Document:

<PAGE>   1

                                                                    EXHIBIT 10.3

                                 LOAN AGREEMENT

This agreement dated as of the 26th day of May, 2000

BETWEEN:

                           INTERNATIONAL MENU SOLUTIONS CORPORATION, a
                           corporation incorporated pursuant to the laws of the
                           State of Nevada,

                           (hereinafter referred to as the  "Parent")

                                     - and -

                           INTERNATIONAL MENU SOLUTIONS INC., a corporation
                           amalgamated pursuant to the laws of the Province of
                           Ontario,

                           (hereinafter referred to as the  "Borrower")

                                     - and -

                           SOUTHBRIDGE INVESTMENT PARTNERSHIP NO. 1, a
                           partnership constituted pursuant to the laws of the
                           Province of Ontario,

                           (hereinafter referred to as "Southbridge")

                                     - and -

                           FIRST ONTARIO LABOUR SPONSORED INVESTMENT FUND LTD.,
                           a corporation incorporated pursuant to the laws of
                           the Province of Ontario,

                           (hereinafter referred to as "First Ontario")

                                     - and -

                           BANK OF MONTREAL CAPITAL CORPORATION, a corporation
                           incorporated pursuant to the laws of Canada,

                           (hereinafter referred to as "BMOCC" and, together
                           with Southbridge and First Ontario, referred to as
                           the "Lender Group")

THIS AGREEMENT WITNESSES THAT for valuable consideration the parties agree as
follows:

                            PART 1.0 - INTERPRETATION

1.1 DEFINITIONS. For the purposes of this Agreement and where the context does
not otherwise require, terms shall have the meanings assigned thereto in
Schedule A annexed hereto.

1.2 BORROWER. Unless otherwise specified herein, all representations, warranties
and covenants in respect of the Borrower in this Agreement mean representations,
warranties and covenants in respect of:

         (a)      the Parent, Borrower and the Group Subsidiaries as a group and
                  on a Consolidated basis; or

<PAGE>   2
                                       2

         (b)      each of the Parent, Borrower and the Group Subsidiaries,

as applicable and as the context implies.

1.3 AUDITED FINANCIAL STATEMENTS. All references in this Agreement to audited
financial statements of a corporation, including the balance sheet and related
statements of income, retained earnings and changes in financial position, mean
Consolidated financial statements prepared by the corporation in accordance with
GAAP together with an auditor's opinion that the statements fairly present the
financial position of the corporation and the results of its operations for the
Fiscal Period reported on in accordance with GAAP. All accounting determinations
for purposes of determining compliance with the financial covenants contained in
section 7.2 shall be made in accordance with GAAP as in effect on the Closing
Date and applied on a basis consistent in all material respects with the
Benchmark Financials. If GAAP shall change from the basis used in preparing the
said financial statements, the certificates required to be delivered pursuant to
subsection 7.1(e) attesting to compliance with the covenants contained herein
shall include, at the election of the Borrower or upon the request of the Lender
Group, calculations setting forth the adjustments necessary to demonstrate how
the Borrower is in compliance with the financial covenants based upon GAAP in
effect on the Closing Date.

1.4 CANADIAN CURRENCY. Unless otherwise specified herein, all amounts and values
referred to in this Agreement shall be calculated in lawful money of Canada.

1.5 INTEREST ACT. Unless otherwise specified, all annual rates of interest
referred to herein are based on a calendar year of 365 or 366 days, as the case
may be. Where a rate of interest hereunder is calculated on the basis of a year
(the "Deemed Year") which contains fewer days than the actual number of days in
the calendar year of calculation, such rate of interest shall be expressed as a
yearly rate for the purposes of the Interest Act (Canada) by multiplying such
rate of interest by the actual number of days in the calendar year of
calculation and dividing it by the number of days in the Deemed Year.

1.6 HEADINGS AND TABLE OF CONTENTS. The division of this Agreement into Parts
and sections and the insertion of headings are for convenience of reference only
and shall not affect the meaning or interpretation of this Agreement.

1.7 REFERENCES. All references to sections, Parts and Schedules are to sections
and Parts of and Schedules to this Agreement. The words "hereto", "herein",
"hereof", "hereunder", "this Agreement" and similar expressions mean and refer
to this Agreement.

1.8 NUMBER AND GENDER. Where the context so requires, words importing the
singular include the plural and vice versa, and words importing gender include
the masculine, feminine and neuter genders.

1.9 MAXIMUM INTEREST RATE.

         (a)      In the event that any provision of this Agreement would oblige
                  the Company to make any payment of interest or any other
                  payment which is construed by a court of competent
                  jurisdiction to be interest in an amount or calculated at a
                  rate which would be prohibited by law or would result in a
                  receipt by the Lender of interest at a criminal rate (as such
                  terms are construed under the Criminal Code (Canada)), then
                  notwithstanding such provision, such amount or rate of
                  interest shall be deemed to have been adjusted nunc pro tunc
                  to the maximum amount or rate of interest, as the case may be,
                  as would not be so prohibited by law or so result in a receipt
                  by the Lender of interest at a criminal rate, such adjustment
                  to be effected, to the extent necessary, as follows:

                  (i)      firstly, by reducing the amount or rate of interest
                           required to be paid hereunder; and

<PAGE>   3
                                       3

                  (ii)     thereafter, by reducing any fees, commissions,
                           premiums and other amounts which would constituted
                           interest for the purposes of Section 347 of the
                           Criminal Code (Canada);

         (b)      If, notwithstanding the provisions of clause (a) of this
                  section and after giving effect to all adjustments
                  contemplated thereby, the Lender shall have received an amount
                  in excess of the maximum permitted by such clause, then such
                  excess shall be applied by the Lender to the reduction of the
                  principal balance of the Outstanding Borrowing and not to the
                  payment of interest or if such excessive interest exceeds such
                  principal balance, such excess shall be refunded to the
                  Company; and

         (c)      Any amount or rate of interest referred to in this section
                  shall be determined in accordance with generally accepted
                  actuarial practices and principles as an effective annual rate
                  of interest over the terms of this Agreement on the assumption
                  that any charges, fees or expenses that fall within the
                  meaning of "interest" (as defined in the Criminal Code
                  (Canada)) shall, if they relate to a specific period of time,
                  be prorated over that period of time and otherwise be prorated
                  over the term of this Agreement and, in the event of dispute,
                  a certificate of a Fellow of the Canadian Institute of
                  Actuaries appointed by the Lender shall be conclusive for the
                  purposes of such determination.

1.10 PARAMOUNTCY. In the event of any conflict or inconsistency between the
provisions of this Agreement and the provisions of the Security, the provisions
of this Agreement shall prevail and be paramount.

1.11 COMMUNICATIONS FROM THE LENDER GROUP. References to notices, consents,
waivers or any other form of communication from the Lender Group mean notices,
consents, waivers or any other form of communication in written form signed or
acknowledged by Southbridge, First Ontario and BMOCC.

1.12 JOINT ACTION OF LENDER GROUP. Southbridge, BMOCC and First Ontario agree to
consult with each other to determine a common course of action to be agreed upon
and Southbridge, First Ontario nor BMOCC shall be entitled to exercise its
rights and remedies pursuant to this Agreement independently of the other except
as herein provided. Each Lender hereby acknowledges that to the extent permitted
by applicable law, the Security and the remedies provided thereunder and
pursuant to this Agreement are for the benefit of the Lenders collectively and
acting together and not severally and further acknowledges that its rights
hereunder and under the Security are to be exercised not severally but by them
upon the decision of the Majority Lenders. Accordingly, notwithstanding any of
the provisions contained herein or in the Security, each Lender shall only take
any action hereunder or thereunder with the prior written agreement of the
Majority Lenders. Each Lender shall, upon any such agreement, cooperate fully
with the Majority Lenders in carrying out such action.

1.13 SCHEDULES. The Schedules forming part of this Agreement are as follows:

       Schedule A Defined Terms
       Schedule B Benchmark Financials            Schedule A - section 1.1(g)
       Schedule C Real Property Description       section 6.1(hh)
       Schedule D Environmental Disclosure        section 6.1(ii)
       Schedule E Material Contracts              Schedule A - section 1.1(ss)
       Schedule F Opinions of Counsel             section 5.1(p)
       Schedule G PPSA Registrations              Schedule A - section 1.1(xx)
       Schedule H Capital                         section 6.1 (l)
       Schedule I Dilution                        section 6.1 (m)
       Schedule J Intellectual Property           section 6.1(s)
       Schedule K Borrower Financials             section 6.1(i)
       Schedule L Tax Filings                     section 6.1(g)

<PAGE>   4
                                       4

       Schedule M Consolidated Forecasts          section 5.1(g)
       Schedule N Litigation                      section 6.1(h)

                           PART 2.0 - CREDIT FACILITY

2.1 CREDIT FACILITY. Subject to the provisions of this Agreement, the Lender
Group agrees to make available to the Borrower a non-revolving term facility in
the maximum principal amount of $4,500,000 available by way of two advances of
the Borrowing with the First Advance and the Second Advance available no later
than June 10, 2000. A Lender shall not be obligated to advance more than its
Loan Amount of the Borrowing.

2.2 PURPOSES OF CREDIT FACILITY. Subject to section 2.3 hereof, the Borrower
shall use the proceeds of the Borrowing for:

         (a)      working capital purposes to operate its business ;

         (b)      other capital expenditures set out in an annual business plan
                  of the Borrower approved by the Lender Group; and

for greater certainty, the Borrower shall not use any of the proceeds from the
Borrowing as consideration for the acquisition of the Great American Barbeque
Company.

2.3 EVIDENCE OF INDEBTEDNESS. The Lender Group shall maintain accounts and
records evidencing the obligations of the Borrower to the Lender Group
hereunder. The Lender Group's accounts and records shall constitute prima facie
evidence of the indebtedness of the Borrower to the Lender Group hereunder.

2.4 ILLEGALITY. If the introduction of or any change in any Applicable Law or in
the interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof, makes it unlawful or
prohibited for the Lender Group to make, to fund or to perform any of its
obligations under this Agreement, the Lender Group may, by sixty days written
notice to the Borrower (unless the provision of the Applicable Law requires
earlier prepayment in which case the notice period shall be such shorter period
as required to comply with the Applicable Law), terminate its obligations under
this Agreement and in such event, the Borrower shall prepay such Borrowing
forthwith (or at the end of such period as the Lender Group in its discretion
agrees), without notice or penalty, together with all accrued but unpaid
interest and fees as may be applicable to the date of payment.

                          PART 3.0 - PRINCIPAL PAYMENTS

3.1 PRINCIPAL REPAYMENT. Unless the Outstanding Borrowing, or any part thereof,
shall have been required to be paid on an earlier date pursuant to the terms
hereof, the Borrower shall repay the principal portion of the Outstanding
Borrowing on the Maturity Date.

3.2 CATCH-UP PAYMENTS. Should the Borrower for any reason be prohibited,
pursuant to the terms of the Senior Loan Agreements, from making any payment of
interest or scheduled principal payment to the Lender Group pursuant to section
3.1 or any other amount payable pursuant to this Agreement, then the Borrower
shall pay interest on such unpaid amounts at the Interest Rate, and all such
payments (including principal, interest and interest on unpaid interest) shall
become immediately due and payable to the extent permitted under the terms of
the Senior Loan Agreements.

<PAGE>   5
                                       5

3.3 PREPAYMENT. The Borrower shall have the right at any time or from time to
time to prepay, subject to payment of three months interest, all or any of the
Outstanding Borrowing in a minimum amount of $200,000 by providing the Lender
Group with five Business Days prior written notice of its intention to prepay.
Each such prepayments shall be applied in reverse order of maturity to the
scheduled principal repayments contemplated by section 3.1 hereof.

3.4 PAYMENT MECHANICS. Each payment under this Agreement shall be made for value
at or before 1:00 p.m. (Toronto time) on the day such payment is due, provided
that, if any such day is not a Business Day, such payment shall be deemed for
all purposes of this Agreement to be due on the Business Day immediately
preceding such day (and any such adjustment shall be taken into account for
purposes of the computation of interest and fees payable under this Agreement).
The First Ontario Proportionate Interest, BMOCC Proportionate Interest, and
Southbridge Proportionate Interest of all payments shall be made by post-dated
cheques delivered to First Ontario, BMOCC, and Southbridge, respectively at
addresses set out in Section 11.1 or such other address as such Lender may from
time to time advise the Borrower in writing. The Borrower shall ensure that each
Lender has at least two post-dated cheques at all times.

3.5 NO CREDIT FOR TRUST FUNDS. For greater certainty, payments of any nature
whatsoever made by the Borrower to the Lender Group which the Lender Group is
required to pay to any Person by reason of any trust imposed by law or by any
Person upon amounts received by the recipient from the Borrower, shall not be
credited against, or deemed to be payment on account of, all or any portion of
the Outstanding Borrowing. All costs and expenses incurred by the Lender Group,
its agents, representatives and solicitors in connection with the repayment of
such monies to any Person shall be for the account of the Borrower and payable
on demand. Interest shall accrue on these costs and expenses, until paid, at the
Interest Rate.

                     PART 4.0 - INTEREST, FEES AND EXPENSES

4.1 PAYMENT OF INTEREST.

        (a)     RATE. The Borrower shall pay interest on the outstanding
                principal amount of each Borrowing from the applicable Borrowing
                Date at a rate per annum equal to the Interest Rate.

        (b)     CALCULATION. Interest shall be calculated and payable monthly in
                arrears on each Interest Payment Date.

4.2 FEES. The Borrower shall pay to Southbridge each of the following:

        (a)     a non-refundable work fee of $157,500 (plus goods and services
                tax exigible thereon), which latter amount was earned on the
                date of execution of the financing proposal dated May 2, 2000
                for the transaction contemplated herein payable on the date of
                the First Advance;

        (b)     a non-refundable commitment fee of 6.5% of the Borrowing plus
                goods and services tax exigible thereon, payable on the date of
                the First Advance.

The said work fee and commitment fee are hereinafter collectively referred to as
the structuring fee. Such fee shall be deemed to be earned for the time, effort
and exposure incurred by the Lender Group in (i) reviewing and establishing all
documentation, financial information, proposal and plans referable to the Credit
Facility, and (ii) establishing satisfactory priority arrangements with the
holders of the Permitted Encumbrances. Southbridge shall pay the First Ontario
Proportionate Interest of the structuring fee to First Ontario Management Ltd.
(acting as agent for First Ontario) and the BMOCC Proportionate Interest of the
structuring fee to BMOCC on the date of the Second Advance.

<PAGE>   6
                                       6

4.3 REIMBURSEMENT OF EXPENSES. All statements, reports, certificates, opinions
and other documents or information required to be furnished to the Lender Group
by the Borrower under this Agreement shall be supplied by the Borrower without
cost to the Lender Group. The Borrower agrees to pay promptly on demand all of
the reasonable legal fees, documentation costs and other reasonable expenses
incurred by the Lender Group, First Ontario Management Ltd. and Crosbie Capital
Management Inc. in connection with the preparation, negotiation, documentation
and operation of this Agreement, and any other document to be executed and
issued as provided herein, including the enforcement of the rights of the Lender
Group under this Agreement or the security granted pursuant to the terms of this
Agreement, whether or not any amounts are advanced under this Agreement
including, without limitation, all due diligence expenses and consulting fees
incurred by the Lender Group. All such amounts which remain unpaid after demand
shall accrue interest at the Interest Rate plus 3% per annum calculated monthly
until paid in full.

4.4 DETERMINATION CONCLUSIVE. Each determination by the Lender Group, acting
reasonably, of any rate or fee shall, in the absence of error, be final,
conclusive and binding on the Borrower.

                         PART 5.0 - CONDITIONS PRECEDENT

5.1 CONDITIONS. The obligation of the Lender Group to make available any
Borrowing under this Agreement is subject to the terms and conditions of this
Agreement and is conditional upon satisfactory evidence being given to the
Lender Group and its counsel as to compliance with the following conditions:

         (a)      REPRESENTATIONS AND WARRANTIES, COVENANTS AND CONDITIONS. The
                  representations and warranties contained in section 6.1 are
                  and shall continue to be true and correct in every respect as
                  if made by the Borrower contemporaneously with the Borrowing.
                  The Lender Group shall have received such certificates or
                  other instruments of the Borrower or of the officers of the
                  Borrower as the Lender Group's counsel may reasonably think
                  necessary in order to establish that the terms, covenants and
                  conditions contained in this Agreement have been performed or
                  complied with at or prior to the Closing by the Borrower and
                  that the representations and warranties of the Borrower herein
                  given are correct at the Closing.

         (b)      RESOLUTIONS AND CERTIFICATES. The Lender Group shall have
                  received, duly executed and in form and substance satisfactory
                  to it:

                  (i)      a copy of the constating documents and by-laws of the
                           Borrower and a copy of the resolutions of the board
                           of directors of each of the Parent and the Borrower
                           authorizing the execution, delivery and performance
                           of this Agreement, the Security and any other
                           instruments contemplated hereunder, certified by an
                           appropriate officer of each of the Parent and the
                           Borrower;

                  (ii)     a certificate of incumbency for each of the Parent
                           and the Borrower showing the names, offices and
                           specimen signatures of the officers who will execute
                           this Agreement, the Security and any other
                           instruments contemplated hereunder and thereunder;
                           and

                  (iii)    such additional supporting documents as the Lender
                           Group or its counsel may reasonably request.

         (c)      APPROVAL. The Investment Committee of each Lender shall have
                  approved the transactions contemplated hereby.

         (d)      DELIVERY OF SECURITY. The Lender Group shall have received the
                  Security (including any necessary consents or subordinations
                  of third parties as may be required by the Lender Group)

<PAGE>   7
                                       7

                  duly executed by the issuer thereof and in form and substance
                  satisfactory to the Lender Group and its counsel.

         (e)      REGISTRATION. The Security has been registered, recorded or
                  filed in all jurisdictions deemed necessary by the Lender
                  Group and its counsel acting reasonably.

         (f)      EVIDENCE OF SENIOR LOANS AND FINANCING COMMITMENTS. The Lender
                  Group shall have received evidence to its satisfaction of the
                  completion of the following loans and financing commitments to
                  or in favour of the Borrower:

                  (i)      credit facilities in the aggregate minimum amount of
                           $10,000,000.00 by the Bank of Nova Scotia;

                  The Lender Group shall also be satisfied with all of the terms
                  and conditions of the above loans and financing commitments
                  consistent with the financial projections used by the Lender
                  Group including, without limitation, the waiver of the
                  requirement to maintain a cash collateral account with the
                  Bank of Nova Scotia, inclusion of 30% of inventory in the
                  borrowing base, and shall have received evidence to its
                  satisfaction that the Bank of Nova Scotia has waived any
                  technical default under its credit facilities or has agreed
                  not to take any action in connection with such technical
                  default.

         (g)      FINANCIAL FORECASTS. The Lender Group shall be satisfied with
                  the Borrower's annual business consolidated plan and forecasts
                  set out in Schedule M given to the Lender Group for the fiscal
                  years ending December 31, 2000 and December 31, 2001.

         (h)      LENDER GROUP SATISFIED RE: TITLE AND LIENS. The Borrower shall
                  have provided evidence satisfactory to the Lender Group that
                  all its Property is free and clear of all Liens except as
                  permitted by the Lender Group. For greater certainty, the
                  Borrower shall have executed and delivered to or shall have
                  caused to be executed and delivered to the Lender Group in
                  form and substance satisfactory to the Lender Group documents
                  evidencing the discharge of any registrations pursuant to the
                  Personal Property Securities Act (Ontario) or other similar
                  legislation in other jurisdictions against the Borrower in
                  favour of any Person (other than the Senior Lenders), unless
                  consented to in writing by the Lender Group.

         (i)      EVIDENCE OF ENVIRONMENTAL COMPLIANCE. The Lender Group shall
                  have received such environmental reports and audits as it may
                  require, but not limited to the Lender Group"s Environmental
                  Questionnaire. The Lender Group and its counsel shall be
                  satisfied with the environmental risk associated with the
                  transactions contemplated herein including, if necessary, with
                  the results of any environmental audit or investigation
                  conducted.

         (j)      INDEBTEDNESS. As at the Closing Date, except for the Borrowing
                  hereunder and Indebtedness disclosed in the Benchmark
                  Financials and Indebtedness incurred in the ordinary course of
                  business, the Borrower shall have no other Indebtedness.

         (k)      LEGAL OPINION. The Lender Group shall have received from
                  counsel to the Borrower favourable legal opinions, in
                  substantially the form and substance of the legal opinion
                  annexed hereto as Schedule F, in connection with this
                  Agreement and the Security, including an opinion to the effect
                  that this Agreement and the Security are valid, legally
                  binding and enforceable subject to the usual qualifications
                  and exceptions.

         (l)      NO DEFAULT. No Default or Event of Default has occurred and is
                  continuing except with respect to a technical default under a
                  Senior Loan Agreement which default has been waived by the
                  Senior Lenders. The Borrower has not received any notice
                  (written or otherwise), and is not

<PAGE>   8
                                       8

                  otherwise aware, of any event or circumstances, whether
                  existing or pending, which would cause any Default or Event of
                  Default to occur with the lapse of time.

         (m)      DUE DILIGENCE. The Lender Group shall have completed and be
                  satisfied in its sole discretion with its review of the
                  results of its due diligence inquiries.

         (n)      MATERIAL ADVERSE CHANGE. No Material Adverse Change has
                  occurred and no event shall have occurred since March 31, 2000
                  which, in the sole discretion of the Lender Group, has had or
                  could reasonably be expected to have a Material Adverse
                  Effect, including without limitation, litigation or claims
                  threatened against the Borrower.

         (o)      Y2K COMPLIANCE. The lender Group shall have received a
                  certificate signed by an officer of the Borrower that all the
                  software used in the Business or owned, developed, installed,
                  packaged or customized by the Borrower, in its existing or
                  previous form, complies with year 2000 requirements in the
                  sole discretion of the Lender Group.

         (p)      FEES AND DISBURSEMENTS. The Lender Group shall have received
                  payment in full of all fees and out of pocket expenses payable
                  to the Lender Group and its agents which have become due in
                  accordance with the provisions hereof, including, without
                  limitation, the structuring fee described in section 4.3 and
                  payment of all disbursements and out of pocket expenses of the
                  Lender Group, First Ontario Management Ltd., and Crosbie
                  Capital Management Inc.

         (q)      INSURANCE. The Lender Group shall have received a certificate
                  of insurance in respect of all policies maintained by the
                  Borrower which shall name Southbridge and BMOCC as next loss
                  payee (after the Senior Lenders) and then First Ontario as
                  next loss payee or as otherwise specified by the Lender Group.

         (r)      LENDER GROUP SATISFIED RE: INSURANCE COVERAGE. The Lender
                  Group shall be satisfied with the insurance coverage of the
                  Borrower's business and Property on terms satisfactory to the
                  Lender Group in its sole and unfettered discretion.

         (s)      MATERIAL CONTRACTS. The Lender Group or its counsel shall have
                  reviewed copies of all documents including without limitation
                  all contracts, permits, licenses and leases material to the
                  business of the Borrower as determined by the Lender Group
                  acting reasonably.

         (t)      SECURITY SHARING AGREEMENT. The Lender Group shall have
                  received the Security Sharing Agreement duly executed by all
                  parties thereto and the Lender Group shall be satisfied that
                  the Security Sharing Agreement is in effect and is valid,
                  binding and enforceable as against all parties thereto.

         (u)      COMPLIANCE WITH LAWS AND MATERIAL CONTRACTS. The business and
                  operations of the Borrower comply in all material respects
                  with all Applicable Laws and, except as otherwise disclosed to
                  the Lenders, with the terms of all Material Contracts to which
                  the Borrower is a party including, without limitation,
                  contracts relating to Permitted Encumbrances and other
                  Indebtedness permitted hereunder.

         (v)      CONSENTS, APPROVALS. The Borrower and the Lender Group shall
                  have received all necessary consents, approvals, exemptions
                  and authorizations required to complete all the transactions
                  contemplated herein.

         (w)      EMPLOYMENT AND NON-COMPETITION AGREEMENT. Michael Steele shall
                  have entered into an employment and non-competition agreement
                  with the Borrower in form and substance satisfactory to the
                  Lender Group.

<PAGE>   9
                                       9

5.2 WAIVER. The terms and conditions stated in this Part 5.0 are inserted for
the sole benefit of the Lender Group and may be waived by it in whole or in part
and with or without terms or conditions in respect of the Borrowing.

                    PART 6.0 - REPRESENTATIONS AND WARRANTIES

6.1 REPRESENTATION AND WARRANTIES. The Borrower represents and warrants to the
Lender Group that:

         (a)      DUE INCORPORATION. The Borrower is duly incorporated,
                  organized and subsisting under the laws of its incorporating
                  jurisdiction. The Borrower has all necessary corporate power
                  and authority to own its properties and assets and to carry on
                  its business as now conducted and is or will be duly licensed
                  or registered or otherwise qualified in all jurisdictions
                  wherein the nature of its assets or the business transacted by
                  it makes such licensing, registration or qualification
                  necessary, except where failure to do so would not give rise
                  to any material legal impediment to the use of the property in
                  the business of the Borrower or the ability of the Borrower to
                  carry on the Business or to perform its obligations hereunder.

         (b)      POWER. The Borrower has full power and capacity to enter into,
                  deliver and perform its obligations under this Agreement, the
                  Security and all other instruments contemplated hereunder.

         (c)      DUE AUTHORIZATION AND NO CONFLICT. The execution, delivery and
                  performance by the Borrower of this Agreement, the Security,
                  and all other instruments contemplated hereunder and the
                  consummation of the transactions contemplated hereby and
                  thereby

                  (i)      have been duly authorized by all necessary corporate
                           action,

                  (ii)     do not and will not conflict with, result in any
                           breach or violation of, or constitute a default under
                           the constating documents or by-laws of, or any
                           Applicable Laws, determination or award presently in
                           effect and applicable to the Borrower, or of any
                           commitment, agreement or any other instrument to
                           which the Borrower is now a party or is otherwise
                           bound,

                  (iii)    do not (except for the Security) result in or require
                           the creation of any Security Interest upon or with
                           respect to any of the properties or assets of the
                           Borrower, and

                  (iv)     do not require the consent or approval (other than
                           those consents or approvals already obtained and
                           copies of which have been delivered to the Lender
                           Group) of, or registration or filing with, any other
                           party (including shareholders of the Borrower) or any
                           governmental body, agency or authority.

         (d)      VALID AND ENFORCEABLE OBLIGATIONS. This Agreement, the
                  Security and all other instruments contemplated hereunder are,
                  or when executed and delivered to the Lender Group will be,
                  legal, valid and binding obligations of the Borrower,
                  enforceable in accordance with their respective terms.

         (e)      TITLE TO ASSETS. The Borrower has a good and marketable title
                  to all its Property, free from any mortgage, charge, hypothec,
                  pledge, assignment, lien, security interest or other
                  encumbrance other than the Permitted Encumbrances.

<PAGE>   10
                                       10

         (f)      ALL ASSETS IN CORPORATIONS. All property (tangible or
                  intangible, including all Intellectual Property) used in
                  carrying on the Business is owned or leased by all or any of
                  the Borrower and the Group Subsidiaries.

         (g)      VALIDITY AND PRIORITY OF SECURITY. The Security constitutes
                  assignments, floating charges or security interests, as
                  applicable, on the undertaking and property and assets of the
                  Borrower purported to be assigned, mortgaged, charged or
                  subjected to a security interest thereby and ranks in priority
                  to any other Security Interests upon such undertaking and
                  property and assets other than Permitted Encumbrances.

         (h)      NO ACTIONS. Except as disclosed in Schedule "N", there are no
                  actions, suits, proceedings, inquiries or investigations
                  existing, pending or threatened, affecting the Borrower in any
                  court or before or by any federal, provincial or municipal or
                  other governmental department, commission, board, tribunal,
                  bureau or agency, Canadian or foreign, which is reasonably
                  likely to materially and adversely affect the financial
                  condition, property, assets, operations or business of the
                  Borrower, the ability of the Borrower to repay the Outstanding
                  Borrowing or which is reasonably likely to materially and
                  adversely affect the ability of the Borrower to perform any of
                  its obligations under this Agreement, the Security or any
                  other instrument contemplated hereunder, or the validity or
                  enforceability of this Agreement or the Security.

         (i)      FINANCIAL INFORMATION. The financial statements of the
                  Borrower furnished to the Lender Group under this Agreement or
                  which were furnished to the Lender Group to induce it to enter
                  into this Agreement including the Benchmark Financials and the
                  Borrower's Financials present fairly the financial condition
                  of the Borrower as at the dates thereof. Since March 31, 2000,
                  no Material Adverse Change has occurred in respect of the
                  financial position of the Borrower except as disclosed to the
                  Lender Group or its agents prior to Closing. All such
                  financial statements and all other information, certificates,
                  schedules, reports and other papers and data furnished to the
                  Lender Group are accurate, complete and correct in all
                  material respects, and all financial forecasts have been
                  prepared in good faith based upon the facts and circumstances
                  known to the Borrower at the time they were provided to the
                  Lender Group and are based upon reasonable assumptions. No
                  event has occurred or subsequent information has become
                  available to the Borrower since the said financial forecasts
                  were provided to the Lender Group which would give rise to a
                  Material Adverse Change in the said forecasts.

         (j)      NO DEFAULTS OR EVENTS OF DEFAULT. Except as disclosed by the
                  Borrower to the Lenders, no event has occurred and is
                  continuing, and no circumstance exists which has not been
                  waived which constitutes a Default or Event of Default
                  hereunder or a default or event of default in respect of any
                  material commitment, agreement or any other instrument to
                  which the Borrower is now a party or is otherwise bound,
                  entitling any other party thereto to accelerate the maturity
                  of amounts of principal owing thereunder, or which would give
                  rise to a Material Adverse Change upon the financial
                  condition, property, assets, operations or business of the
                  Borrower.

         (k)      COMPLIANCE WITH LAW. The Borrower is not in violation of any
                  terms of its constating documents or by-laws or of any law,
                  regulation, rule, order, judgment, writ, injunction, decree,
                  determination or award presently in effect and applicable to
                  it, the violation of which would give rise to a Material
                  Adverse Change.

         (l)      CAPITAL OF THE BORROWER. The authorized and issued share
                  capital of the Borrower is as set out in Schedule 6.1(l);

         (m)      NON-DILUTION. Except as contemplated by Schedule 6.1.m, no
                  Person now has any agreement, option or right capable of
                  becoming an agreement or option for the pledge, purchase,
                  subscription or issuance from the Borrower of any shares of
                  the Borrower issued or

<PAGE>   11
                                       11

                  unissued, and no other shares in the capital of the Borrower
                  will be issued without the prior written consent of the Lender
                  Group.

         (n)      LOCATION OF ASSETS. Except for inventory from time to time in
                  the possession of freight forwarders acting on behalf of the
                  Borrower in the ordinary course or stored in warehouses, all
                  property and assets of the Borrower are located at the
                  Borrower's place of business in Ontario, Quebec and
                  California.

         (o)      SUBSIDIARIES. None of the Parent, Borrower, or Group
                  Subsidiaries owns any shares or voting securities of any
                  Person or has any Subsidiaries except as set out herein.

         (p)      PARTNERSHIP. The Borrower is not in partnership with any
                  Person nor is it a participant in any joint venture.

         (q)      TAXES. Except as set out in Schedule 6.1(q), the Borrower has
                  filed all foreign, provincial and local tax returns which are
                  required to be filed and has paid all Taxes due pursuant to
                  such returns or pursuant to any assessment received by the
                  Borrower except such Taxes, if any, as are being contested in
                  good faith and as to which adequate reserves have been
                  provided. The Borrower is not in arrears in the payment of any
                  amount to any governmental body or agency including, without
                  limitation, amounts owing or to be remitted with respect to
                  employee withholdings for income tax or Canada Pension Plan,
                  goods and services tax or provincial sales taxes. The charges,
                  accruals and reserves on the books of the Borrower in respect
                  of any taxes or other governmental charges are adequate.

         (r)      INTELLECTUAL PROPERTY. The Borrower owns or has the right to
                  use all patents, trademarks, trade names, copyrights, licenses
                  and rights with respect thereto necessary for the conduct in
                  all material respects of its business as now conducted and as
                  presently proposed to be conducted, without any known conflict
                  with the rights of others, and in each case free from any lien
                  other than Permitted Encumbrances.

         (s)      INTELLECTUAL PROPERTY.

                  (i)      Schedule J attached hereto lists all issued patents,
                           patent applications and registrations, trade marks,
                           trade mark applications and registrations, copyright
                           applications and registrations, registered trade
                           names, and registered industrial designs, domestic or
                           foreign, owned by the Borrower and used in the
                           operation of the Business,

                           all of the foregoing, together with:

                           A.       all trade secrets, know-how, inventions and
                                    other intellectual property owned by the
                                    Borrower and material to the operation of
                                    the Business; and

                           B.       all computer systems and application
                                    software, including without limitation all
                                    documentation relating thereto and the
                                    latest revisions of all related object and
                                    source codes therefor, owned by the Borrower
                                    and material to the operation of the
                                    Business,

                           being hereinafter collectively called the
                           "Intellectual Property").

                  (ii)     The Borrower has good and valid title to all of the
                           Intellectual Property, free and clear of any and all
                           encumbrances, except in the case of any Intellectual
                           Property licensed to the Borrower as disclosed in
                           Schedule J. Complete and correct copies of all
                           agreements whereby any rights in any of the
                           Intellectual Property have been granted or licensed
                           to the

<PAGE>   12
                                       12

                           Borrower have been provided to the Purchaser. No
                           royalty or other fee is required to be paid by the
                           Borrower to any other person in respect of the use of
                           any of the Intellectual Property except as provided
                           in such agreements delivered to the Purchaser. The
                           Borrower has protected its rights in the Intellectual
                           Property in the manner and to the extent described in
                           Schedule J. Complete and correct copies of all
                           agreements whereby any rights in any of the
                           Intellectual Property have been granted or licensed
                           by the Borrower to any other person have been
                           provided to the Purchaser.

                  (iii)    Except as disclosed in Schedule J, and to the best of
                           the Borrower's knowledge after due inquiry, there are
                           no restrictions on the ability of the Borrower or any
                           successor to or assignee from the Borrower to use and
                           exploit all rights in the Intellectual Property. To
                           the best of the Borrower's knowledge after due
                           inquiry, all statements contained in all applications
                           for registration of the Intellectual Property were
                           true and correct as of the date of such applications.
                           Except as noted in Schedule J, each of the trade
                           marks and trade names included in the Intellectual
                           Property is in use. To the best of the Borrower's
                           knowledge after due inquiry, none of the rights of
                           the Borrower in the Intellectual Property will be
                           impaired or affected in any way by the transactions
                           contemplated by this Agreement.

                  (iv)     To the best of their knowledge after due inquiry, the
                           conduct of the Business and the use of the
                           Intellectual Property does not infringe, and the
                           Borrower has not received any notice, complaint,
                           threat or claim alleging infringement of, any patent,
                           trade mark, trade name, copyright, industrial design,
                           trade secret or other Intellectual Property or
                           propriety right of any other person, and the conduct
                           of the Business does not include any activity which
                           may constitute passing off.

                  (v)      To the best of their knowledge after due inquiry, the
                           computer systems, including hardware and software,
                           are free from viruses and the Borrower has taken, and
                           will continue to take, all steps and implement all
                           procedures necessary to ensure, so far as reasonably
                           possible, that such systems are free from viruses and
                           will remain so until the Closing.

         (t)      SOLVENCY. The Borrower is solvent, is able to pay its debts as
                  they become due and has capital sufficient to carry on its
                  business, now owns property having a value both at fair
                  valuation and at present fair saleable value greater than the
                  amount required to pay its debts, and will not be rendered
                  insolvent by the execution and delivery of this Agreement or
                  the Senior Loan Agreements or by the completion of the
                  transactions contemplated hereunder or thereunder.

         (u)      MARGIN SECURITIES. The Borrower does not own any margin
                  securities, and none of the proceeds of the borrowings
                  hereunder shall be used for the purpose of purchasing or
                  carrying any margin securities or for the purpose of reducing
                  or retiring any Indebtedness which was originally incurred to
                  purchase any margin securities.

         (v)      EMPLOYEE RELATIONS. To the best of the Borrower's knowledge
                  after due inquiry, there are no controversies pending or
                  threatened between the Borrower and any of its employees,
                  other than employee grievances arising in the ordinary course
                  of business which are not, in the aggregate, material to the
                  continued financial success and well-being of the Borrower,
                  and the Borrower is in compliance in all material respects
                  with all federal and provincial laws respecting employment and
                  employment terms, conditions and practices, except where the
                  failure to so comply would not give rise to a Material Adverse
                  Change.

         (w)      DISCLOSURE OF MATERIAL CONTRACTS. The Borrower has provided to
                  the Lender Group or its agents copies of all Material
                  Contracts to which it is a party or by which it is bound.

<PAGE>   13
                                       13

         (x)      ENVIRONMENTAL AUDIT REPORTS. The Borrower has provided the
                  Lender Group with all environmental audit reports and site
                  assessment reports in its possession. The Borrower is in
                  compliance with all Environmental Laws.

         (y)      FRENCH FORM OF NAME. The Borrower's full corporate name is
                  International Menu Solutions Inc. and the Borrower has no
                  French form of name. Other than its corporate name, the
                  Borrower does not use any other business name except those
                  described in Schedule J hereto.

         (z)      REAL PROPERTY. Schedule C to this Agreement contains a
                  complete and accurate description of the Real Property and of
                  the Borrower's interest in the Real Property. Except as
                  disclosed in this Agreement, the occupation and uses to which
                  the Real Property has been put by the Borrower are in material
                  compliance with all applicable statutes, by-laws, ordinances,
                  regulations, covenants, restrictions or official plans
                  (including, without limitation, applicable zoning by-laws,
                  building codes, regulations and ordinances).

         (aa)     ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule D
                  attached to this Agreement,

                  (i)      all facilities and property (including underlying
                           ground water) owned or leased by the Borrower have
                           been, and continue to be, owned, leased or used in
                           compliance with all Requirements of Environmental
                           Law;

                  (ii)     there have been no past, and there are no pending or
                           threatened:

                           A.       claims, complaints notices or requests for
                                    information received by the Borrower with
                                    respect to any alleged violation of any
                                    Requirements of Environmental Law concerning
                                    the Property; or

                           B.       complaints, notices or inquiries to the
                                    Borrower regarding potential liability under
                                    any Requirements of Environmental Law
                                    concerning the Property;

                  (iii)    to the best of the Borrower's knowledge after due
                           inquiry, there have been no Releases of Hazardous
                           Materials at, on or under any property now or
                           previously owned, leased or used by the Borrower,
                           that, singly or in the aggregate, have resulted in or
                           may be expected to result in a Material Adverse
                           Change and there is not now and has not been any
                           storage tanks located beneath the surface of any such
                           property;

                  (iv)     except as described in Schedule D hereof, each of the
                           Borrower and its predecessors in title has been
                           issued and is in compliance with all material
                           permits, certificates, approvals, licenses and other
                           authorizations under any Requirements of
                           Environmental Law to carry on its business;

                  (v)      to the best of the Borrower's knowledge after due
                           inquiry, there are no conditions that, directly or
                           indirectly, relate to environmental matters and any
                           property owned, leased or used by the Borrower,
                           (whether on, above or below the lands or any
                           structures, buildings or facilities, now or formerly
                           owned, operated or used by the Borrower, or by
                           adjoining properties or businesses) including,
                           without limitation, being located within an
                           environmentally sensitive area as determined by any
                           governmental authority, the condition of the soil or
                           ground water in the area, the use of urea
                           formaldehyde foam insulation, friable asbestos
                           fireproofing or insulation, PCBs or radioactive
                           substances that, singly or in the aggregate have
                           resulted in, or may be expected to result in, a
                           Material Adverse Change; and

<PAGE>   14
                                       14

                  (vi)     the Borrower is maintaining and its predecessors in
                           title have maintained an appropriate environmental
                           management system and compliance programs, policies
                           and procedures to manage its business and ensure
                           compliance with the Requirements of Environmental Law
                           and the proper understanding and management of all
                           environmental and occupational health and safety
                           matters.

         (bb)     CONTINGENT FINANCIAL OBLIGATIONS. Except for Contingent
                  Financial Obligations in favour of the Senior Lenders and as
                  set out in Schedule 6.1(bb), the Borrower does not have any
                  Contingent Financial Obligations. The Borrower has not
                  received notice of and is not otherwise aware of any event or
                  circumstance, whether existing or pending, which would cause
                  any Contingent Financial Obligation to become payable or
                  liquidated.

         (cc)     FULL DISCLOSURE. All information heretofore furnished by the
                  Borrower to the Lender Group for the purposes of, or in
                  connection with, this Agreement or any transactions
                  contemplated hereby is, and all such information hereinafter
                  furnished by the Borrower to the Lender Group will be, true,
                  accurate and complete in all material respects on the date as
                  of which such information is stated or certified. The Borrower
                  has disclosed to the Lender Group in writing any and all facts
                  which materially and adversely affect, or may affect, (to the
                  extent the Borrower can reasonably foresee) the Business,
                  operations or financial condition of the Borrower or the
                  ability of the Borrower to perform its obligations under this
                  Agreement and the Security.

         (dd)     "CSBIFA QUALIFICATIONS" The Borrower:

                  (i)      is a taxable Canadian corporation within the meaning
                           of the Income Tax Act (Canada);

                  (ii)     carries on no business other than the Business;

                  (iii)    not less than 90% of the fair market value of the
                           property of the Borrower is attributable to property
                           used by the Borrower in the Business;

                  (iv)     immediately prior to Closing, the Borrower and all
                           corporations related to it have fewer than 500 full
                           time employees and the ordinary place of employment
                           for 50% or more of such full time employees is
                           located in the Province of Ontario and the wages and
                           salaries payable to the employees whose ordinary
                           place of employment is located in the Province of
                           Ontario constitutes 50% or more of the total payroll
                           expense of the Borrower; and

                  (v)      immediately prior to Closing, the carrying value of
                           the assets of the Borrower and its Subsidiaries
                           calculated in the manner prescribed by the CSBIFA
                           legislation does not exceed $50,000,000.

                  The interpretation of the Borrower under Section 1.2 is not
                  applicable for the purposes of this subparagraph 6.1(dd).

         (ee)     ELIGIBLE USE OF FUNDS. The proceeds of the loan advance from
                  First Ontario contemplated by this Agreement shall not be used
                  to fund any of the following purposes:

                  (i)      relending unless permitted pursuant to the CSBIFA
                           legislation;

                  (ii)     investment in land except land that is incidental and
                           ancillary to the business of the Borrower;

                  (iii)    reinvestment outside of Canada;

<PAGE>   15
                                       15

                  (iv)     the purchasing or acquiring of the securities of any
                           person unless permitted pursuant to the CSBIFA
                           legislation;

                  (v)      the payment of dividends;

                  (vi)     a return of capital to the shareholders of the
                           Borrower; or

                  (vii)    to carry on a business through a permanent
                           establishment or branch operation outside of Canada.

6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in this Part 6.0 shall survive the execution and delivery
of this Agreement and the making of the Borrowing hereunder, regardless of any
investigation or examination made by the Lender Group or its counsel and the
Lender Group shall be deemed to have relied upon each of such representations
and warranties in making available each Borrowing hereunder.

                              PART 7.0 - COVENANTS

7.1 POSITIVE COVENANTS. From the date hereof and until the Outstanding Borrowing
is repaid in full, the Borrower will observe and perform, or will cause the
observance and performance of each of the following covenants, unless compliance
therewith shall have been waived in writing by the Majority Lenders:

         (a)      EXISTENCE. The Borrower will do or cause to be done all such
                  things as are necessary to maintain its corporate existence in
                  good standing, to ensure that it has at all times the right
                  and is duly qualified to conduct its business and to obtain
                  and maintain all rights, privileges and franchises necessary
                  for the conduct of its business.

         (b)      CONDUCT OF BUSINESS. The Borrower will maintain, operate and
                  use its properties and assets, and will carry on and conduct
                  its business in a proper and efficient manner so as to
                  preserve and protect such properties and assets and business
                  and the profits thereof.

         (c)      PAYMENT OF PRINCIPAL, INTEREST AND EXPENSES. The Borrower will
                  duly and punctually pay or cause to be paid to the Lender
                  Group the Outstanding Borrowing at the times and places and in
                  the manner provided for herein.

         (d)      PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and
                  discharge promptly when due all Taxes, assessments and other
                  governmental charges or levies imposed upon it or upon its
                  properties or assets or upon any part thereof, as well as all
                  claims of any kind (including claims for labour, materials and
                  supplies) which, if unpaid, would by law become a Lien or
                  charge upon any such properties or assets; but the Borrower
                  shall not be required to pay any such Tax, assessment, charge
                  or levy or claim if the amount, applicability or validity
                  thereof shall currently be contested in good faith by
                  appropriate proceedings and if the Borrower shall have set
                  aside on its books a reserve to the extent required by GAAP in
                  an amount which is reasonably adequate with respect thereto.

         (e)      REPORTING REQUIREMENTS. The Borrower shall deliver to each of
                  Southbridge, Crosbie Capital Management Inc. (as agent of
                  First Ontario), and BMOCC or such other party as the Lender
                  Group may otherwise from time to time direct:

                  (i)      within 90 days of the Fiscal Year end of the
                           Borrower, one copy of its annual audited financial
                           statements which shall be prepared on a Consolidated
                           basis by the auditor of the Borrower, including the
                           balance sheet and statements of income, retained
                           earnings and

<PAGE>   16
                                       16

                           changes in financial position, together with a
                           detailed unqualified report of the auditors of the
                           Borrower and all supporting notes and schedules (the
                           "Annual Financials");

                  (ii)     within 90 days of the Fiscal Year end of the
                           Borrower, a certificate signed by the President or
                           Treasurer of the Borrower to the effect that the
                           Annual Financials present fairly the financial
                           position of the Borrower at the date thereof and have
                           been prepared in accordance with GAAP;

                  (iii)    within 30 days prior to the end of each Fiscal Year
                           an annual business plan and forecast for the next two
                           Fiscal Years consisting of:

                           A.       monthly detailed pro forma balance sheets,
                                    income statements and statements of changes
                                    in financial position for the Borrower (all
                                    prepared in accordance with GAAP) together
                                    with covenant calculations and such
                                    explanations, notes and supporting
                                    information which are required to explain
                                    and supplement the information so provided
                                    and key assumptions (particularly relating
                                    to revenues, gross margins, detailed
                                    general, selling and administrative expenses
                                    and working capital);

                           B.       a written point form commentary by the
                                    President of the Borrower describing any
                                    changes in any Fiscal Year"s budget compared
                                    to the most recent previously submitted plan
                                    and forecast for such Fiscal Years;

                           C.       a capital expenditure plan indicating:

                                    (i)      the nature and amount of capital
                                             expenditures;

                                    (ii)     planned expenditures for facilities

                                    proposed to be incurred in such Fiscal
                                    Years; and

                           D.       a sales forecast by month for the following
                                    Fiscal Year setting out anticipated revenue
                                    by prior year comparatives and a brief note
                                    explaining each significant line of the said
                                    forecast;

                           which annual business plan is subject to approval by
                           the Lender Group, acting reasonably.

                  (iv)     within 30 days after the end of each month a monthly
                           financial report consisting of:

                           A.       monthly and year-to-date financial
                                    statements on a Consolidated basis in a form
                                    consistent with its business plan (the
                                    "Monthly Financials") which shall contain a
                                    comparison of budget to the actual results
                                    of both the current and prior year, a
                                    calculation of all the financial covenants
                                    provided for in section 7.2 hereof);

                           B.       a forecast of its balance sheet, income
                                    statement, and cash flow statement
                                    calculated on a rolling 12 month basis with
                                    up-to-date pro forma calculations of the
                                    financial covenants contained in section 7.2
                                    herein and the Incorporated Covenants
                                    certified by the President or the Chief
                                    Financial Officer of the Borrower;

                           C.       a written bullet point commentary signed by
                                    the President or Chief Financial Officer of
                                    the Borrower on the material variances in
                                    actual results to date from budgeted results
                                    and on the outlook for the business of the
                                    Borrower for the balance of the Fiscal Year
                                    in comparison to the budget for that Fiscal
                                    Year; and

<PAGE>   17
                                       17

                           D.       a certificate signed by the President or
                                    Chief Financial Officer of the Borrower
                                    stating that:

                                    (1)      the amounts of vacation pay, wages,
                                             source deductions and taxes
                                             required to be remitted by the
                                             Borrower and those said amounts not
                                             yet due have been or will be so
                                             remitted in a timely fashion and
                                             are in good standing since the date
                                             of the last such certificate;

                                    (2)      the property and business
                                             operations and activities of the
                                             Borrower are to, the best of such
                                             officers after due inquiry, in
                                             compliance in all material respects
                                             with all Environmental Laws and
                                             Environmental Orders or describing
                                             in reasonable detail any such
                                             non-compliance and the Borrower's
                                             plans, if any, to remedy such
                                             non-compliance; and

                                    (3)      that the Borrower is not in breach
                                             of any of the covenants or
                                             representations and warranties
                                             contained herein, or if such is not
                                             the case, providing detailed
                                             particulars of all such breaches,
                                             together in either case with
                                             reasonably detailed evidence of
                                             compliance with all financial
                                             covenants contained herein; and

                  (v)      coincident with their delivery to the Senior Lenders
                           a copy of all reports and notices given or delivered
                           to the Senior Lenders to the extent that they are not
                           duplicative of the information provided for herein,
                           and a summary sheet which converts any information
                           contained therein expressed as U.S. dollars into
                           Canadian dollars and combines such information with
                           the information provided to all Senior Lenders on a
                           consolidated basis; and

                  (vi)     upon request, such further information concerning the
                           financial position and business operations as the
                           Lender Group may from time to time request.

                  All forecasts and projections contemplated in the financial
                  reports and summaries described above shall be prepared by
                  management of the Borrower based on the best available
                  information and shall be applied on the basis of an analysis
                  which shall be consistently applied.

         (f)      LOCATION OF ASSETS. The Borrower shall give to the Lender
                  Group prompt written notice of any change in the location of
                  all property and assets of the Borrower such that the
                  representation and warranty set out in paragraph 6.1(n)
                  hereof, as updated, shall be true and correct at all times.

         (g)      INSURANCE. The Borrower shall insure and keep insured its
                  business, properties and assets, placed with such insurers and
                  with such coverage (including without limitation business
                  interruption insurance and all existing coverages now in
                  place) and against such loss or damage to the full insurable
                  value of such properties and assets without co-insurance as
                  the Lender Group shall reasonably require or, in the absence
                  of such requirement, to the extent insured against by
                  comparable corporations engaged in comparable businesses. Upon
                  request by the Lender Group, the Borrower shall promptly
                  supply the Lender Group with copies of all insurance policies;
                  losses under all such insurance policies affecting assets
                  charged by the Security shall be payable to the Lender Group
                  as loss payee as its interest may appear and each such policy
                  shall provide for a minimum of 45 days notice to the Lender
                  Group of cancellation or lapse; the Borrower shall pay or
                  cause to be paid all premiums necessary to maintain any such
                  insurance policies in good standing as such premiums become
                  due and payable. At the Lender Group"s request, the Borrower
                  shall retain, at the Borrower's expense, an independent
                  insurance consultant and/or auditor, to review the adequacy of
                  the Borrower's

<PAGE>   18
                                       18

                  insurance coverage and to confirm compliance with this
                  covenant. If the said independent consultant and/or auditor
                  shall recommend changes in the Borrower's insurance coverage
                  or other arrangements, the Borrower shall promptly implement
                  such recommendations.

         (h)      BOOKS AND RECORDS. The Borrower shall at all times maintain
                  proper records and books of account and therein make true and
                  correct entries of all dealings and transactions relating to
                  its business, shall keep such books, records and accounts at
                  the principal place of business of the Borrower (and shall not
                  maintain any duplicate of such books, records and accounts
                  elsewhere except for electronic back-ups required for data
                  recovery). The Borrower shall make its books of account and
                  other accounting and corporate records and its property,
                  plants and equipment available for inspection by the Lender
                  Group or any agent of the Lender Group and make its senior
                  management available to discuss with the Lender Group its
                  affairs, finances and accounts, in each case upon reasonable
                  prior notice to the Borrower at all reasonable times.

         (i)      ACCESS. The Borrower will permit the Lender Group through its
                  officers or employees or through any consultants or agents
                  retained by it, upon request, to have access at any reasonable
                  time and from time to time, to any of the Borrower's
                  management employees and premises and to any records,
                  information or data in its possession so as to enable the
                  Lender Group to ascertain the state of the Borrower's
                  financial condition or operations and will permit the Lender
                  Group to make copies of and abstracts from such records,
                  information or data and will upon request of the Lender Group
                  to deliver to the Lender Group copies of such records,
                  information or data.

         (j)      NOTICE OF ADVERSE CHANGE. The Borrower shall give to the
                  Lender Group prompt written notice of any Material Adverse
                  Change in the condition of its business, financial or other,
                  or of any material loss, destruction or damage to its
                  properties and assets.

         (k)      NOTICE OF NAME CHANGE OR ACQUISITION OF ASSETS. The Borrower
                  shall give to the Lender Group written notice thirty days
                  prior to any change of name or any acquisition of assets in
                  any jurisdiction outside the Province of Ontario.

         (l)      NOTICE OF DEFAULT IN THIS AGREEMENT OR SENIOR LOAN AGREEMENTS.
                  The Borrower shall give to the Lender Group prompt written
                  notice of:

                  (i)      any Default or Event of Default hereunder; and

                  (ii)     any event of default arising pursuant to the Senior
                           Loan Agreements.

         (m)      NOTICE OF LITIGATION. The Borrower will give to the Lender
                  Group prompt written notice of any action, suit, litigation,
                  or other proceeding which is commenced or threatened against
                  it and which involves a claim or potential claim in excess of
                  $50,000 or an aggregate of claims or potential claims in
                  excess of $100,000.

         (n)      REGISTRATION OF SECURITY. The Borrower will provide the Lender
                  Group with such assistance and do such things as the Lender
                  Group may from time to time request so that the Security and
                  any other instruments of conveyance or assignment effected
                  pursuant to this Agreement or otherwise will be and remain
                  registered, recorded or filed from time to time in such manner
                  and in such places as may in the opinion of the Lender Group
                  be necessary or advisable in perfecting the Security Interests
                  constituted thereby.

         (o)      AFTER ACQUIRED PROPERTY AND FURTHER ASSURANCES. The Borrower
                  shall notify the Lender Group in writing in advance of any
                  proposed acquisition and confirmation of completion by the

<PAGE>   19
                                       19

                  Borrower in an amount greater than $100,000 of any property or
                  asset (unless contemplated by the Borrower's capital
                  expenditure budget) including a full description of such
                  property or asset, and the Borrower shall from time to time
                  execute and deliver to the Lender Group, in form satisfactory
                  to the Lender Group and its counsel, all such further deeds or
                  other instruments of conveyance, assignment, transfer,
                  mortgage, pledge, charge or security interest in connection
                  with all property or assets acquired by the Borrower after the
                  date of this Agreement, including any insurance thereon.

         (p)      NON-DILUTION. Except as contemplated by Schedule 6.1(p) or
                  approved by the board of directors of the Borrower, the
                  Borrower shall not enter into or grant any agreement, option
                  or right capable of becoming an agreement or option for the
                  pledge, purchase, subscription or issuance from the Borrower
                  of any shares of the Borrower, issued or unissued, and no
                  other shares in the capital of the Borrower will be issued
                  without the prior written consent of the Lender Group.

         (q)      ENVIRONMENTAL MATTERS. The Borrower shall,

                  (i)      use and operate all of its facilities and properties
                           in compliance with all Requirements of Environmental
                           Law, keep all permits, approvals, certificates,
                           licenses and other authorizations relating to
                           environmental matters in effect and remain in
                           compliance therewith, and handle all Hazardous
                           Materials in compliance with all applicable
                           Requirements of Environmental Law;

                  (ii)     immediately notify the Lender Group of any event or
                           occurrence that will, or is likely to give rise to a
                           report, inquiry or investigation and provide copies
                           upon receipt of all written claims, complaints,
                           investigations, notices or inquiries relating to the
                           condition of the Borrower's facilities and properties
                           or compliance with Requirements of Environmental Law,
                           and shall proceed diligently to resolve any such
                           claims, complaints, investigations, notices or
                           inquiries relating to compliance with Requirements of
                           Environmental Law in a manner which in the reasonable
                           judgment of the Lender Group is appropriate in the
                           circumstances and not adverse to the interests of the
                           Lender Group under this Agreement;

                  (iii)    immediately notify the Lender Group of any proposed
                           business activity to be conducted by the Borrower
                           that involves the use or handling of Hazardous
                           Materials or which increases the potential
                           environmental liability of the Borrower in any
                           manner;

                  (iv)     immediately notify the Lender Group of any proposed
                           change in the use or occupation of any real property
                           occupied by the Borrower before the change occurs or
                           of any proposal of the Borrower to acquire or become
                           a tenant in any real property;

                  (v)      immediately notify the Lender Group of any release of
                           any Hazardous Material or of any other environmental
                           incident affecting the Borrower or any of its
                           properties or assets that has resulted or may result
                           in a Material Adverse Change;

                  (vi)     provide such information and certifications which the
                           Lender Group may reasonably request from time to time
                           to evidence compliance by the Borrower of all its
                           obligations under this Agreement and the Security
                           Documents;

                  (vii)    undertake, at the Borrower's expense, such
                           environmental audits or studies on any property
                           owned, leased or used by the Borrower or the
                           operations of its business as the Lender Group may
                           reasonably request;

<PAGE>   20
                                       20

                  (viii)   provide, at the Borrower's expense, all third party
                           consents, authorizations and directions that are
                           required to permit any inspection or review of any
                           property owned, leased or used by the Borrower and
                           the activities carried out thereon and the Borrower
                           hereby consents to the release to the Lender Group,
                           or its representatives, of information relating to
                           the same and compliance by the Borrower and others
                           having an interest in the same with all Requirements
                           of Environmental Law; and

                  (ix)     maintain an appropriate environmental management
                           system and compliance programs, policies and
                           procedures to manage its business and ensure
                           compliance with the Requirements of Environmental Law
                           and the proper understanding and management of all
                           environmental and occupational health and safety
                           matters.

         (r)      ILLNESS & INCAPACITY. If, at any time, Mr. Michael Steele
                  shall be prevented by reason of illness or other physical
                  incapacity from performing his duties as senior executive
                  officer of the Borrower for a period of two (2) consecutive
                  months or more, and, if such incapacity relates to an illness,
                  a duly qualified medical physician has certified that his
                  condition is not likely to materially improve so as to permit
                  him to re-assume his duties hereunder within the then next
                  following month, then the Borrower shall immediately appoint,
                  as a temporary replacement for Mr. Michael Steele, a senior
                  executive officer (to be consented to by the Lender Group in
                  its sole discretion), to perform the duties and assume the
                  responsibilities of Mr. Michael Steele during his continued
                  illness or other physical incapacity.

         (s)      INTELLECTUAL PROPERTY. The Borrower shall use commercially
                  reasonable best efforts to cause any past and current
                  employee, independent contractor or consultant which has dealt
                  with any intellectual property of the Borrower to execute and
                  deliver an assignment and waiver of any right relating to the
                  intellectual property of the Borrower.

         (t)      CSBIFA QUALIFICATIONS. The Borrower will give to the Lender
                  Group prompt written notice if any of the following cease to
                  be true:

                  (i)      the Borrower is a taxable Canadian corporation within
                           the meaning of the Income Tax Act (Canada);

                  (ii)     the Borrower carries on no business other than the
                           Business;

                  (iii)    not less than 90% of the fair market value of the
                           property of the Borrower is attributable to property
                           used by the Borrower in the Business;

                  (iv)     the Borrower and its Subsidiaries have fewer than 500
                           full time employees and the ordinary place of
                           employment for 50% or more of such full time
                           employees is located in the Province of Ontario and
                           the wages and salaries payable to the employees whose
                           ordinary place of employment is located in the
                           Province of Ontario constitutes 50% or more of the
                           total payroll expense of the Borrower; or

                  (v)      the carrying value of the assets of the Borrower and
                           its Subsidiaries calculated in the manner prescribed
                           by the CSBIFA legislation does not exceed
                           $50,000,000.

         (u)      REGISTRATION

                  (i)      On or before August 31, 2000, the Parent shall file
                           with the U.S. Securities & Exchange Commission a
                           registration statement (a "Qualifying Registration
                           Statement") which shall include shares of the Common
                           Stock of the Parent which will be available to the
                           Lenders:

<PAGE>   21
                                       21

                           A.       upon conversion or exchange of any
                                    securities held by the Lenders for Common
                                    Stock of the Parent; and

                           B.       upon the exercise of any warrants issued by
                                    the Parent and held by any of the Lenders
                                    and conversion of the Class X shares of the
                                    Borrower for Common Stock of the Parent.

                  (ii)     On or before May 31, 2001, the Securities and
                           Exchange Commission shall have declared the
                           Qualifying Registration Statement described in
                           Section 7.1(u)(i) above effective so that the Common
                           Stock of the Parent to be issued to the Lenders may
                           be freely sold by the Lenders under the Qualifying
                           Registration Statement without any holding periods or
                           resale restrictions applicable to legended securities
                           in the United States."

7.2 FINANCIAL COVENANTS. The Borrower shall maintain and keep in full force and
effect each of the financial covenants set forth below. The calculations and
determination of each such financial covenant, and all accounting terms
contained therein, shall be calculated and construed in accordance with GAAP:

         (a)      WORKING CAPITAL OF THE BORROWER. The Borrower shall at all
                  times after the First Advance maintain Working Capital of not
                  less than $2,750,000.00.

         (b)      INCORPORATED COVENANTS. Borrower shall at all time after
                  Closing maintain the Incorporated Covenants.

         (c)      TARGETS. For any rolling three month period after the First
                  Advance, the Borrower shall maintain its consolidated revenue
                  and EBITDA at not less than 85% of that forecasted in the
                  Consolidated Forecasts contained in Schedule "M" hereof.

If the Incorporated Covenants are in conflict with or impose a more burdensome
obligation on the Borrower than the respective covenants set out in paragraph
7.2(a) hereof, then the obligation of the Borrower shall be to perform the more
burdensome respective obligation imposed by the Incorporated Covenants.

If the covenants set out in paragraph 7.2(a) hereof are in conflict with or
impose a more burdensome obligation on the Borrower than the respective
Incorporated Covenants, then the obligation of the Borrower shall be to perform
the more burdensome respective obligation imposed by the covenants set out in
paragraph 7.2(a) hereof, as applicable.

7.3 NEGATIVE COVENANTS. From the date hereof and until the Outstanding Borrowing
is paid in full, the Borrower shall adhere to the following covenants unless
waived in writing by the Majority Lenders:

         (a)      NOT TO AMALGAMATE, ETC. The Borrower shall not enter into any
                  transaction or series of related transactions (whether by way
                  of amalgamation, merger, winding-up, consolidation,
                  reorganization, reconstruction, continuance, transfer, sale,
                  lease or otherwise) whereby all or substantially all of its
                  undertaking, properties, rights or assets would become the
                  property of any other Person or, in the case of amalgamation
                  or continuance, of the continuing corporation resulting
                  therefrom.

         (b)      NEGATIVE PLEDGE. The Borrower shall not create, assume, incur
                  or suffer to exist any Security Interest in or upon any of
                  their respective undertakings, properties, rights or assets
                  except for:

                  (i)      Permitted Encumbrances;

<PAGE>   22
                                       22

                  (ii)     Security Interests in respect of which the Lender
                           Group has given its prior written consent as to
                           existence and ranking; and

                  (iii)    Security Interests in inventory and accounts
                           receivable in favour of an operating lender.

         (c)      NO GUARANTEES. The Borrower shall not be or become liable,
                  directly or indirectly, contingently or otherwise, for any
                  obligation of any other Person by Guarantee other than as
                  permitted hereunder or in connection with a Permitted
                  Encumbrance.

         (d)      RESTRICTIONS ON SUBSIDIARIES, INVESTMENTS AND LOANS. The
                  Borrower shall not, directly or indirectly, acquire or form
                  any Subsidiary or make any loan to or investment in, or
                  purchase or otherwise acquire or hold any shares or securities
                  of, any other Person except as contemplated herein. The
                  Borrower shall not become a partner in any partnership or a
                  participant in any joint venture.

         (e)      RELOCATION OF ASSETS. The Borrower shall not locate or permit
                  to be situated any of its property or assets in any
                  jurisdiction other than as set out in section 6.1(v) without
                  having first (i) obtained the prior consent of the Lender
                  Group in writing and (ii) taken such action as is necessary to
                  perfect a Security Interest in favour of the Lender Group in
                  such property or assets; (iii) if a leasehold premises,
                  obtained a form of non-disturbance agreement satisfactory to
                  the Lender Group, and (iv) delivered such opinions of counsel
                  with respect thereto as the Lender Group may reasonably
                  require, all at the Borrower's expense.

         (f)      PAYMENTS TO SHAREHOLDERS. The Borrower shall not declare or
                  make any payment to any shareholder of the Borrower or any
                  Person related thereto, other than the Lender Group, without
                  the prior written consent of the Lender Group, except regular
                  periodic payments for salary and remuneration made to
                  employees in the ordinary course of business or except as
                  required pursuant to agreements existing prior to the date
                  hereof as disclosed to the Lender Group.

         (g)      CAPITAL EXPENDITURES. The Borrower shall not make Capital
                  Expenditures in excess of the Permitted Capital Expenditures
                  without the prior written consent of the Lender Group.

         (h)      LEASE PAYMENTS. The aggregate Lease Payments and payments
                  pursuant to Capitalized Lease Obligations made by the Borrower
                  during any Fiscal Year shall not exceed $1,000,000 without the
                  prior written consent of the Lender Group.

         (i)      DISPOSITION OF ASSETS. The Borrower shall not sell, assign,
                  transfer, lease (as lessor) or otherwise dispose of any of its
                  properties or assets other than inventory and obsolete or
                  surplus fixed assets in the ordinary course of business.

         (j)      INVENTORY AND BONA FIDE. Except for purchases and sales
                  amongst the Group Subsidiaries, the Borrower shall purchase
                  and sell inventory only from and to parties respectively at
                  arm"s length to the Borrower.

         (k)      CHANGE OF BUSINESS. The Borrower shall not change the nature
                  of its business or discontinue any of its material business.

         (l)      NO AMENDMENT TO ORGANIZATIONAL DOCUMENTS, FISCAL YEAR OR
                  SENIOR LOAN AGREEMENTS. The Borrower shall not amend its
                  organizational documents or change its Fiscal Year end or
                  agree to any amendment or refinancing of the terms, conditions
                  and provisions of the Senior

<PAGE>   23
                                       23

                  Loan Agreements as such exist on the Closing Date, without the
                  prior written consent of the Lender Group.

         (m)      NO REDUCTION IN INSURANCE COVERAGE. The Borrower shall not
                  reduce the extent or scope of its insurance coverage without
                  the prior written consent of the Lender Group.

         (n)      NO MATERIAL CONTRACTS. The Borrower shall not enter into, or
                  become bound by, any Material Contracts without the prior
                  written consent of the Lender Group except in the ordinary
                  course of business.

         (o)      ELIGIBLE USE OF FUNDS. The proceeds of the loan advances from
                  First Ontario contemplated by this Agreement shall not be used
                  to fund any of the following purposes:

                  (i)      relending unless permitted pursuant to the CSBIFA
                           legislation;

                  (ii)     investment in land except land that is incidental and
                           ancillary to the business of the Borrower;

                  (iii)    reinvestment outside of Canada;

                  (iv)     the purchasing or acquiring of the securities of any
                           person unless permitted pursuant to the CSBIFA
                           legislation;

                  (v)      the payment of dividends;

                  (vi)     a return of capital to the shareholders of the
                           Borrower; or

                  (vii)    to carry on a business through a permanent
                           establishment or branch operation outside of Canada.

         (p)      ACQUISITION. The Borrower shall not complete the acquisition
                  of Great American Barbeque Company unless it has obtained a
                  new working capital credit facility of at least $1,000,000 USD
                  on terms satisfactory to the Lender Group.

7.4 TRACING OF FUNDS. For greater certainty, the proceeds of the loan advance
from First Ontario shall not be used for any purpose which are not an eligible
use of funds pursuant to section 18 of the Community Small Business Investment
Funds Act (Ontario). Such ineligible expenditures shall be paid from the
proceeds of the loan advance from Southbridge and BMOCC.

7.5 INCURRING FURTHER DEBTS. Subject to paragraph 7.3(b) hereof, from the date
hereof and until the Outstanding Borrowing is paid in full, the Borrower shall
not incur any additional secured indebtedness or indebtedness ranking pari passu
or senior to the Outstanding Borrowing without the prior written consent of
Southbridge and BMOCC except Indebtedness secured by Permitted Encumbrances.

                               PART 8.0 - SECURITY

8.1 OBLIGATION TO PROVIDE. As security for the repayment of the Outstanding
Borrowing, and the discharge and performance of all obligations of the Borrower
to the Lender Group hereunder, the Borrower shall issue or cause to be issued in
favour of the Lender Group the security contemplated under this Part 8.0 which
shall rank in priority to the security of any other Person (other than the
Senior Lenders) unless specifically provided.

<PAGE>   24
                                       24

8.2 SECURITY. Subject to section 8.3 hereof, the Borrower shall execute and
deliver to or shall cause to be executed and delivered to the Lender Group in
form and substance satisfactory to the Lender Group the following documents:

         (a)      in respect of First Ontario, a general security agreement
                  creating a floating charge on all the undertaking, property
                  and assets of any or all of the Parent, the Borrower and the
                  Group Subsidiaries including, without limitation, all
                  intellectual property, licenses and leases in registerable
                  form (as appropriate); and in respect of Southbridge and
                  BMOCC, a general security agreement creating a fixed charge on
                  all the undertaking, property and assets of any or all of the
                  Parent, the Borrower and the Group Subsidiaries including,
                  without limitation, all intellectual property, licenses and
                  leases in registerable form (as appropriate);

         (b)      an assignment of insurance policies and proceeds thereof
                  issued to any or all of the Parent, the Borrower and the Group
                  Subsidiaries covering its business or Property;

         (c)      a pledge by the Borrower and the Parent to the Lender Group of
                  all of the shares of each of the Group Subsidiaries;

         (d)      a guarantee from each of the Parent, and Group Subsidiaries in
                  respect of the obligations of the Borrower pursuant to this
                  Agreement, such guarantee to be secured by the respective
                  general security agreement and assignment of insurance
                  policies and proceeds thereof described in paragraphs (a) and
                  (b) above; and

         (e)      all such other security agreements which the Lender Group may
                  reasonably require.

For purposes of this section 8.2, the interpretation of Borrower in section 1.2
does not apply.

8.3 FIRST ONTARIO SUBORDINATION OF SECURITY. Notwithstanding any other provision
in this Agreement, First Ontario hereby subordinates all existing and future
security now or hereinafter delivered by the Borrower to First Ontario pursuant
to this Agreement (collectively, the "Subordinate Security") to and in favour of
all existing security now or hereafter delivered by the Borrower to Southbridge
and BMOCC pursuant to this Agreement (collectively, the "Senior Security") and
all liens, charges, security interests and other encumbrances contained in the
Senior Security shall, in all events and under all circumstances, rank in
priority to all liens, charges, security interests and other encumbrances
contained in the Subordinate Security.

8.4 DISCHARGE OF PPSA REGISTRATIONS. The Borrower shall execute and deliver to
or shall cause to be executed and delivered to the Lender Group in form and
substance satisfactory to the Lender Group documents evidencing the discharge of
the registrations under the Personal Property Securities Act (Ontario) and
similar legislation in other jurisdictions in favour of any Person (other than
the Senior Lenders) against the Property of the Borrower unless consented to in
writing by the Lender Group.

8.5 ACKNOWLEDGMENT OF SECURITY ARRANGEMENTS. The Borrower hereby agrees with,
and acknowledges to, the Lender Group that all of the security granted to First
Ontario and BMOCC pursuant to the subordinated loan agreement dated May 10, 1999
between First Ontario, BMOCC, the Parent, and the Borrower is continuing
security for all obligations of the Borrower to First Ontario and BMOCC,
including all obligations of the Borrower to Southbridge, First Ontario and
BMOCC under the credit facility contemplated by this Agreement.

8.6 FURTHER ASSURANCES. The Borrower from time to time shall deliver or cause to
be delivered to the Lender Group duly executed documents in form and substance
satisfactory to the Lender Group and its counsel as may be reasonably requested
by the Lender Group for the purpose of giving effect to this Agreement or the
Security or for the purpose of establishing compliance with the representations,
warranties and conditions of this Agreement.

<PAGE>   25
                                       25

                          PART 9.0 - EVENTS OF DEFAULT

9.1 EVENTS OF DEFAULT. Notwithstanding anything to the contrary herein, the
Outstanding Borrowing shall, at the option of the Lender Group, become
immediately due and payable to the Lender Group and the Security shall, at the
option of the Lender Group, become immediately enforceable upon the occurrence
of any of the following events:

         (a)      FAILURE TO PAY PRINCIPAL OR INTEREST - if the Borrower fails
                  to make payment within 2 Business Days of the day on which any
                  principal amount or interest payable hereunder is due;

         (b)      FAILURE TO PAY OTHER AMOUNTS - if the Borrower fails to make
                  payment when due of any amount payable hereunder other than
                  principal or interest and if such payment is not made within 5
                  Business days of the day on which such payment is due;

         (c)      FALSE REPRESENTATIONS, ETC. - if any representation, warranty,
                  certificate, statement or report made or given herein or
                  otherwise in connection with the Credit Facility is false or
                  erroneous in any material respect;

         (d)      CROSS-DEFAULT - if the Borrower defaults in the payment, when
                  due, of any Indebtedness to any Person(s), and such default
                  has not been waived by such Person(s); or such Indebtedness is
                  accelerated or otherwise becomes due and payable prior to the
                  stated maturity thereof;

         (e)      CROSS DEFAULT TO THE SENIOR LOAN AGREEMENTS - if the Borrower
                  is in default of any obligation which has not been waived by
                  the Senior Lenders under a Senior Loan Agreement;

         (f)      RECEIPT OF NOTICE FROM SENIOR LENDER. If the Lender Group
                  receives notice from a Senior Lender that a payment may not be
                  made to the Lender Group by the Borrower.

         (g)      DEFAULT IN OTHER COVENANTS - if, other than in respect of any
                  covenant to pay, there is any default or failure in the
                  observance or performance of any other act hereby required to
                  be done or any other covenant or condition hereby required to
                  be observed or performed, and the default or failure continues
                  for 5 Business Days after notice by the Lender Group to the
                  Borrower specifying such default or failure;

         (h)      CHANGE IN OWNERSHIP OR CONTROL - if there is any sale or
                  pledge of the beneficial ownership of the shares in the Parent
                  owned by Michael Steele or if any Person holds more than 30%
                  of the issued voting shares of the Parent;

         (i)      INSURANCE LAPSE - if any insurance on the properties or assets
                  of the Borrower lapses and such coverage shall not be
                  reinstated within 15 Business Days of such lapse;

         (j)      INSOLVENCY - if the Borrower is unable to pay debts as such
                  debts become due, or is, or is adjudged or declared to be, or
                  admits to being, bankrupt or insolvent;

         (k)      VOLUNTARY PROCEEDINGS - if the Borrower makes a general
                  assignment for the benefit of creditors; or any proceeding or
                  filing is instituted or made by the Borrower seeking relief on
                  its behalf as debtor, or to adjudicate it a bankrupt or
                  insolvent, or seeking liquidation, winding-up, reorganization,
                  arrangement, adjustment or composition of it or its debts
                  under any similar law relating to bankruptcy, insolvency,
                  reorganization or relief of debtors, or seeking appointment of
                  a receiver, trustee, custodian or other similar official for
                  it or for any substantial part of its

<PAGE>   26
                                       26

                  properties or assets; or the Borrower takes any corporate
                  action to authorize any of the actions set forth in this
                  section 9.1(k);

         (l)      INVOLUNTARY PROCEEDINGS - if any notice of intention is filed
                  or any proceeding or filing is instituted or made against the
                  Borrower in any jurisdiction seeking to have an order for
                  relief entered against it as debtor or to adjudicate it a
                  bankrupt or insolvent, or seeking liquidation, winding-up,
                  reorganization, arrangement, adjustment or composition of it
                  or its debts under any law relating to bankruptcy, insolvency,
                  reorganization or relief of debtors, or seeking appointment of
                  a receiver, trustee, custodian or other similar official for
                  it or for any substantial part of its properties or assets or
                  seeking possession, foreclosure or retention, or sale or other
                  disposition of, or other proceedings to enforce security over,
                  all or a substantial part of the assets of the Borrower unless
                  the same is being contested actively and diligently in good
                  faith by appropriate and timely proceedings and is dismissed,
                  vacated or stayed within 30 days of institution thereof;

         (m)      RECEIVER, ETC. - if a receiver, liquidator, trustee,
                  sequestrator or other officer with like powers is appointed
                  with respect to, or an encumbrancer takes possession of, or
                  forecloses or retains, or sells or otherwise disposes of, or
                  otherwise proceeds to enforce security over any material
                  portion of the properties or assets of the Borrower or gives
                  notice of its intention to do so;

         (n)      EXECUTION, DISTRESS - if any writ, attachment, execution,
                  sequestration, extent, distress or any other similar process
                  becomes enforceable against the Borrower or if a distress or
                  any analogous process is levied against any of the properties
                  or assets of the Borrower, except where the same is being
                  contested actively and diligently in good faith by appropriate
                  and timely proceedings;

         (o)      SUSPENSION OF BUSINESS - if the Borrower suspends or ceases or
                  threatens to suspend or cease its business;

         (p)      SALE - if the Borrower sells or otherwise disposes of, or
                  threatens to sell or otherwise dispose of, all or a
                  substantial part of its undertaking and property and assets
                  whether in one transaction or a series of related
                  transactions;

         (q)      IMPAIRMENT OF SECURITY - if, in the sole and unfettered
                  opinion of the Lender Group, any Security may be or becomes
                  impaired, invalid, unperfected or unenforceable in any
                  material respect unless such impairment, invalidity,
                  unperfection or unenforceability was solely caused by or was
                  the result of an omission by the Lender Group;

         (r)      MATERIAL CHANGE - if there is a Material Adverse Change in the
                  business or affairs of the Borrower;

         (s)      LITIGATION - if the Borrower fails, within 30 days of the
                  commencement of same, to contest actively and diligently in
                  good faith by appropriate and timely proceedings any action,
                  suit, litigation or other proceeding commenced against it
                  which would materially adversely affect the Borrower;

         (t)      DEATH OR TERMINATION OF KEY PERSON - if Mr. Michael Steele
                  should die; and

         (u)      TERMINATION OF EMPLOYMENT OF KEY PERSON - if Mr. Michael
                  Steele should be terminated from his employment with the
                  Borrower and has not been reinstated by the Borrower within 15
                  days of such termination.

<PAGE>   27
                                       27

9.2 LENDER GROUP MAY WAIVE. The Lender Group may at any time waive any Default
or Event of Default which may have occurred, provided that no such waiver shall
extend to or be taken in any manner whatsoever to affect any subsequent Default
or Event of Default or the rights or remedies resulting therefrom. No such
waiver shall be effective unless given by the Lender Group in writing.

9.3 ACCELERATION. If any Event of Default shall occur,

         (a)      the whole or any part of the principal amount of the
                  Outstanding Borrowing and all accrued and unpaid interest
                  thereon, and

         (b)      all other payments due under this Agreement,

shall, at the option of the Lender Group, become immediately due and payable
with interest thereon, at the rate or rates determined as provided in this
Agreement, to the date of actual payment thereof, all without additional notice,
presentment, protest, demand, notice of dishonour or any other demand or notice
whatsoever, all of such are hereby expressly waived by the Borrower. In such
event the Security shall become immediately enforceable and the Lender Group
may, in its discretion, exercise any right or recourse and/or proceed by any
action, suit, remedy or proceeding against the Borrower authorized or permitted
by law for the recovery of all the obligations and proceed to exercise any and
all rights under this Agreement and under the Security, and no such remedy for
the enforcement of the rights of the Lender Group shall be exclusive of or
dependent on any other remedy but any one or more of such remedies may from time
to time be exercised independently or in combination.

9.4 TERMINATION OF LENDER GROUPS' OBLIGATIONS. The occurrence of an Event of
Default terminates any right of the Borrower to obtain any further credit from
the Lender Group pursuant to this Agreement and relieves the Lender Group of any
obligation to provide any further credit under this Agreement.

9.5 MONITOR. Upon the occurrence of an Event of Default, and until such Event of
Default is cured, the Lender Group shall have the right to require the Borrower
to appoint such financial adviser as the Lender Group may specify, as monitor to
provide on-going reports to the Lender Group on the financial condition and
prospects of the Borrower. The reasonable expenses of such monitor shall be paid
promptly by the Borrower upon receipt of invoice.

9.6 REMEDIES ARE CUMULATIVE. For greater certainty, the rights and remedies of
the Lender Group under this Agreement are cumulative and are in addition to and
not in substitution for any rights or remedies provided by law; and any single
or partial exercise by the Lender Group of any right or remedy for a Default or
Event of Default or breach of any term, covenant, condition or agreement herein
contained shall not be deemed to be a waiver of or to alter, affect or prejudice
any other right or remedy to which the Lender Group may be lawfully entitled for
the same default or breach, and any waiver by the Lender Group of the strict
observance, performance or compliance with any term, covenant, condition or
agreement herein contained and any indulgence granted by the Lender Group shall
be deemed not to be a waiver of that or any subsequent default.

9.7 CASH COLLATERAL ACCOUNTS. Upon the occurrence of an Event of Default and in
addition to any other rights or remedies of the Lender Group hereunder, the
Lender Group as and by way of collateral security shall be entitled to deposit
and retain in an account to be maintained by the Lender Group (with interest)
amounts which are received by the Lender Group from the Borrower hereunder or as
proceeds of realization of any Security to the extent such amounts may be
required to satisfy any contingent or unmatured obligations or liabilities of
the Borrower to the Lender Group hereunder.

<PAGE>   28
                                       28

                        PART 10.0 - ENVIRONMENTAL MATTERS

10.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants
as follows:

         (a)      The Borrower's business has been operated in compliance in all
                  material respects with all applicable Environmental Laws and
                  with all permits, licenses and authorizations issued pursuant
                  to Environmental Laws.

         (b)      There are no claims, investigations, litigation,
                  administrative proceedings, whether pending, or to the best of
                  the Borrower's knowledge after due inquiry, threatened
                  relating to any Contaminants, Releases or other forms of
                  pollution or alleged violation of applicable Environmental
                  Laws (collectively Environmental Matters) that may reasonably
                  be expected to have or give rise to a Material Adverse Change
                  upon the Borrower. The Borrower has not assumed any material
                  liability of any other Person for response, removal,
                  remediation, investigation, clean up, compliance or required
                  capital expenditures in connection with any matter arising
                  prior to the date hereof.

10.2 ENVIRONMENTAL COVENANTS. The Borrower covenants with the Lender Group as
follows:

         (a)      COMPLIANCE. The Borrower shall comply in all respects with the
                  requirements of any Environmental Law applicable to it.

         (b)      NOTIFICATION. The Borrower shall promptly forward to the
                  Lender Group copies of all material orders, notices, permits,
                  applications or other communications and reports in connection
                  with any Environmental Law affecting or relating to the
                  Property or the operations and activities of the Borrower.

10.3 INDEMNITY. The Borrower shall at all times indemnify and hold the Lender
Group harmless against and from any and all claims, suits, actions, debts,
damages, costs, losses, obligations, judgments, charges, and expenses, of any
nature whatsoever suffered or incurred by the Lender Group, whether upon
realization of the Security, or as lender to the Borrower, or as successor to or
assignee of any right or interest of the Borrower, or as a result of any order,
investigation or action by any governmental or regulatory authority relating to
the Borrower or its business or Property or as privileged or hypothecary
creditor or mortgagee in possession of Property or as successor or
successor-in-interest to the Borrower as a result of any taking of possession of
all or any of the Property or by any other means relating to the Borrower, under
or on account of any breach of Environmental Law, with respect to:

         (a)      the Release of a Contaminant, the threat of the Release of any
                  Contaminant, or the presence of any Contaminant affecting any
                  Property, whether or not the same originates or emanates from
                  such Property, including any loss of value of the Property as
                  a result of any of the foregoing,

         (b)      the Release of a Contaminant owned by, or under the charge,
                  management or control of the Borrower, or any predecessor or
                  assignor of the Borrower,

         (c)      any costs incurred by any federal, provincial, state,
                  municipal, local or other governmental or regulatory authority
                  or any other person or damages from injury to, destruction of,
                  or loss of natural resources in relation to, the Property or
                  elsewhere, including reasonable costs of assessing such
                  injury, destruction or loss incurred under any Environmental
                  Laws,

         (d)      liability for personal injury or property damage arising by
                  reason of any civil law offenses or quasi-offenses or under
                  any statutory or common law tort or similar theory, including,
                  without

<PAGE>   29
                                       29

                  limitation, damages assessed for the maintenance of a public
                  or private nuisance or for the carrying on of a dangerous
                  activity at, near, or with respect to the Property or
                  elsewhere, and/or

         (e)      any other environmental matter affecting the Property or the
                  operations and activities of the Borrower within the
                  jurisdiction of any federal, provincial, municipal, state or
                  local environmental agency.

The obligations of the Borrower under this section 10.3 shall arise upon the
discovery of the presence or Release of any Contaminant, whether or not any
federal, provincial, municipal, state or local environmental agency has taken or
threatened any action in connection with the presence of any Contaminant.

10.4 SCOPE OF INDEMNITY. The Borrower acknowledges that the Lender Group has
agreed to make the Borrowing available in reliance upon its representations,
warranties, and covenants in this Part. For this reason, it is the intention of
the Borrower and the Lender Group that the provisions of this Part shall
supersede any other provisions in this Agreement, or the Security which in any
way limit the liability of the Borrower and the Borrower shall be liable for any
obligations arising under or in connection with this Part even if the amount of
the liability incurred exceeds the Outstanding Borrowing. The obligations of the
Borrower arising under this Part are absolute and unconditional and shall not be
affected by any act, omission or circumstance whatsoever, except in respect of
negligence or wilful misconduct by the Lender Group. The obligations of the
Borrower arising under this Part shall survive the repayment of the Outstanding
Borrowing and shall survive the transfer of any or all right, title and interest
in and to any Property by the Borrower to any person.

10.5 CONSULTANTS, ETC. The Lender Group, acting reasonably, may employ lawyers,
engineers, scientists, or consultants of the Lender Group"s choice at the
expense of the Borrower. Any engineer, scientist, or consultant so engaged by
the Lender Group may upon reasonable notice to the Borrower enter onto the
premises of the Borrower for the purpose of any inquiry and may make any
necessary excavation or bore holes and take samples of any material or
substance, and record or copy any information by any method. The Lender Group
shall ensure that any such Person employed by or acting on behalf of the Lender
Group shall conduct itself and any inquiry or other activity on or in respect of
any Property in a manner which does not disrupt the business of the Borrower or
which results in a breach of any Environmental Law. The Borrower hereby consents
to any inquiries by the Lender Group or any lawyers, engineers, scientists, or
consultants engaged on its behalf under any freedom of access or freedom of
information legislation and agrees to execute such further consents or documents
as may be necessary to give effect to this section 10.5. The Lender Group shall
not disclose to any Person any of the information obtained as a result of the
foregoing without the prior written consent of the Borrower unless disclosure is
required by law, in which case the Lender Group shall notify the Borrower and
provide the Borrower with a reasonable opportunity to oppose the disclosure of
such information.

10.6 FEES AND EXPENSES. If the Lender Group retains the services of any lawyer,
engineer, scientist, or consultant in connection with the subject of this Part,
the Borrower shall pay the reasonable out-of-pocket costs and fees thereby
incurred if retained and applicable to such party as a result of any breach of
Environmental Law or in connection with any inquiry or investigation by a
federal, provincial, municipal, state or local government or agency in
connection with Environmental Law or if the services performed are reasonably
necessary for the performance of the functions of the Lender Group under this
Agreement or for the preservation or protection of the Security.

10.7 INTEREST. If the Lender Group incurs any obligations, costs or expenses
under this Part or in respect of any Environmental Activity covered by this
Part, the Borrower shall pay the same to the Lender Group on demand in respect
of such party's obligations, and if such payment is not received within ten
days, such amount will be treated as a Borrowing and the Borrower will pay
interest thereon at the Interest Rate plus 3% per annum calculated monthly which
shall accrue from the date of expiry of such ten day period to the date of
payment.

<PAGE>   30
                                       30

10.8 ENVIRONMENTAL COMPLIANCE. If the Borrower provides the Lender Group with
any notification required under section 7.1(q) or 10.2 hereof or if the Lender
Group otherwise receives any environmental information, the Lender Group, in its
sole discretion, may determine that an adverse change in the environmental
condition of the Borrower has occurred, which decision shall constitute, in the
absence of manifest error, conclusive evidence of the adverse change. Following
such determination, the Lender Group may provide to the Borrower directions or
instructions as to the remedial action to be undertaken by the Borrower with
respect to such adverse change, and the Borrower shall comply with any such
direction or instruction diligently and at its own expense. Notwithstanding the
issuance of any such direction or instruction, the Borrower shall remain solely
responsible for compliance with all Requirements of Environmental Law with
respect to its assets, properties and businesses and the Lender Group shall not,
and shall not be deemed to, assume or be charged with any liability or
obligation with respect to such compliance.

                               PART 11.0 - GENERAL

11.1 NOTICES. Any notice, request or other communication hereunder to any of the
parties hereto shall be in writing and be well and sufficiently given if
delivered personally or sent by prepaid registered mail to its address or by
telecopier to the number and to the attention of the person set forth below:

        (a)     In the case of the Borrower and Parent:

                350 Creditstone Road
                Concord, Ontario
                L4K 3Z2

                Attention: Mr. Michael Steele, President

                Telecopier No.: (905) 366-6368

                With a copy to:

                McCarter Grespan Robson Beynon Thompson
                675 Riverbend Drive
                Kitchener, Ontario
                N2K 3S5

                Attention: Thomas D. Beynon

                Telecopier No.: (519) 742-1841

        (b)     In the case of the Lender Group:

                First Ontario Labour Sponsored Investment Fund Ltd.
                c/o First Ontario Management Ltd.
                234 Eglinton Avenue East
                Suite 310
                Toronto, Ontario
                M4P 1K5

                Attention: Mr. Ken Delaney, President

                Telecopier No.: (416) 487-1345

<PAGE>   31
                                       31

                and

                Bank of Montreal Capital Corporation
                302 Bay Street
                7th Floor
                Toronto, Ontario
                M5X 1A1

                Attention: Mr. Mel Margolese, Managing Director

                Telecopier No.: (416) 867-4108

                with a copy to:

                Crosbie Capital Management Inc.
                9th Floor, P.O. Box 116
                First Canadian Place
                Toronto, Ontario
                M5X 1A4

                Attention: Mr. Colin Walker, Partner

                Telecopier No.: (416) 362-3447

                Southbridge Investment Partnership No. 1
                150 Water Street South
                Cambridge, Ontario
                N1R 3E2

                Attention: Lynda King

                Telecopier No.: (519) 621-8886

                and with a copy to:

                Gowling, Strathy & Henderson
                Suite 1020
                50 Queen Street North
                Kitchener, Ontario
                N2H 6M2

                Attention: Mr. Peter M. Koch
                           Mr. F. John Durdan

                Telecopier No.: (519) 571-5040

Any such notice shall be deemed to be given and received, if delivered, when
delivered, and if mailed, on the third Business Day following the date on which
it was mailed, unless an interruption of postal services occurs or is continuing
on or within the three Business Days after the date of mailing in which case the
notice shall be deemed to have been received on the third Business Day after
postal service resumes and if sent by telecopier on the next Business Day after
the day on which the telecopy is sent. Either party may by notice to the other,
given as aforesaid, designate a changed address or telecopier number.

<PAGE>   32
                                       32

11.2 PERFORMANCE OF COVENANTS BY THE LENDER GROUP. If any of the covenants or
obligations contained herein shall not be performed by the Borrower, the Lender
Group may perform such covenant or obligation and, if in so doing the Lender
Group spends money or incurs liability, the amount of money so spent or
liability incurred shall be added to the principal of Outstanding Borrowing. All
such amounts shall become immediately due and payable and any such amounts which
remain unpaid after demand shall accrue interest at the Interest Rate plus 3%
per annum calculated monthly until paid in full.

11.3 BREAK FEE. If the Borrower does not complete the transactions contemplated
hereby, the Borrower shall promptly, but no later than June 10, 2000, pay to
First Ontario Management Ltd. (acting as agent for the Lender Group) a break fee
of $100,000 plus goods and services tax exigible thereon. Such fee shall be
deemed to be earned for the time, effort and exposure incurred by the Lender
Group in (i) reviewing and establishing all documentation, financial
information, proposal and plans referable to the Credit Facility, and (ii)
establishing satisfactory priority arrangements with the holders of the
Permitted Encumbrances. Such fee shall be paid on the Closing Date if it has not
been paid prior to the Closing Date.

11.4 INDEMNITY. In addition to any other indemnity provided for herein, the
Borrower hereby indemnifies the Lender Group on demand against any loss (other
than loss of profit), expense or liability which the Lender Group may sustain or
incur as a consequence of the action or inaction of the Borrower in connection
with:

         (a)      any default in payment of the principal amount of any
                  Borrowing or any part thereof or interest accrued thereon, as
                  and when due and payable;

         (b)      any failure to fulfill on or before any Borrowing Date the
                  conditions precedent to any Borrowing as provided for in this
                  Agreement, if as a result of such failure such Borrowing is
                  not made on such date;

         (c)      the occurrence of any Event of Default; or

         (d)      any misrepresentation made by the Borrower herein or in any
                  instrument in writing delivered to the Lender Group in
                  connection with this Agreement,

excluding only any loss arising as a result of the Lender Group"s negligence.

11.5 PUBLICITY. The Lender Group shall be entitled to publicity in connection
with the transactions contemplated in this Agreement.

11.6 NO SET-OFF OR COUNTERCLAIM. The obligation of the Borrower to make payments
hereunder shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any set-off, compensation,
counterclaim, recoupment, defence or other right which the Borrower may have
against the Lender Group.

11.7 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

11.8 TIME OF ESSENCE. Time shall, in all respects, be of the essence of this
Agreement.

11.9 ASSIGNMENT. The Borrower may not assign this Agreement or any part hereof
without the prior written consent of the Lender Group. The Lender Group shall be
entitled to assign this Agreement.

11.10 ENTIRE AGREEMENT. This Agreement, together with any security or other
instrument contemplated hereby, constitutes the entire agreement between the
parties with respect to the matters covered hereby and supersedes any other
prior agreements or representations.

<PAGE>   33
                                       33

11.11 AMENDMENTS. No amendment, modification or waiver of any provision of this
Agreement or consent by the Lender Group to any departure from any provision of
this Agreement is in any way effective unless it is in writing and signed by the
Borrower (in respect of an amendment or modification), and the Lender Group, in
which event the amendment, modification, waiver or consent is effective only in
the specific instance and for the specific purpose for which it is given.

11.12 LAW GOVERNING. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and shall be treated in all respects as an Ontario contract
and the parties hereby submit and attorn to the non-exclusive jurisdiction of
the courts of the Province of Ontario.

11.13 CONFLICT. In the event that there is any conflict between the provisions
contained in this Agreement and the provisions contained in any document
delivered pursuant hereto or in connection herewith including, without
limitation, the Security, the provisions of this Agreement shall have priority
over and shall override the provisions contained in the other document.

11.14 LOAN PARTICIPATION. The Lender Group, without additional cost and expense
to the Borrower, reserves the right to sell, assign or transfer or grant a
participation in the Credit Facility, in whole or in part, to one or more
Persons (the "Participants"), without notice to, or the consent of the Borrower.
For the purpose of selling, assigning, transferring or granting a participation,
the Lender Group may disclose, on a confidential basis, to a potential
Participant such information concerning the Borrower as the Lender Group
considers appropriate. The Borrower agrees to execute and deliver such further
documentation and take such further action as the Lender Group considers
necessary or advisable to give effect to such sale, assignment, transfer or
grant of participation. In the case of sale, assignment, transfer or granting of
a participation, the Participant shall have, to the extent of such sale,
assignment, transfer or grant of participation, the same rights and obligations
as it would have if it were the Lender Group on the Closing Date and as such had
executed this Agreement and the Security and any other instrument contemplated
hereunder as required.

11.15 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and enure to
the benefit of the parties and their respective successors and assigns.

11.16 COUNTERPART. This Agreement and any agreement contemplated thereby may be
executed in one or more counterparts, each of which so executed shall constitute
an original and all of which together shall constitute one and the same
Agreement or agreement, as applicable.

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and
year first above written.

                 REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK

<PAGE>   34
                                       34

                                   INTERNATIONAL MENU SOLUTIONS CORPORATION

                                   By:      ______________________________
                                            Name:   Michael Steele
                                            Title:  President
                                                                            c/s

                                   INTERNATIONAL MENU SOLUTIONS INC.

                                   By:      ______________________________
                                            Name:   Michael Steele
                                            Title:  President
                                                                            c/s

                                   SOUTHBRIDGE INVESTMENT PARTNERSHIP NO. 1
                                   by its general partner,
                                   SIPGP NO. 1 INC.

                                   By:      ______________________________
                                            Name:   Michael Petersen
                                            Title:  President
                                                                            c/s

                                   BANK OF MONTREAL CAPITAL CORPORATION

                                   By:      ______________________________
                                            Name:   Mel Margolese
                                            Title:  Managing Director

                                   FIRST ONTARIO LABOUR SPONSORED INVESTMENT
                                   FUND LTD.

                                   By:      ______________________________
                                            Name:   Colin Walker
                                            Title:  Vice-President

<PAGE>   35

                                   SCHEDULE A

                                 DEFINED TERMS

(a)      "AFFILIATES" shall have the meaning ascribed to that term in the
         Business Corporations Act (Ontario).

(b)      "AGREEMENT" means this agreement and the schedules hereto and any
         amendments or supplements to this agreement or the schedules at any
         time and from time to time.

(c)      "APPLICABLE LAW" means, at any time, with respect to any Person,
         property, transaction or event, all applicable laws, statutes,
         regulations, treaties, judgments and decrees and (whether or not having
         the force of law) all applicable official directives, rules, consents,
         approvals, by-laws, permits, authorizations, guidelines, orders and
         policies of any governmental or regulatory body or Persons having
         authority over any of the parties hereto.

(d)      "BENCHMARK FINANCIALS" means the Consolidated interim financial
         statements of the Parent prepared by the Parent and forming part of its
         10-Q filing under the Securities Exchange Act of 1934 as at March 31,
         2000 which are attached as Schedule B hereto.

(e)      "BMOCC PROPORTIONATE INTEREST" means zero percent (0%) until the Second
         Advance is made, and then it shall be 11.11%.

(f)      "BORROWER'S FINANCIALS" means the consolidated financial statements of
         International Menu Solutions Inc. and its Subsidiaries as at March 31,
         2000 which are attached as Schedule K.

(g)      "BORROWING" means a drawdown of or advance by a Lender under, the
         Credit Facility.

(h)      "BORROWING DATE" means the Business Day on which a Borrowing is made.

(i)      "BUSINESS" means the business of a marketer and seller of home meal
         replacement products throughout North America.

(j)      "BUSINESS DAY" means a day on which banks are open for business in
         Toronto, Ontario other than a Saturday, Sunday or such other day as
         banks in Toronto, Ontario are authorized or required to be closed for
         business.

(k)      "CAPITAL EXPENDITURES" means expenditures by the Borrower which would
         be classified as capital in nature according to GAAP.

(l)      "CAPITALIZED LEASE OBLIGATIONS" means monetary obligations under
         agreements for the lease or rental of real or personal property that in
         accordance with GAAP are required to be capitalized.

(m)      "CLOSING" means the completion of the first advance by the Lender Group
         to the Borrower.

(n)      "CLOSING DATE" means May 31, 2000.

(o)      "CONSOLIDATED" means, when used to describe the calculation of any
         amount relating to the Borrower and its Subsidiaries, consolidated in
         accordance with GAAP.

<PAGE>   36

(p)      "CONTAMINANT" includes, but is not limited to, any pollutant,
         dangerous, toxic or hazardous substance, waste of any description
         whatsoever, hazardous materials or contaminants including any of the
         foregoing as defined in any Environmental Law.

(q)      "CONTINGENT FINANCIAL OBLIGATION" means, at any time and without
         duplication, any obligation of the Borrower guaranteeing, indemnifying
         or securing or in effect guaranteeing, indemnifying or securing,
         whether directly or indirectly, any indebtedness, liability or
         obligation, absolute or contingent, of any other Person, as determined
         in accordance with GAAP.

(r)      "CREDIT FACILITY" means the credit facility made available under Part
         2.0.

(s)      "CSBIFA" means the Community Small Business Investment Fund Act
         (Ontario);

(t)      "CURRENT ASSETS" means, at any particular time, the current assets of
         the Borrower as at such date determined in accordance with GAAP.

(u)      "CURRENT LIABILITIES" means, at any particular time, the current
         liabilities of the Borrower as at such date plus, to the extent not
         otherwise included and without duplication:

         (i)      the current portion of Capitalized Lease Obligations; and

         (ii)     the current portion of all Indebtedness owed by the Borrower,

         determined in accordance with GAAP.

(v)      "DEBT" means, at any particular time, the aggregate amount of all
         Current Liabilities and all long-term debt (both the current and
         non-current portions) of the Borrower as such amounts would be
         classified on the balance sheet of the Borrower in accordance with GAAP
         at such time including, but not limited to:

         (i)      short-term debt;

         (ii)     long-term debt;

         (iii)    Capitalized Lease Obligations;

         (iv)     the current portion of subordinated debt;

         (v)      Guarantees; and

         (vi)     unpostponed shareholder loans.

         For greater certainty, Debt shall exclude deferred taxes and the
         long-term portion of the subordinated debt.

(w)      "DEFAULT" means any of the events described in section 9.1 regardless
         of whether any requirement in connection with such event for the giving
         of notice, the lapse of time, or the happening of any further
         condition, event or act has been satisfied or met.

(x)      "EBITDA" means, in respect of any particular Fiscal Period, the
         difference obtained by subtracting all gains included in net income
         attributable to the sale of fixed assets or any other non-cash gains
         arising out of the ordinary course of business from the aggregate of:

<PAGE>   37

         (i)      Consolidated Net Income;

         (ii)     Consolidated Interest Expenses;

         (iii)    Consolidated income tax expenses, including deferred income
                  taxes;

         (iv)     Consolidated depreciation and amortization expenses and other
                  non-cash expenses; and

         (v)      Consolidated losses included in net income attributable to the
                  sale of fixed assets or any other non-cash charges arising out
                  of the ordinary course of business,

         all as determined at the end of the said Fiscal Period by the auditors
         of the Borrower in accordance with GAAP.

(y)      "ENVIRONMENTAL ACTIVITY" means any past, present or future activity,
         event or circumstance in respect of a Contaminant, including, without
         limitation, its storage, use, holding, collection, purchase,
         accumulation, assessment, generation, manufacture, construction,
         processing, treatment, stabilization, disposition, handling or
         transportation or its Release into the natural environment including
         the movement through or in the air, soil, subsoil, surface water or
         groundwater.

(z)      "ENVIRONMENTAL LAWS" means any and all federal, provincial, municipal,
         local and foreign statutes, laws, regulations, ordinances, rules,
         judgments, orders, decrees, permits, licences, agreements or other
         governmental restrictions having the force of law relating to the
         environment, occupational health and safety, health protection or any
         Environmental Activity.

(aa)     "ENVIRONMENTAL QUESTIONNAIRE" means the environmental questionnaire
         prepared by the Lender Group and completed by the Borrower.

(bb)     "EVENT OF DEFAULT" means any of the events described in section 9.1,
         provided that any requirement in connection with such event for the
         giving of notice, the lapse of time or the happening of any further
         condition, event or act has been satisfied or met.

(cc)     "FIRST ADVANCE" means the advance of $3,000,000 by Southbridge of the
         Borrowing.

(dd)     "FIRST ONTARIO PROPORTIONATE INTEREST" means zero percent (0%) until
         the Second Advance is made and then, it shall mean 22.22 % thereafter.

(ee)     "FISCAL PERIOD" means a Fiscal Year or any period of one, two or three
         Fiscal Quarters.

(ff)     "FISCAL QUARTER" means any of the fiscal quarters of the Borrower
         ending on the last day of March, June, September and December in each
         year.

(gg)     "FISCAL YEAR" of an entity means the 12 month period ending on the
         fiscal-year end of that entity and in the case of the Borrower the 12
         month period ending on December 31 of each year.

(hh)     "GAAP" means the generally accepted accounting principles recommended
         in Canada by the Canadian Institute of Chartered Accountants as set
         forth from time to time in the publication known as the CICA Handbook
         save and except that in connection with the Parent,

<PAGE>   38

         "GAAP" means the generally accepted accounting principles applicable in
         the United States of America.

(ii)     "GROUP SUBSIDIARIES" means, collectively, Prime Foods Processing Inc.,
         Transcontinental Gourmet Foods Inc., Tasty Selections Inc., D. C. Food
         Processing Inc., The Ultimate Cookie Co. Inc., Huxtable's Kitchens
         Inc., and any other direct or indirect Subsidiary.

(jj)     "GUARANTEE" means, with respect to a Person, any absolute or contingent
         liability of that Person under any guarantee, agreement, endorsement
         (other than for collection or deposit in the ordinary course of
         business), discount with recourse or other obligation to pay, purchase,
         repurchase or otherwise be or become liable or obligated upon or in
         respect of any Indebtedness of any other Person and including any
         absolute or contingent obligations to:

         (i)      advance or supply funds for the payment or purchase of any
                  Indebtedness of any other Person,

         (ii)     purchase, sell or lease (as lessee or lessor) any property,
                  assets, goods, services, materials or supplies primarily for
                  the purpose of enabling any other Person to make payment of
                  Indebtedness or to assure the holder thereof against loss, or

         (iii)    indemnify or hold harmless any other Person from or against
                  any losses, liabilities or damages, in circumstances intended
                  to enable such other Person to incur or pay any Indebtedness
                  or to comply with any agreement relating thereto or otherwise
                  to assure or protect creditors against loss in respect of such
                  Indebtedness.

(kk)     "HAZARDOUS MATERIALS" means any substance or material that is
         prohibited, controlled or otherwise regulated by any governmental
         authority pursuant to the Requirements of Environmental Law, including,
         without limitation, any contaminant, pollutant, dangerous substance,
         toxic substance, designated substance, controlled product, hazardous
         waste, subject waste, hazardous material, dangerous good or petroleum,
         its derivatives, by-products or other hydrocarbons, asbestos,
         polychlorinated biphenyls (PCBs) or PCB contaminated fluids or
         equipment, explosives, or radioactive substances, all as defined in or
         pursuant to the Requirements of Environmental Law.

(ll)     "INCORPORATED COVENANTS" means the financial covenants imposed by the
         Senior Loan Agreements, as amended from time to time thereafter,
         provided that such amendments impose a more burdensome obligation on
         the Borrower than the covenants set out in the Senior Loan Agreements.

(mm)     "INDEBTEDNESS" of a Person means, without duplication,

         (i)      all debts, liabilities and obligations, contingent and other,
                  including principal, interest, charges and fees, which in
                  accordance with GAAP would be classified upon the Person's
                  balance sheet as liabilities including, without limitation,
                  all Capitalized Lease Obligations,

         (ii)     all obligations secured by any Security Interest, including
                  principal, interest, charges and fees, existing on property
                  owned or acquired by the Person subject to such Security
                  Interest whether or not the Person has assumed or otherwise
                  become liable for the payment of such obligations, and

         (iii)    all obligations and liabilities incurred pursuant to
                  Guarantees issued by the Person.

<PAGE>   39

(nn)     "INTEREST EXPENSES" means, for any particular Fiscal Period, the amount
         which would, in accordance with GAAP, be classified on the Consolidated
         income statement of the Borrower for such period as gross interest
         expense, including the interest component of all Capitalized Lease
         Obligations.

(oo)     "INTEREST PAYMENT DATE" means the last Business Day of each calendar
         month.

(pp)     "INTEREST RATE" means:

         (i)      for the period from the date of the First Advance until and
                  including August 31, 2000, 12% per annum;

         (ii)     for the period from September 1, 2000 until and including
                  November 30, 2000, 24% per annum; and

         (iii)    for the period December 1, 2000 until the outstanding
                  principal amount of the Borrowing has been paid in full, 36%
                  per annum.

(qq)     "LEASE PAYMENTS" means, for any particular period, the amount which
         would, in accordance with GAAP, be classified on the Consolidated
         income statement of the Borrower for such period as operating or
         non-capital lease payment expenses.

(rr)     "LENDER" means one of the Lender Group

(ss)     "LIEN" means any deed of trust, mortgage, charge, hypothec, assignment,
         pledge, lien or other security interest or encumbrance of whatever kind
         or nature, including without limitation, vendor"s privilege or
         supplier"s right of reclamation, regardless of form and whether
         consensual or arising by law (statutory or otherwise) that secures the
         payment of any indebtedness or liability or the observance or
         performance of any obligation, and including any agreement to give any
         of the foregoing.

(tt)     "LOAN AMOUNT" means $3,000,000 in the case of Southbridge, $1,000,000
         in the case of First Ontario, and $500,000 in the case of BMOCC.

(uu)     "MAJORITY LENDERS" means any one or more Lenders holding in the
         aggregate a minimum of 75% of the Outstanding Borrowing.

(vv)     "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means, with
         respect to any event, act, condition or occurrence of whatever nature
         (including any adverse determination in any litigation, arbitration or
         governmental investigation or proceeding), whether singly or in
         conjunction with any other event or events, act or acts, condition or
         conditions, occurrence or occurrences, whether or not related, a
         material adverse change in, or a material adverse effect upon, any of
         the business, property, assets, operations, conditions (financial or
         otherwise) or prospects of the Borrower as determined in the good faith
         exercise of the Lender Group"s judgment.

(ww)     "MATERIAL CONTRACTS" means the material contracts and agreements to
         which the Borrower is a party in connection with the business of the
         Borrower, including all leases, conditional sales agreements, licenses,
         supply agreements and sales agreements, excluding those which have a
         remaining term of less than three months or under which the annual
         obligations or benefits of the Borrower are less than $250,000, all of
         which are described in SCHEDULE E to this Agreement.

(xx)     "MATURITY DATE" means February 28, 2001.

<PAGE>   40

(yy)     "NET INCOME" means, for any particular Fiscal Period, the amount which
         would be classified on the Consolidated income statement of the
         Borrower for such period as net income in accordance with GAAP.

(zz)     "OUTSTANDING BORROWING" means the aggregate of (i) the outstanding
         principal amount of each Borrowing, (ii) all unpaid interest and fees
         thereon as herein provided, and (iii) all other fees, charges and
         expenses required to be paid by the Borrower to the Lender Group
         hereunder or pursuant to any written agreements now or hereafter
         entered into between the Borrower and the Lender Group.

(aaa)    "PERMITTED CAPITAL EXPENDITURES" means:

         (i)      for the calendar year ending 12/31/2000, capital expenditures
                  in an amount not in excess of that presented to the Lenders as
                  part of the Consolidated Forecasts contained in Schedule M and
                  in particular, representing an amount of no greater than
                  $5,000,000 in respect of the capital projects (a) for
                  Transcontinental Gourmet Foods Inc; and (b) the relocation and
                  expansion of Pasta Kitchens; and

         (ii)     for the calendar year ending 12/31/2001, an amount not
                  exceeding $5,000,000 except as agreed to in writing by the
                  Lenders;

                  provided however, that the Company will immediately cease
                  making capital commitments and, to the extent possible, defer
                  payments at any time it foresees not being able to remain
                  within the working capital covenant (section 7.2(a)) herein or
                  any covenant of the Senior Lenders.

                  For greater certainty, the Company will not be permitted to
                  complete any acquisition of any business without the prior
                  written consent of the Lenders.

(bbb)    "PERMITTED ENCUMBRANCES" means any one or more of the following with
         respect to the property, assets and undertaking of the Borrower:

         (i)      Liens for taxes, assessments or government charges or levies
                  not at the time due and delinquent or the validity of which
                  are being contested in good faith by proper legal proceedings
                  and as to which reserves are being maintained in accordance
                  with GAAP so long as forfeiture of any part of the property or
                  assets of the Borrower will not result from the failure to pay
                  such taxes, assessments or governmental charges or levies
                  during the period of such contest;

         (ii)     the Lien of any judgment rendered or claim filed against the
                  Borrower which is being contested in good faith by proper
                  legal proceedings and as to which reserves are being
                  maintained in accordance with GAAP so long as forfeiture of
                  any part of the property or assets of the Borrower will not
                  result from the failure to satisfy such judgment or claim
                  during the period of such contest;

         (iii)    undetermined or inchoate Liens and charges incidental to
                  current operations which have not at such time been filed
                  pursuant to law or which relate to obligations not due or
                  delinquent;

         (iv)     restrictions, easements, rights-of-way, servitudes or other
                  similar rights in land granted to or reserved by other Persons
                  which in the aggregate do not materially impair the
                  usefulness, in the operation of the business of the Borrower,
                  of the property subject to such restrictions, easements,
                  rights-of-way servitudes or other similar rights in land
                  granted to or reserved by other Persons;

<PAGE>   41

         (v)      the right reserved to or vested in any municipality or
                  governmental or other public authority by the terms of any
                  lease, licence, franchise, grant or permit acquired by the
                  Borrower or by any statutory provision, to terminate any such
                  lease, licence, franchise, grant or permit, or to require
                  annual or other payments as a condition to the continuance
                  thereof;

         (vi)     the encumbrance resulting from the deposit of cash or
                  securities in connection with contracts, tenders or
                  expropriation proceedings, or to secure workers" compensation,
                  surety or appeal bonds, costs of litigation when required by
                  law and public and statutory obligations;

         (vii)    security given to a public utility or any municipality or
                  governmental or other public authority when required by such
                  utility or other authority in connection with the operations
                  of the Borrower, all in the ordinary course of business;

         (viii)   the reservations, limitation, provisos and conditions, if any,
                  expressed in any original grants from the Crown or in
                  comparable grants, if any, in jurisdictions other than Canada;

         (ix)     title defects or irregularities which are of a minor nature
                  and in the aggregate will not materially impair the use of the
                  property for the purpose for which it is held;

         (x)      any validly perfected Lien created, assumed or arising by
                  operation of law after the date of this Agreement, to provide
                  or secure the whole or any part of the consideration of the
                  acquisition of property, whether by lease or by conditional
                  sales contract, where:

                  A.       the principal amount secured does not exceed the cost
                           to the Borrower of such property,

                  B.       the Borrower's obligation to repay is secured only by
                           the property so acquired by the Borrower,

                  C.       the property is not being acquired as a replacement
                           or substitution for the property or assets which are
                           charged under the Security, and

                  D.       the aggregate amount secured by the Liens described
                           in this paragraph (x) created, assumed or arising
                           during any Fiscal Year of the Borrower shall not
                           exceed the annual amount determined in the discretion
                           of the Lender Group, which annual amount shall not
                           exceed 75% of the actual capital expenditures for the
                           period;

         (xi)     security given to the Senior Lenders pursuant to the
                  respective Senior Loan Agreements; and

         (xii)    any other Lien on property or properties of the Borrower that
                  is hereafter specifically consented to in writing by the
                  Lender Group or described in Schedule G annexed hereto.

(ccc)    "PERSON" includes an individual, a partnership, a joint venture, a
         trust, an unincorporated organization, a company, a corporation, an
         association, a government or any department or agency thereof and any
         other incorporated or unincorporated entity.

<PAGE>   42

(ddd)    "PROPERTY" means any moveable or immoveable or personal or real
         property owned, leased, occupied or under the charge, management or
         control of the Borrower.

(eee)    "REAL PROPERTY" means the real properties which are owned or occupied
         by the Borrower and situated at the locations which are identified in
         Schedule C to this Agreement as the locations of freehold and leasehold
         properties.

(fff)    "RELATED PARTIES" means Persons who are Affiliates of the Borrower or
         Subsidiaries of the Borrower or who are otherwise related to the
         Borrower within the meaning of the Income Tax Act (Canada).

(ggg)    "RELEASE" includes discharge, spray, inject, inoculate, abandon,
         deposit, spill, leak, seep, pour, emit, empty, throw, dump, place,
         escape, leach, disperse, migrate and exhaust, and when used as a noun
         (as applicable) has a similar meaning.

(hhh)    "REQUIREMENTS OF ENVIRONMENTAL LAW" means all requirements of the
         common law or of statutes, regulations, by-laws, ordinances, treaties,
         judgments and decrees, and (whether or not they have the force of law)
         rules, policies, guidelines, orders approvals, notices, permits,
         decisions, directives, directions and the like, of any federal,
         territorial, provincial, regional, municipal or local, judicial,
         regulatory or administrative agency, board or governmental authority
         relating to environmental or occupational health and safety matters and
         any property owned, leased or used by the Borrower and its activities
         carried out thereon (whether in the past, present or the future)
         including, but not limited to, all such requirements relating to: (i)
         the protection, preservation or remediation of the natural environment
         (the air, land, surface water or groundwater); (ii) the generation,
         handling, treatment, storage, transportation or disposal of or other
         dealing with solid, gaseous or liquid waste; and (iii) Hazardous
         Materials.

(iii)    "SECOND ADVANCE"means the advance of $1,000,000 by First Ontario and
         $500,000 by BMOCC of the Borrowing.

(jjj)    "SECURITY" means the security and agreements described in Part 8.0 and
         any additional security issued from time to time by any Person in
         support of the liabilities and obligations hereunder.

(kkk)    "SECURITY INTEREST" includes a mortgage, charge, floating charge,
         pledge, hypothec, assignment, lien, interest claim, encumbrance,
         conditional sale agreement or other title retention agreement,
         subordination trust or other security interest or arrangement of any
         kind or character intended to create a security interest in substance
         regardless of whether the Person creating the interest retains an
         equity of redemption, and any agreement to provide or enter into at any
         time or on the happening of any event such a security interest or
         arrangement.

(lll)    "SECURITY SHARING AGREEMENT" means an agreement of even date herewith
         made between Southbridge, First Ontario, and BMOCC.

(mmm)    "SENIOR LENDERS" means The Bank of Nova Scotia, Business Development
         Bank of Canada, and The Royal Bank of Canada or any other lender
         providing operating or term credit facilities (other than capital
         leases or real estate mortgages) and having Liens in priority to the
         Liens of the Lender Group.

(nnn)    "SENIOR LOAN AGREEMENTS" means, certain loan agreements made between

<PAGE>   43

         (i)      The Bank of Nova Scotia as Lender and the Borrower, as
                  borrower, dated April 15, 1999;

         (ii)     Business Development Bank and Prime Foods Processing Inc.
                  dated November 5, 1997;

         (iii)    Royal Bank of Canada and D.C. Food Processing Inc. dated
                  August 19, 1999;

         (iv)     Bank of Montreal Capital Corporation and First Ontario Labour
                  Sponsored Investment Fund Ltd. as Lenders and the Borrower as
                  borrower dated May 10, 1999; and

         (iv)     any other credit agreement or mortgage with a Senior Lender.

(ooo)    "SHAREHOLDERS" means any Person (other than the Lender Group) who
         directly or indirectly is the legal or beneficial owner of any share in
         the capital stock of the Borrower.

(ppp)    "SOUTHBRIDGE PROPORTIONATE INTEREST" means 100% until the Second
         Advance is made, then it shall mean 66.67%.

(qqq)    "SUBSIDIARY" means a body corporate which is a subsidiary of another
         body corporate within the meaning of that term as used in the Business
         Corporations Act (Ontario) as amended from time to time and
         "SUBSIDIARIES" means more than one Subsidiary.

(rrr)    "TAX" and "TAXES" include all present and future taxes, levies,
         imposts, stamp taxes, duties, charges to tax, fees, deductions,
         withholdings and any restrictions or conditions resulting in a charge
         to tax and all penalties, interest and other payments on or in respect
         thereof.

(sss)    "TOTAL PRINCIPAL" means the current portion of the principal of the
         long term debt of the Borrower determined in accordance with GAAP.

(ttt)    "WORKING CAPITAL" means Current Assets less Current Liabilities.

(uuu)    "WRITTEN" and "IN WRITING" shall include printing, typewriting or any
         electronic means of communication capable of being visibly reproduced
         at the point of reception including telex, telegraph or telecopy.<PAGE>   1

                                                                     Exhibit 4.2

================================================================================

                         REGISTRATION RIGHTS AGREEMENT

                           13% Senior Notes due 2010

                           Dated as of March 24, 2000

                                  by and among

                           MGC COMMUNICATIONS, INC.,

                          MPOWER HOLDING CORPORATION,

                           BEAR, STEARNS & CO. INC.,

                             SALOMON SMITH BARNEY,

                             GOLDMAN, SACHS & CO.,

                              MERRILL LYNCH & CO.

                                      and

                            WARBURG DILLON READ LLC

================================================================================
<PAGE>   2
          This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 24, 2000 by and among MGC Communications, Inc., Nevada
corporation (the "Company"), and Mpower Holding Corporation, a Delaware
Corporation (the "Co-Obligor"), and Bear, Stearns & Co. Inc., Salomon Smith
Barney Inc., Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Warburg Dillon Read LLC (each an "Initial Purchaser" and
together, the "Initial Purchasers"), each o whom have agreed to purchase the
Company's 13% Senior Notes due 2010 (the "Notes") pursuant to the Purchase
Agreement (as defined below).

          This Agreement is made pursuant to Purchase Agreement, dated March 17,
2000 (the "Purchase Agreement"), by and among the Company, the Co-Obligor and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Notes, the Company and the Co-Obligor have agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 8 of the Purchase Agreement.

          The parties hereby agree as follows:

     SECTION 1. DEFINITIONS

          As used in this Agreement, the following capitalized terms shall have
the following meanings:

          Act: The Securities Act of 1993, as amended from time to time, and
the rules and regulations of the Commission promulgated thereunder.

          Broker-Dealer: Any broker or dealer registered under the Exchange Act.

          Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Notes acquired directly from
the Company or any of its affiliates).

          Business Day: Any day except a Saturday, Sunday or other day in
the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.

          Closing Date: The date hereof.

          Commission: The Securities and Exchange Commission.

          Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Exchange Notes in the Same aggregate
principal amount as the aggregate principal amount of Notes tendered by Holders
thereof pursuant to the Exchange Offer.

          Exchange Act: The Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the Commission promulgated
thereunder.

<PAGE>   3
          Exchange Notes: The Company's 13% Series B Senior Notes due 2010 to be
issued pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the
request of any holder of Notes covered by a Shelf Registration Statement, in
exchange for such Notes.

          Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchanged offer by such Holders.

          Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.

          Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Notes to certain ("Qualified institutional buyers") as such
term is defined in Rule 144A under the Act, or pursuant to offers and sales that
occur outside the United States to persons other than U.S. persons within the
meaning of Regulation S under the Act.

          Holders: As defined in Section 2 hereof.

          Indenture: The Indenture, dated the Closing Date, between the Company,
the Co-Obligor and HSBC Bank USA, as Trustee (the 'Trustee"), pursuant to which
the Senior Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.

          Interest Payment Due: As defined in the Indenture and the Senior
Notes.

          NASD: National Association of Securities Dealers, Inc.

          Offering Memorandum: The final offering memorandum, dated March 17,
2000, relating to the Company and the Notes.

          Permitted Suspension: As defined in Section 4(a) hereof.

          Person: An individual, partnership, corporation, trust, unincorporated
organization, limited liability entity, or a government or agency or political
subdivision thereof.

          Preliminary Offering Memorandum: The preliminary offering memorandum,
dated March 10, 2000, relating to the Company and the Notes.

          Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

          Registration Default: As defined in Section 5 hereof.

                                       2
<PAGE>   4

          Registration Statement: Any registration statement of the Company and
the Co-Obligor relating to (a) an offering of Exchange Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case,
(i) which is filed pursuant to the provisions of this Agreement and
(ii) including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.

          Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.

          Senior Notes: The Notes and the Exchange Notes.

          Shelf Registration Statement: As defined in Section 4 hereof.

          TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.

          Transfer Restricted Securities: Each Note until the earliest to occur
of (i) the date on which such Note is exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of a Note for an Exchange
Note, the date on which such Exchange Note is sold to a purchaser who receives
from such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Note is effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note may be distributed to the public pursuant to Rule 144
under the Act.

          Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to
the public.

     SECTION 2.  HOLDERS

          A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Transfer Restricted Securities are registered
in such Person's name.

     SECTION 3.  REGISTERED EXCHANGE OFFER

          a) Unless the Exchange Offer shall be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(1) below have been complied
with), the Company and the Co-Obligor shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 90 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use its best efforts to cause such Exchange Offer Registration Statement
to become effective at the earliest possible time, but in no event later than
180 days after the Closing Date, (iii) in connection with the foregoing (A)
file all pre-effective amendments to such Exchange Offer Registration Statement
as may be necessary in order to cause such Exchange Offer Registration
Statement to become effective, (B) file, if applicable a post-effective
amendment to such Exchange Offer Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings, if any, in connection with
the registration and qualification of the Exchange Notes to be made under the
Blue Sky laws of such jurisdictions as are necessary to permit

                                       3
<PAGE>   5

Consummation of the Exchange Offer and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitted
registration of the Exchange Notes to be offered in exchange for the Notes that
are Transfer Restricted Securities and to permit sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers as contemplated by
Section 3(c) below.

          b) The Company and the Co-Obligor shall cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the
Exchange Offer open, for a period of not less that the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less the 20
Business Days. The Company and the Co-Obligor shall cause the Exchange Offer to
comply with all applicable federal and state securities laws. No securities
other than the Senior Notes and any additional Notes which may be issued after
the date hereof under the Indenture shall be included in the Exchange Offer
Registration Statement. The Company and the Co-Obligor shall use their
respective best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 Business Days thereafter unless
required by applicable law.

          c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Notes that are Transfer
Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Notes (other than Transfer Restricted Securities
acquired directly from the Company) pursuant to the Exchange Offer; however,
such Broker-Dealer may be deemed to be an "underwriter" within the meaning of
the Act and must, therefore, deliver a prospectus meeting the requirements of
the Act in connection with its initial sale of each Exchange Note received by
such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement
may be satisfied by the delivery by such Broker-Dealer of the Prospectus
contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales of Broker-Dealer Transfer Restricted Securities by Restricted
Borker-Dealers that the Commission may require in order to permit such sales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer
except to the extent required by the Commission as a result of a change in
policy after the date of this Agreement.

          The Company and the Co-Obligor shall use their respective best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers, and
to ensure that such Registration Statement conforms with the requirements of
this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period expiring on the
earlier of (i) the date that all Broker-Dealer Transfer Restricted Securities
cease to be Transfer Restricted Securities and (ii) 365 days from the date on
which the Exchange Offer Registration Statement is declared effective provided,
that the Company and the Co-Obligor will have the option of suspending the
effectiveness of the Exchange Offer Registration Statement at any time after
the consummation of the Exchange Offer for periods of up to an aggregate of 60
days in any calendar year if the Board of Directors of the Company and the
Co-Obligor determine that (x) the compliance with the disclosure obligations
necessary to maintain the effectiveness of the Exchange Offer Registration
Statement at such time could

                                       4
<PAGE>   6

reasonably be expected to have a material adverse effect on the Company, the
Co-Obligor or a pending corporate transaction of the Company or the
Co-Obligor or (y) as a result of the occurrence of a corporate transaction it
is necessary to amend the Exchange Offer Registration Statement so that such
Registration Statement does not include any untrue statement of material fact or
omit to state any material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading (an
"Exchange Registration Permitted Suspension").

          The Company and the Co-Obligor shall promptly provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers upon request at any time during such 365-day period in order to
facilitate such sales.

     SECTION 4. SHELF REGISTRATION

          a) Shelf Registration. If (i) the Company and the Co-Obligor are not
required to file the Exchange Offer Registration Statement with respect to the
Senior Notes or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
any Holder of Transfer Restricted Securities notifies the Company within 20
Business Days following the Consummation of the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Exchange Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Senior Notes acquired directly from the Company or an
affiliate of the Company, then the Company and the Co-Obligor shall:

               (x) cause to be filed on or prior to (1) in the case of
     Registration Statement filed pursuant to clause (i) above, 30 days after
     the date on which the Company and the Co-Obligor determine that they are
     not required to filed the Exchange Offer Registration Statement and in any
     event, within 150 days after the Closing Date and (2) in the case of a
     Registration Statement filed pursuant to clause (ii) above, 30 days after
     the date on which the Company receives the notice specified in clause (ii)
     above, a shelf registration statement pursuant to Rule 415 under the Act,
     (which may be an amendment to the Exchange Offer Registration Statement (in
     either event, the "Shelf Registration Statement")), relating to all
     Transfer Restricted Securities the Holders of which shall have provided the
     information required pursuant to Section 4(b) hereof, and

               (y) use their best efforts to cause such Shelf Registration
     Statement to become effective on or prior to (1) in the case of a
     Registration Statement filed pursuant to clause (i) above, 90 days after
     the date on which the Company and the Co-Obligor become obligated to file
     such Shelf Registration Statement (and in any event, within 240 days after
     the Closing Date), and (2) in the case of a Registration Statement filed
     pursuant to clause (ii) above, 90 days after the date on which the Company
     receives the notice specified in clause (ii) above. If, after the Company
     and the Co-Obligor have filed an Exchange Offer Registration Statement
     which satisfies the requirements of Section 3(a) above, the Company and the
     Co-Obligor are required to file and make effective a Shelf Registration
     Statement solely because the Exchange Offer is not permitted under
     applicable federal law, then the filing of the Exchange Offer Registration
     Statement shall be deemed to satisfy the requirements of clause (x) above.
     Such an event shall have no effect on the requirements of this clause (y),
     or on the Effectiveness Target Date as defined in Section 5 below.

                                       5
<PAGE>   7

The Company and the Co-Obligor shall use their respective best efforts to keep
the Shelf Registration Statement referred to in this Section 4(a) continuously
effective, supplemented and amended as required by the provisions of Sections
6(b) and (c) hereof to the extent necessary to ensure that it is available for
sales of Transfer Restricted Securities by the Holders thereof entitled to the
benefit of this Section 4(a), and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period expiring on the
earlier of (i) the date that all Holders of Transfer Restricted Securities have
sold such securities and (ii) 365 days from the date on which the Shelf
Registration Statement is declared effective provided, that the Company and the
Co-Obligor will have the option of suspending the effectiveness of the Shelf
Registration Statement for periods of up to an aggregate of 60 days in any
calendar year if the Board of Directors of the Company and the Co-Obligor
determine that (x) the compliance with the disclosure obligations necessary to
maintain the effectiveness of the Shelf Registration Statement at such time
could reasonably be expected to have a material adverse effect on the Company,
the Co-Obligor or a pending corporate transaction of the Company or the
Co-Obligor or (y) as a result of the occurrence of a corporate transaction it
is necessary to amend the Shelf Registration Statement so that such
Registration Statement does not include any untrue statement of material fact
or omit to state any material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading (an "Shelf
Registration Permitted Suspension" and, together with an Exchange Registration
Permitted Suspension, a "Permitted Suspension").

          (b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 Business Days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the
Act for use in connection with any Shelf Registration Statement or Prospectus
or preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information required
to be provided by such Holder for inclusion therein. Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish promptly
to the Company, for so long as the Registration Statement is effective, all
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.

     SECTION 5. LIQUIDATED DAMAGES

          If (i) the Company and the Co-Obligor fail to file any of the
Registration Statements required by this Agreement on or before the latest date
specified for such filing in this Agreement, (ii) any of such Registration
Statements is not declared effective by the Commission on or prior to the
latest date specified for such Effectiveness (the "Effectiveness Target Date").
(iii) the Company and the Co-Obligor fail to Consummate the Exchange Offer
within 30 Business Days of the effectiveness Target Date with respect to the
Exchange Offer Registration Statement or (iv) the Shelf Registration Statement
or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in this Agreement
without being succeeded promptly by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective within five Business Days of the date the Registration Statement
ceased to be effective or usable in connection with such resales provided that
such effectiveness

                                       6
<PAGE>   8
was not suspended in connection with a Permitted Suspension (each such event
referred to in clauses (i) through (iv) above, a "Registration Default"), then
commencing on the day following the date on which such Registration Default
occurs, the Company and the Co-Obligor, jointly and severally, agree to pay to
each Holder of Transfer Restricted Securities, for the first 90-day period
immediately following the occurrence of such Registration Default, liquidated
damages in an amount equal to $.05 per week per $1,000 principal amount of Notes
constituting Transfer Restricted Securities held by such Holder for each week or
pro rata for a portion of each week thereof that the Registration Default
continues. The amount of liquidated damages payable to each Holder shall
increase by an additional $.05 per week per $1,000 principal amount of Notes
constituting Transfer Restricted Securities held by such Holder for each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum of $.50 per week per $1,000 principal amount of Notes constituting
Transfer Restricted Securities held by such Holder provided, in no event shall
the Company and the Co-Obligor be required to pay liquidated damages on any
Transfer Restricted Security for more than one Registration Default at any given
time. Notwithstanding anything to the contrary set forth herein, (i) upon the
filing of the Exchange Offer Registration Statement (or, if applicable, the
Shelf Registration Statement), after a Registration Default of the type
specified in clause (i) above, (2) upon the effectiveness of the Exchange Offer
Registration Statement (or, if applicable, the Shelf Registration Statement),
after a Registration Default of the type specified in clause (ii) above, (3)
upon Consummation of the Exchange Offer, after a Registration Default of the
type specified in clause (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (or, if applicable, the
Shelf Registration Statement) again to be declared effective or made usable
after a Registration Default of the type specified in clause (iv) above, the
liquidated damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.

          All accrued liquidated damages shall be paid by the Company and the
Co-Obligor to Cede & Co., as nominee of the Depository Trust Company (the
"Global Security Holder") by wire transfer of immediately available funds or by
federal funds check and to Holders of Definitive Securities by mailing checks to
their registered addresses by the Company or the Co-Obligor on each Interest
Payment Date. All obligations of the Company and the Co-Obligor set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.

     SECTION 6. REGISTRATION PROCEDURES

          a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Co-Obligor shall comply with all applicable
provisions of Section 6(c) below, shall use their respective best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and shall comply with all of the following provisions:

               (i) If, following the date hereof there has been published a
     change in Commission policy with respect to exchange offers such as the
     Exchange Offer, such that in the reasonable opinion of counsel to the
     Company and the Co-Obligor there is a substantial question as to whether
     the Exchange Offer is permitted by applicable federal law, the Company and
     the Co-Obligor hereby agree to seek a no-action letter or other favorable
     decision from the Commission allowing the Company and the Co-Obligor to
     Consummate an Exchange Offer for such Notes. The

                                       7
<PAGE>   9
     Company and the Co-Obligor hereby agree to pursue the issuance of such a
     decision to the Commission staff level. In connection with the foregoing,
     the Company and the Co-Obligor hereby agree to take such other actions as
     are requested by the Commission or otherwise required in connection with
     the issuance of such decision, including without limitation (A)
     participating in telephonic conferences with the Commission, (B) delivering
     to the Commission staff an analysis prepared by counsel to the Company and
     the Co-Obligor setting forth the legal bases, if any, upon which such
     counsel has concluded that such an Exchange Offer should be permitted and
     (C) diligently pursuing a resolution by the Commission staff of such
     submission.

          (ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company or the Co-Obligor,
prior to the Consummation of the Exchange Offer, a written representation to the
Company and the Co-Obligor (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect that
(A) it is not an affiliate of the Company or the Co-Obligor, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange
Notes to be issued in the Exchange Offer and (C) it is acquiring the Exchange
Notes in its ordinary course of business. As a condition to its participation in
the Exchange Offer pursuant to the terms of this Agreement, each Holder shall
acknowledge and agree that any Broker-Dealer and any such Holder using the
Exchange Offer to participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's letter
to Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction and
that such a secondary resale transaction must be converted by an effective
registration statement containing the selling security holder information
required by Item 507 or 508, as applicable, of Regulation S-K if the resales are
of Exchange Notes obtained by such Holder in exchange for Notes acquired by such
Holder directly from the Company and the Co-Obligor.

          (b) Shelf Registration Statement. In connection with the Shelf
Registration Statement each of the Company and the Co-Obligor shall comply with
all the provisions of Section 6(c) below and shall use its best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Co-Obligor will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.

          (c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Exchange Offer Registration Statement and the related Prospectus, to the extent
that the same are required to be available to permit sale of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers), the Company and
the Co-Obligor shall:

                                       8
<PAGE>   10
          (i) subject to a Permitted Suspension, use their respective best
efforts to keep such Registration Statement continuously effective and provide
all requisite financial statements for the period specified in Section 3 or 4 of
this Agreement, as applicable. Upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period required
by this Agreement, the Company and the Co-Obligor shall file promptly an
appropriate amendment to such Registration Statement, (1) in the case of clause
(A), correcting any such misstatement or omission, and (2) in the case of either
clause (A) or (B), use their respective best efforts to cause such amendment to
be declared effective and such Registration Statement and the related Prospectus
to become usable for their intended purpose(s) as soon as practicable
thereafter;

          (ii) except in the event of a Permitted Suspension, prepare and file
with the Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep the Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Act, and to comply fully with Rules 424 and
430A, as applicable, under the Act in a timely manner: and comply with the
provisions of the Act with respect to the disposition of all securities covered
by such Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;

          (iii) advise the underwriters, if any and selling Holders promptly
and, if requested by such Persons, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption form
qualification of the Transfer Restricted Securities under state securities or
Blue Sky laws, the Company and the Co-Obligor shall use their respective best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time;

                                       9
<PAGE>   11
                 (iv) make available to each selling Holder named in any
         Registration Statement or Prospectus and each of the underwriters in
         connection with such sale, if any, before filing with the Commission,
         copies of any Registration Statement or any Prospectus included therein
         or any amendments or supplements to any such Registration Statement or
         Prospectus (including all documents incorporated by reference after the
         initial filing of such Registration Statement), substantially in the
         form proposed to be filed, which documents will be subject to the
         review and comment of such Holders and underwriters in connection with
         such sale, if any, for a period of at least five Business Days, and the
         Company and the Co-Obligor will not file any such Registration
         Statement or Prospectus or any amendment or supplement to any such
         Registration Statement or Prospectus (including all such documents
         incorporated by reference) to which the selling Holders of the Transfer
         Restricted Securities covered by such Registration Statement or the
         underwriters in connection with such sale, if any, shall reasonably
         object within five Business Days after the receipt thereof. A selling
         Holder or underwriter, if any, shall be deemed to have reasonably
         objected to such filing if such Registration Statement, amendment,
         Prospectus or supplement, as applicable, as proposed to be filed,
         contains a material misstatement or omission or fails to comply with
         the applicable requirements of the Act;

                 (v) promptly upon the filing of any document that is to be
         incorporated by reference into a Registration Statement or Prospectus,
         make available copies of such document to the selling Holders and to
         the underwriter(s) in connection with such sale, if any, make the
         Company's and the Co-Obligor's representatives available for discussion
         of such document and other customary due diligence matters, and include
         such information in such document prior to the filing thereof as such
         selling Holders or underwriter(s), if any, reasonably may request;

                 (vi) make available at reasonable times for inspection by the
         selling Holders, any underwriter participating in any disposition
         pursuant to such Registration Statement and any attorney or accountant
         retained by such selling Holders or any of such underwriters, all
         financial and other records, pertinent corporate documents and
         properties of the Company and the Co-Obligor and cause the Company's
         and the Co-Obligor's officers, directors and employees to supply all
         information reasonably requested by any such Holder, underwriter,
         attorney or accountant in connection with such Registration Statement
         or any post-effective amendment thereto subsequent to the filing
         thereof and prior to its effectiveness; provided that any person to
         whom information is provided under this clause (vi) agrees in writing
         to maintain the confidentiality of such information to the extent such
         information is not in the public domain;

                 (vii) if requested by any selling Holders or the underwriters
         in connection with such sale, if any, promptly include in any
         Registration Statement or Prospectus, pursuant to a supplement or
         post-effective amendment if necessary, such information as such selling
         Holders and underwriter(s), if any, may reasonably request to have
         included therein, including, without limitation, information relating
         to the "Plan of Distribution" of the Transfer Restricted Securities,
         information with respect to the principal amount of Transfer Restricted
         Securities being sold to such underwriters, the purchase price being
         paid therefor and any other terms of the offering of the Transfer
         Restricted Securities to be sold in such offering; and make all
         required filings of such Prospectus supplement or post-effective
         amendment as soon as practicable after the Company is notified of the
         matters to be included in such Prospectus supplement or post-effective
         amendment;

                                       10
<PAGE>   12
                 (viii) cause the Transfer Restricted Securities covered by the
         Registration Statement to be rated with the appropriate rating
         agencies, if so requested by the Holders of a majority in aggregate
         principal amount of Senior Notes covered thereby or the underwriters,
         if any;

                 (ix) furnish to each selling Holder and each of the
         underwriters in connection with such sale, if any, without charge, at
         least one copy of the Registration Statement, as first filed with the
         Commission, and of each amendment thereto, and make available all
         documents incorporated by reference therein and all exhibits (including
         exhibits incorporated therein by reference);

                 (x) deliver to each selling Holder and each of the
         underwriters, if any, without charge, as many copies of the Prospectus
         (and each preliminary prospectus) and any amendment or supplement
         thereto as such Persons reasonably may request; the Company and the
         Co-Obligor hereby consent to the use of the Prospectus and any
         amendment or supplement thereto by each of the selling Holders and each
         of the underwriters, if any, in connection with the offering and the
         sale of the Transfer Restricted Securities covered by the Prospectus or
         any amendment or supplement thereto;

                 (xi) enter into such agreements (including, unless not
         required pursuant to Section 10 hereof, an underwriting agreement) and
         make such representations and warranties and take all such other
         actions in connection therewith in order to expedite or facilitate the
         disposition of the Transfer Restricted Securities pursuant to any
         Registration Statement contemplated by this Agreement as may be
         reasonably requested by any Holder of Transfer Restricted Securities or
         underwriter in connection with any sale or resale pursuant to any
         Registration Statement contemplated by this Agreement, and in such
         connection, whether or not an underwriting agreement is entered into
         and whether or not the registration is an Underwritten Registration,
         the Company and the Co-Obligor shall upon request of any underwriter or
         any such Holder who is a Broker-Dealer or who may be deemed to be an
         underwriter:

                         (A) furnish to each such selling Holder and each
               underwriter, if any, upon the effectiveness of the Shelf
               Registration Statement and to each Restricted Broker-Dealer upon
               consummation of the Exchange Offer:

                 (1) (A) a certificate, signed by (x) the President or any Vice
                 President and (y) a principal financial or accounting officer
                 of the Company, and (B) a certificate signed by (x) the
                 President or any Vice President and a principal financial or
                 accounting officer of the Co-Obligor, each dated the date of
                 effectiveness of the Shelf Registration Statement or the date
                 of Consummation of the Exchange Offer, as the case may be,
                 confirming with respect to the Prospectus or any purchase or
                 underwriting agreement and the Transfer Restricted Securities,
                 as of the date thereof, the matters set forth in paragraphs
                 (a), (b), (c) and (d) of Section 8 of the Purchase Agreement
                 and such other matters as the Holders and/or underwriter(s) may
                 reasonably request;

                 (2) an opinion, dated the date of effectiveness of the Shelf
                 Registration Statement or the date of Consummation of the
                 Exchange Offer, as the case may be, of counsel for the Company
                 and the Co-Obligor, covering (i) due authorization and
                 enforceability of the Notes and the Exchange Notes, (ii) a
                 statement to the effect

                                       11
<PAGE>   13
                 that such counsel has participated in conferences with officers
                 and other representatives of the Company and the Co-Obligor and
                 representatives of the independent public accountants for the
                 Company and the Co-Obligor and have considered the matters
                 required to be stated therein and the statements contained
                 therein, although such counsel has not independently verified
                 the accuracy completeness or fairness of such statements; and
                 that such counsel advises that, on the basis of the foregoing
                 (relying as to materiality to a large extent upon facts
                 provided to such counsel by officers and other representatives
                 of the Company and the Co-Obligor and without independent check
                 or verification), no facts came to such counsel's attention
                 that caused such counsel to believe that the applicable
                 Registration Statement, at the time such Registration Statement
                 or any post-effective amendment thereto became effective, and,
                 in the case of the Exchange Offer Registration Statement, as of
                 the date of Consummation, contained an untrue statement of a
                 material fact or omitted to state a material fact required to
                 be stated therein or necessary to make the statements therein
                 not misleading, or that the Prospectus contained in such
                 Registration Statement as of its date and, in the case of the
                 opinion dated the date of Consummation of the Exchange Offer,
                 as of the date of Consummation, contained an untrue statement
                 of a material fact or omitted to state a material fact
                 necessary in order to make the statements therein, in the light
                 of the circumstances under which they were made, not misleading
                 and (iii) such other matters of the type customarily covered in
                 opinions of counsel for an issuer in connection with similar
                 securities offerings, as may reasonably be requested by such
                 parties. Without limiting the foregoing, such counsel may state
                 further that such counsel assumes no responsibility for, and
                 has not independently verified, the accuracy, completeness or
                 fairness of the financial statements, notes and schedules and
                 other financial, statistical and accounting data included in
                 any Registration Statement contemplated by this Agreement or
                 the related Prospectus; and

                 (3) if the registration is a registration in which securities
                 of the Company and the Co-Obligor are sold to an underwriter
                 for reoffering to the public, obtain a customary comfort
                 letter, dated as of the date of effectiveness of the Shelf
                 Registration Statement, addressed to the Board of Directors of
                 the Company and the Co-Obligor or any underwriter from the
                 Company's and the Co-Obligor's independent accountants, in the
                 customary form and covering manners of the type customarily
                 covered in comfort letters to boards of directors in
                 underwritten offerings;

                         (B) set forth in full in or incorporate by reference
          in the underwriting agreement, if any, in connection with any sale or
          resale pursuant to any Shelf Registration Statement the
          indemnification provisions and procedures of Section 8 hereof with
          respect to all parties to be indemnified pursuant to said Section; and

                         (C) deliver such other documents and certificates as
          may be reasonably requested by such parties to evidence compliance
          with clause (A) above and with any customary conditions contained in
          the underwriting agreement or other agreement entered into by the
          Company and the Co-Obligor pursuant to this clause (xi),if any.

                                       12

<PAGE>   14
         The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any time
the representations and warranties of the Company and the Co-Obligor
contemplated in (A)(1) above cease to be true and correct, the Company and the
Co-Obligor shall so advise the underwriters, if any, and such selling Holders
promptly and if requested by such Persons, shall confirm such advice in writing;

                 (xii) prior to any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders, the underwriters, if
         any, and their respective counsel in connection with the registration
         and qualification of the Transfer Restricted Securities under the
         securities or Blue Sky laws of such jurisdictions as the selling
         Holders or underwriters, if any, may request and do any and all other
         acts or things necessary or advisable to enable the disposition in such
         jurisdictions of the Transfer Restricted Securities covered by the
         applicable Registration Statement; provided, however, that neither the
         Company nor the Co-Obligor shall be required to register or qualify as
         a foreign corporation where it is not now so qualified or to take any
         action that would subject it to the service of process in suits or to
         taxation, other than as to matters and transactions relating to the
         Registration Statement, in any jurisdiction where it is not now so
         subject;

                 (xiii) issue, upon the request of any Holder of Notes covered
         by any Shelf Registration Statement contemplated by this Agreement.
         Exchange Notes having an aggregate principal amount equal to the
         aggregate principal amount of Notes surrendered to the Company or the
         Co-Obligor by such Holder in exchange therefor or being sold by such
         Holder; such Exchange Notes to be registered in the name of such Holder
         or in the name of the purchasers of such Exchange Notes; in return, the
         Notes held by such Holder shall be surrendered to the Company or the
         Co-Obligor for cancellation;

                 (xiv) in connection with any sale of Transfer Restricted
         Securities that will result in such securities no longer being Transfer
         Restricted Securities, cooperate with the selling Holders and the
         underwriters, if any, to facilitate the timely preparation and delivery
         of certificates representing Transfer Restricted Securities to be sold
         and not bearing any restrictive legends; and to register such Transfer
         Restricted Securities in such denominations and such names as the
         Holders or the underwriters, if any, may request at least two Business
         Days prior to such sale of Transfer Restricted Securities;

                 (xv) use their respective best efforts to cause the Transfer
         Restricted Securities covered by the Registration Statement to be
         registered with or approved by such other governmental agencies or
         authorities as may be necessary to enable the seller or sellers thereof
         or the underwriters, if any, to consummate the disposition of such
         Transfer Restricted Securities, subject to the proviso contained in
         clause (xii) above;

                 (xvi) if any fact or event contemplated by Section 6(c)(iii)(D)
         above shall exist or have occurred, except in the event of a Permitted
         Suspension, prepare a supplement or post-effective amendment to the
         Registration Statement or related Prospectus or any document
         incorporated therein by reference or file any other required document
         so that, as thereafter delivered to the purchasers of Transfer
         Restricted Securities, the Prospectus will not contain an untrue
         statement of a material fact or omit to state any material fact
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading;

                                       13
<PAGE>   15
                 (xvii) provide a CUSIP number for all Senior Notes not later
         than the effective date of a Registration Statement covering such
         Transfer Restricted Securities and provide the Trustee under the
         Indenture with printed certificates for the Senior Notes which are in a
         form eligible for deposit with the Depository Trust Company;

                 (xviii) cooperate and assist in any filings required to be
         made with the NASD and in the performance of any due diligence
         investigation by any underwriter (including any "qualified independent
         underwriter") that is required to be retained in accordance with the
         rules and regulations of the NASD, and use its best efforts to cause
         such Registration Statement to become effective and approved by such
         governmental agencies or authorities as may be necessary to enable the
         Holders selling Transfer Restricted Securities to consummate the
         disposition of such Transfer Restricted Securities;

                 (xix) otherwise use their respective best efforts to comply
         with all applicable rules and regulations of the Commission, and make
         generally available to its security holders with regard to any
         applicable Registration Statement, as soon as practicable, a
         consolidated earnings statement meeting the requirements of Rule 158
         (which need not be audited) covering a twelve-month period beginning
         after the effective date of the Registration Statement (as such term is
         defined in paragraph (c) of Rule 158 under the Act);

                 (xx) cause the Indenture to be qualified under the TIA not
         later than the effective date of the first Registration Statement
         required by this Agreement, and, in connection therewith, cooperate
         with the Trustee and the Holders of Senior Notes to effect such changes
         to the Indenture as may be required for such Indenture to be so
         qualified in accordance with the terms of the TIA; and execute and use
         their respective best efforts to cause the Trustee to execute, all
         documents that may be required to effect such changes and all other
         forms and documents required to be filed with the Commission to enable
         such Indenture to be so qualified in a timely manner;

                 (xxi) cause all Transfer Restricted Securities covered by the
         Registration Statement to be listed on each securities exchange on
         which similar securities issued by the Company are then listed if
         requested by the Holders of a majority in aggregate principal amount of
         Notes or the managing underwriters, if any; and

                 (xxii) provide promptly to each Holder upon written request
         each document filed with the Commission pursuant to the requirements of
         Section 13 or Section 15(d) of the Exchange Act.

         (d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from the Company
or the Co-Obligor of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in
writing (the "Advice") by the Company or the Co-Obligor that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company or the Co-Obligor, each Holder will deliver to the
Company or the Co-Obligor (at the Company's or the Co-Obligor's expense) all
copies, other than

                                       14
<PAGE>   16
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company or the Co-Obligor shall give
any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and
including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the
Advice.

       Section 7.   Registration Expenses

         (a) All expenses incident to the Company's and the Co-Obligor's
performance of or compliance with this Agreement will be borne by the Company
and the Co-Obligor, jointly and severally, regardless of whether a Registration
Statement becomes effective, including without limitation: (i) all registration
and filing fees and expenses (including filings made with the NASD (including,
if applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel, as may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Senior Notes and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and the Co-Obligor and, in accordance with Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the Senior Notes on a national exchange or automated
quotation system if required hereunder; and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Co-Obligor
(including the expenses of any special audit and comfort letters required by or
incident to such performance).

         The Company and the Co-Obligor will, in any event, bear their
respective internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company and the Co-Obligor.

         (b) In connection with any Registration Statement required by this
Agreement, the Company and the Co-Obligor will reimburse the Holders of Transfer
Restricted Securities being tendered in the Exchange Offer and/or resold
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority in principal amount of the
Transfer Restricted Securities for whose benefit such Registration Statement is
being prepared.

       Section 8.   Indemnification

         (a) The Company and the Co-Obligor agree, jointly and severally, to
indemnify and hold harmless (i) each Holder, (ii) each Person, if any, who
controls a Holder within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act and (iii) the respective officers, directors, partners,
employees, representatives and agents of any Holder or any controlling person to
the fullest extent lawful, from and against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to attorneys'
fees and any and all expenses whatsoever incurred in investigating, preparing or

                                       15
<PAGE>   17
defending against any investigation or litigation, commenced or threatened, or
any claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or in
any supplement thereto or amendment thereof, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company and the Co-Obligor will not be liable in any such case to the
extent, but only to the extent, that (i) any such loss, liability, claim, damage
or expense arises out of or is based upon any such untrue statement or alleged
untrue statements or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder expressly for use therein and (ii) the foregoing indemnity
with respect to any untrue statement contained in or omitted from a Registration
Statement or the Prospectus shall not inure to the benefit of any Holder (or any
person controlling such Holder), from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Senior Notes which are
the subject thereof if it is finally judicially determined that such loss,
liability, claim, damage or expense resulted solely from the fact that the
Holder sold Senior Notes to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Registration
Statement or the Prospectus, as amended or supplemented, and (x) the Company and
the Co-Obligor shall have previously and timely furnished sufficient copies of
the Registration Statement or Prospectus, as so amended or supplemented, to such
Holder in accordance with this Agreement and (y) the Registration Statement or
Prospectus, as so amended or supplemented, would have corrected such untrue
statement or omission of a material fact. This indemnity agreement will be in
addition to any liability which the Company or the Co-Obligor may otherwise
have, including, under this Agreement.

         (b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company and the Co-Obligor, each Person, if any, who controls
the Company or the Co-Obligor within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of the Company and the
Co-Obligor, against any losses, liabilities, claims, damages and expenses
whatsoever (including but not limited to attorneys' fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Holder expressly for use therein. This indemnity will be in addition to any
liability which a Holder may otherwise have, including under this Agreement. In
no event, however, shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the proceeds received by such Holder
upon its sale of the Senior Notes giving rise to such indemnification
obligation.

                                       16
<PAGE>   18
         (c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom indemnification is
to be sought in writing of the commencement thereof (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 8 except to the extent that it has been prejudiced
in any material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to take
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying party or parties shall not
have the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; provided, however, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its prior written consent, provided, however, that such consent
was not unreasonably withheld.

         (d) In order to provide for contribution in circumstances in which the
indemnification provided for in this Section 8 is for any reason held to be
unavailable from the Company or the Co-Obligor or is insufficient to hold
harmless a party indemnified thereunder, the Company, the Co-Obligor and each
Holder shall contribute to the aggregate losses, claims, damages, liabilities
and expenses of the nature contemplated by such indemnification provision
(including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claims asserted, but after deducting in the case of losses, claims, damages,
liabilities and expenses suffered by the Company or the Co-Obligor, any
contribution received by the Company or the Co-Obligor from persons, other than
the Holders, who may also be liable for contribution, including persons who
control the Company or the Co-Obligor within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act) to which the Company, the Co-Obligor
and any Holder may be subject, in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Co-Obligor from the
offering of Senior Notes on the one hand and any such Holder from its sale of
Senior Notes on the other hand or,if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in this Section 8, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Co-Obligor
on the one hand and the Holders on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Co-

                                       17

<PAGE>   19
Obligor on the one hand and any Holder on the other hand shall be deemed to be
in the same proportion as (x) the total proceeds from the offering of the Senior
Notes (net of discounts but before deducting expenses) received by the Company
and the Co-Obligor and (y) the total proceeds received by such Holder upon its
sale of Senior Notes which would otherwise give rise to the indemnification
obligation less any amount paid by such Holder to acquire the Senior Notes so
sold, respectively. The relative fault of the Company and the Co-Obligor on the
one hand and of the Holders on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Co-Obligor or the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Co-Obligor and each Holder agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) no Holder shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Senior Notes exceeds the sum of (A) the amount
paid by such Holder for such Senior Notes plus (B) the amount of any damages
which such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, (A) each
Person, if any, who controls a Holder within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and (B) the respective officers,
directors, partners, employees, representatives and agents of a Holder or any
controlling person shall have the same rights to contribution as such Holder,
and (X) each Person, if any, who controls the Company or the Co-Obligor within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
(Y) the respective officers, directors, partners, employees, representatives and
agents of the Company and the Co-Obligor shall have the same rights to
contribution as the Company and the Co-Obligor, subject in each case to clauses
(i) and (ii) of this Section 8(d). Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 8, notify such party
or parties from whom contribution may be sought, but the failure to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its prior written consent; provided,
however, that such written consent was not unreasonably withheld.

       Section 9.   Rule 144A

         The Company and the Co-Obligor hereby agree with each Holder, for so
long as any Transfer Restricted Securities remain outstanding, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.

       Section 10.   Underwritten Registrations

                                       18
<PAGE>   20
         In the event a Shelf Registration Statement is required to be filed by
the Company and the Co-Obligor, the Holders of Transfer Restricted Securities
included or required to be included in such Shelf Registration Statement may
elect to sell their Transfer Restricted Securities pursuant to one or more
Underwritten Registrations; provided, however, that in no event shall any such
Underwritten Registration be commenced if a period of less than 180 days has
elapsed since the consummation of the most recent Underwritten Registration
hereunder; and provided further that in no event shall the Holders effect more
than three such Underwritten Registrations hereunder. No Holder may participate
in any Underwritten Registration hereunder unless such Holder (a) agrees to sell
such Holder's Transfer Restricted Securities on the basis provided in customary
underwriting arrangements entered into in connection therewith and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.

       Section 11.   Selection of Underwriters

         In any Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will be
selected by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities included in such offering; provided, that such
investment bankers and managers must be reasonably satisfactory to the Company
and the Co-Obligor. Such investment bankers and managers are referred to herein
as the "underwriters."

       Section 12.   Miscellaneous

         (a) Remedies. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indenture, the Purchase Agreement or granted
by law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Co-Obligor agree that monetary damages (including the liquidated damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.

         (b) No Inconsistent Agreements. Each of the Company and the Co-Obligor
will not on or after the date of this Agreement enter into any agreement with
respect to its respective securities that conflicts with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's or
the Co-Obligor's securities under any agreement in effect on the date hereof,
except where a waiver with respect thereto has been obtained prior to the date
of effectiveness of any registration statement required under this Agreement.

         (c) Adjustments Affecting the Senior Notes. Neither the Company nor the
Co-Obligor will take any action, or permit any change to occur, with respect to
the Senior Notes that would materially adversely affect the ability of the
Holders to Consummate any Exchange Offer.

         (d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless the Company and the Co-Obligor
have obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities, and the consent of the

                                       19
<PAGE>   21
Holders of a majority of the outstanding principal amount of Registrable
Securities shall be binding on every Holder of Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority of the outstanding principal amount of Transfer Restricted
Securities that are subject to such Exchange Offer.

         (e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:

                 (i) if to a Holder, at the address set forth on the records of
         the Registrar under the Indenture, with a copy to the Registrar under
         the Indenture; and

                 (ii) if to the Company or the Co-Obligor:

                      MGC Communications, Inc.
                      171 Sully's Trail Suite 202
                      Pittsford, New York 14534
                      Telecopier No.: (716) 218-6550
                      Attention: General Counsel

                      With a copy to:

                      Shearman & Sterling
                      599 Lexington Avenue
                      New York, New York 10022
                      Telecopier No.: (212) 848-7179
                      Attention: Andrew Jansky, Esq.

       All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.

       Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

         (f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities directly from such Holder.

                                       20
<PAGE>   22
         (g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

         (j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

         (k) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject mater contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company and the
Co-Obligor with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.

         (l) Release. Notwithstanding anything to the contrary in this
agreement, provided that no Registration Default has occurred and is continuing,
upon the occurrence of a Release (as defined in the Indenture dated as of March
24, 2000 by and among the Company, the Co-Obligor and the Trustee named
therein), the Company shall be discharged from its obligations under this
agreement as of the date of the Release.

                            [Signature Page Follows]

                                       21
<PAGE>   23
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            MGC COMMUNICATIONS, INC.

                                            By:             [SIG]
                                               --------------------------------
                                            Name:
                                            Title:

                                            MPOWER HOLDING CORPORATION

                                            By:             [SIG]
                                               --------------------------------
                                            Name:
                                            Title:

BEAR, STEARNS & CO. INC.

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

SALOMON SMITH BARNEY INC.

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

GOLDMAN, SACHS & CO.

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

MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED

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

<PAGE>   24
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            MGC COMMUNICATIONS, INC.

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

                                            MPOWER HOLDING CORPORATION

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

BEAR, STEARNS & CO. INC.

By:              [SIG]
   -------------------------------------
   Name:
   Title: Senior Managing Director

SALOMON SMITH BARNEY INC.

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

GOLDMAN, SACHS & CO.

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

MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED

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

<PAGE>   25
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            MGC COMMUNICATIONS, INC.

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

                                            MPOWER HOLDING CORPORATION

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

BEAR, STEARNS & CO. INC.

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

SALOMON SMITH BARNEY INC.

By:                [SIG]
   -------------------------------------
   Name:  Lea V. Medow
   Title: Vice President

GOLDMAN, SACHS & CO.

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

MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED

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

<PAGE>   26
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            MGC COMMUNICATIONS, INC.

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

                                            MPOWER HOLDING CORPORATION

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

BEAR, STEARNS & CO. INC.

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

SALOMON SMITH BARNEY INC.

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

GOLDMAN, SACHS & CO.

By:        [SIG]
   -------------------------------------
   Name:
   Title:

MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED

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

<PAGE>   27
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                            MGC COMMUNICATIONS, INC.

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

                                            MPOWER HOLDING CORPORATION

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

BEAR, STEARNS & CO. INC.

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

SALOMON SMITH BARNEY INC.

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

GOLDMAN, SACHS & CO.

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

MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED

By:                [SIG]
   -------------------------------------
   Name:  [ILLEGIBLE]
   Title: Vice President

<PAGE>   28

   Name:
   Title

WARBURG DILLON READ LLC

By:             [SIG]
   -------------------------------------
   Name:  Vincent Lu
   Title: Executive Director

By:             [SIG]
   -------------------------------------
   Name:  P. Whitridge Williams
   Title: Associate Director

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00011-of-00352.parquet"}]]