiliate or Associate
of an Acquiring Person, any other Person acting jointly or in concert with an
Acquiring Person or any Affiliate or Associate of any such other Person (as such
terms are deemed in the Rights Agreement).

       ________________________________

       Signature

       ________________________________
                                             (Please print name below signature)

NOTICE

         In the event that the certifications set forth above in the Form of
Election to Exercised Assignment are not completed, the Corporation shall deem
the Beneficial Owner of the Rights represented by this Rights Certificate to be
an Acquiring Person (as defined in the Rights Agreement) and, accordingly, such
Rights shall to be null and void.

                                       45

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