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Exhibit 10.9
 
 

  [e10_9logo.jpg]  
 
South Central Ontario Region
381 King St. W. & Francis St., 2nd Fl.
Kitchener, Ontario
N2G 1B8
 
Telephone No.: (519) 570-7322
Fax No.: (519) 579-2610

 
February 19, 2007
 
Franklin Covey Canada, Ltd.
60 Struck Crt
Cambridge, ON  N1R 8L2
 
 
Attn: Mr. Mark Pallin,
 
Dear Sir,
 
We are pleased to offer the Borrower the following credit facilities (the
"Facilities"), subject to the following terms and conditions.
 
BORROWER 
 
(the "Borrower")
 
LENDER
 
The Toronto-Dominion Bank (the "Bank"), through its South Central Ontario Region
branch, in Kitchener, Ontario.
 
CREDIT LIMIT
 
 
1) CDN $500,000
2) CDN $895,253 as reduced pursuant to the section headed "Repayment and
Reduction of Amount of Credit Facility".
 
TYPE OF CREDIT AND BORROWING OPTIONS 
1) Operating Loan available at the Borrower's option by way of:
          Prime Rate Based Loans in CDN$ ("Prime Based Loans")
 
2) Committed Reducing Term Facility (Single Draw)available at the Borrower's
option by way of:
          Fixed Rate Term Loan in CDN$
          Floating Rate Term Loan available by way of:
                    Prime Rate Based Loans in CDN$ ("Prime Based Loans")
 
 
PURPOSE 
1) Working Capital
2) Real Estate Financing
   
TENOR
1) Uncommitted
2) Committed
 
 
 
CONTRACTUAL TERM
1) No term
2) March 15, 2009
 
   
RATE TERM (FIXED RATE TERM LOAN)
1) No term
2) Fixed rate: 6 month, 1-3 years but never to exceed the Contractual Term
Maturity Date
    Floating rate: No term
 
   
AMORTIZATION
2) 15 years to January 2015
 
    INTEREST RATES AND FEES 
Advances shall bear interest and fees as follows:
 
1) Operating Loan:
Prime Based Loans: Prime Rate + 0% per annum
2) Committed Reducing Term Facility: 
Fixed Rate Term Loans: As determined by the Bank, in its sole discretion, for
the Rate Term selected bythe Borrower, and as set out in the Rate and Payment
Terms Notice applicable to that Fixed Rate Term Loan.
            Floating Rate Term Loans available by way of:
            Prime Based Loans: Prime Rate + 0% per annum
 
For all Facilities, interest payments will be made in accordance with Schedule
"A" attached hereto unless otherwise stated in this Letter or in the Rate and
Payment Terms Notice applicable for a particular drawdown. Information on
interest rate and fee definitions, interest rate calculations and payment is set
out in the Schedule "A" attached hereto.
   
DRAWDOWN 
1) On a revolving basis.
2) Fully drawn. Amounts repaid may not be redrawn.
   
BUSINESS CREDIT SERVICE 
 
The Borrower will have access to the Operating Loan (Facility 1) via Loan
Account Number 9327791-2752 (the "Loan Account") up to the Credit Limit of the
Operating Loan by withdrawing funds from the Borrower's Current Account Number
327791-2752 (the "Current Account"). The Borrower agrees that each advance from
the Loan Account will be in an amount equal to $10,000 (the "Transfer Amount")
or a multiple thereof. If the Transfer Amount is NIL, the Borrower agrees that
an advance from the Borrower's Loan Account may be in an amount sufficient to
cover the debits made to the Current Account.
 
The Borrower agrees that:
a) all other overdraft privileges which have governed the Borrower's Current
Account are hereby cancelled.
b) all outstanding overdraft amounts under any such other agreements are now
included in indebtedness under this Agreement.
 
The Bank may, but is not required to, automatically advance the Transfer Amount
or a multiple thereof or any other amount from the Loan Account to the Current
Account in order to cover the debits made to the Current Account if the amount
in the Current Account is insufficient to cover the debits. The Bank may, but is
not required to, automatically and without notice apply the funds in the Current
Account in amounts equal to the Transfer Amount or any multiple thereof or any
other amount to repay the outstanding amount in the Loan Account.
   
REPAYMENT AND REDUCTION OF AMOUNT OF CREDIT FACILITY 
1) On demand. If the Bank demands repayment, the Borrower will pay to the Bank
all amounts outstanding under the Operating Loan.
2) All amounts outstanding will be repaid on or before the Contractual Term
Maturity Date. The drawdown will be repaid in equal monthly payments. The
details of repayment and interest rate applicable to such drawdown will be set
out in the" Rate and Payment Terms Notice" applicable to that drawdown. Any
amounts repaid may not be reborrowed.
   
SECURITY
The following security shall be provided, shall, unless otherwise indicated,
support all present and future indebtedness and liability of the Borrower and
the grantor of the security to the Bank including without limitation
indebtedness and liability under guarantees, foreign exchange contracts, cash
management products, and derivative contracts, shall be registered in first
position, and shall be on the Bank's standard form, supported by resolutions and
solicitor's opinion, all acceptable to the Bank:
 
a) General Security Agreement ("GSA") representing a first charge on all the
Borrower’s assets and undertakings with SLO and Resolution
b) General Assignment of Fire Insurance.
c) Continuing Collateral Mortgage, representing a first charge, on real property
located at 60 Struck Court, Cambridge, Ontario, in the principal amount of
$1,500,000, beneficially owned by and registered in the name of Franklin Covey
Canada, Ltd.
d) Guarantee of Advances from Franklin Covey Co.
         Limited $1,500,000
 
All persons and entities required to provide a guarantee shall be referred to
herein individually as a "Surety" and/or "Guarantor" and collectively as the
"Guarantors".
 
All of the above security and guarantees shall be referred to collectively in
this Agreement as "Bank Security".
   
DISBURSEMENT CONDITIONS 
The obligation of the Bank to permit any drawdown hereunder is subject to the
Standard Disbursement Conditions contained in Schedule "A" and the following
additional drawdown conditions:
 
a) Borrower Questionnaire and Site Visit to be completed satisfactory to the
Bank.
b) Accountant Prepared Financial statements for the year ended Aug 31, 2006 are
to be provided to the bank with no material change from management prepared
statements.
c) Management prepared interim financial statements for the most recent period
ended are to be provided to the bank.
d) Borrower to commit to transferring all day-to-day banking to TDBFG.
   
REPRESENTATIONS AND WARRANTIES
All representations and warranties shall be deemed to be continually repeated so
long as any amounts remain outstanding and unpaid under this Agreement or so
long as any commitment under this Agreement remains in effect. The Borrower
makes the Standard Representations and Warranties set out in Schedule "A".
 
   
POSITIVE COVENANTS 
So long as any amounts remain outstanding and unpaid under this Agreement or so
long as any commitment under this Agreement remains in effect, the Borrower will
and will ensure that its subsidiaries and each of the Guarantors will observe
the Standard Positive Covenants set out in Schedule "A" and in addition will:
 
a) provide to the Bank annually, Audited year end financial statements for
Franklin Covey Co. within 120 days of each fiscal year end,
b) provide to the Bank annually, Accountant Prepared Notice to Reader Financial
Statements for Franklin Covey Canada, Ltd. , within 120 days of each fiscal year
end,
c) obtain prior approval from the Bank and it's solicitor, for any lease or
easement that would restrict use of the property. Approval not to be
unreasonably withheld.
   
NEGATIVE COVENANTS 
So long as any amounts remain outstanding and unpaid under this Agreement or so
long as any commitment under this Agreement remains in effect, the Borrower will
and will ensure that its subsidiaries and each of the Guarantors will observe
the Standard Negative Covenants set out in Schedule "A". In addition the
Borrower will not and will ensure that its subsidiaries and each of the
Guarantors will not:
 
a) allow the subject property herein to be further encumbered.
   
REPORTING
The Borrower acknowledges that the financial reporting obligations contained
herein, including the submission of the financial statements to the Bank on a
timely basis, constitute a material condition precedent to the Bank providing
the credit facilities contemplated herein. Should the Borrower fail to fulfill
such obligations within the delays set forth herein and such default is not
remedied within 10 days from the date of the Bank's written notice to the
Borrower setting forth the nature of the default, then the Borrower shall be
deemed to have committed an "Event of Default" as hereinafter defined.
 
Notwithstanding the foregoing, and without prejudice to and under strict reserve
thereof, of any rights and recourses the Bank may have in the circumstances, the
Bank shall nevertheless have the right to engage, at the Borrower's expense, an
independent auditor to examine the Borrower's books, records and physical
assets, and perform such tests and analysis and such other verifications as the
Bank may, in its sole discretion, determine necessary to assess its loan risk
and realizable value of the Security.
   
PERMITTED LIENS
Permitted Liens as referred to in Schedule "A" are:
 
Purchase Money Security Interests in equipment which Purchase Money Security
Interest exists on the date of this Agreement ("Existing PMSIs") which are known
to the Bank and all future Purchase Money Security Interests on equipment
acquired to replace the equipment under Existing PMSIs, provided that the cost
of such replacement equipment may not exceed the cost of the equipment subject
to the Existing Lien by more than 10%.
   
FINANCIAL COVENANTS 
The Borrower agrees at all times to:
 
a) maintain a Debt Service Coverage ratio, of not less than 1.25:1. Tested
Annually.
 
The Debt Service Coverage ratio to be calculated as follows:
 
EBITDA - Any Capital Cash Outflows to related company (Dividends, Shareholder
loans, etc.) - Capital Expenditures
Principal + Interest
 
EBITDA is defined as Earnings Before Interest, Income Taxes, Depreciation, and
Amortization.
   
EVENTS OF DEFAULT
The Bank may accelerate the payment of principal and interest under any
committed credit facility hereunder and cancel any undrawn portion of any
committed credit facility hereunder, at any time after the occurrence of any one
of the Standard Events of Default contained in Schedule "A" attached hereto.
   
ANCILLARY FACILITIES
As at the date of this Agreement, the following uncommitted ancillary products
are made available. These products may be subject to other agreements.
 
1) TD Visa Business cards.
2) Spot Foreign Exchange Facility which allows the Borrower to enter into
US$1,000,000 for settlement on a spot basis.
3) Certain treasury products, such as forward foreign exchange transactions.
 
The Borrower agrees that treasury products will be used to hedge its risk and
will not be used for speculative purposes.
 
The paragraph headed "FX CLOSE OUT" as set out in Schedule "A" shall apply to FX
Transactions.
   
AVAILABILITY OF OPERATING LOAN
The Operating Loan is uncommitted, made available at the Bank's discretion, and
is not automatically available upon satisfaction of the terms and conditions,
conditions precedent, or financial tests set out herein.
 
The occurrence of an Event of Default is not a precondition to the Bank's right
to accelerate repayment and cancel the availability of the Operating Loan.
   
SCHEDULE "A" - STANDARD TERMS
AND CONDITIONS 
Schedule "A" sets out the Standard Terms and Conditions ("Standard Terms and
Conditions") which apply to these credit facilities. The Standard Terms and
Conditions, including the defined terms set out therein, form part of this
Agreement, unless this letter states specifically that one or more of the
Standard Terms and Conditions do not apply or are modified.
       

We trust you will find these facilities helpful in meeting your ongoing
financing requirements. We ask that if you wish to accept this offer of
financing (which includes the Standard Terms and Conditions), please do so by
signing and returning the attached duplicate copy of this letter to the
undersigned. This offer will expire if not accepted in writing and received by
the Bank on or before February 26, 2007.
 
Yours truly,
 
THE TORONTO-DOMINION BANK
 
 
John W. Edwards
Relationship Manager
 
 
Robert Lewis
Manager Commercial Credit
 
 

  
 
 
TO THE TORONTO-DOMINION BANK:
 
 hereby accepts the foregoing offer this             day
of                           , 2007.
 
Signature
 
Signature
Print Name & Position
 
Print Name & Position

 
cc. Guarantor(s)
 
The Bank is providing the guarantor(s) with a copy of this letter as a courtesy
only. The delivery of a copy of this letter does not create any obligation of
the Bank to provide the guarantor(s) with notice of any changes to the credit
facilities, including without limitation, changes to the terms and conditions,
increases or decreases in the amount of the credit facilities, the establishment
of new credit facilities or otherwise. The Bank may, or may not, at its option,
provide the guarantor(s) with such information, provided that the Bank will
provide such information upon the written request of the guarantor.
 
 

 
SCHEDULE A
STANDARD TERMS AND CONDITIONS
 
 
1.INTEREST RATE DEFINITIONS
 
Prime Rate means the rate of interest per annum (based on a 365/366 day year)
established and reported by the Bank to the Bank of Canada from time to time as
the reference rate of interest for determination of interest rates that the Bank
charges to customers of varying degrees of creditworthiness in Canada for
Canadian dollar loans made by it in Canada.
 
The Stamping Fee rate per annum for CDN$ B/As is based on a 365/366 day year and
the Stamping Fee is calculated on the Face Amount of each B/A presented to the
Bank for acceptance.  The Stamping Fee rate per annum for US$ B/As is based on a
360 day year and the Stamping Fee is calculated on the Face Amount of each B/A
presented to the Bank for acceptance.
 
LIBOR means the rate of interest per annum (based on a 360 day year) as
determined by the Bank (rounded upwards, if necessary to the nearest whole
multiple of 1/16th of 1%) at which the Bank may make available United States
dollars which are obtained by the Bank in the Interbank Euro Currency Market,
London, England at approximately 11:00 a.m. (Toronto time) on the second
Business Day before the first day of, and in an amount similar to, and for the
period similar to the interest period of, such advance.
 
USBR means the rate of interest per annum (based on a 365/366 day year)
established by the Bank from time to time as the reference rate of interest for
the determination of interest rates that the Bank charges to customers of
varying degrees of creditworthiness for US dollar loans made by it in Canada.
 
Any interest rate based on a period less than a year expressed as an annual rate
for the purposes of the Interest Act (Canada) is equivalent to such determined
rate multiplied by the actual number of days in the calendar year in which the
same is to be ascertained and divided by the number of days in the period upon
which it was based.
 
2. INTEREST CALCULATION AND PAYMENT  
 
Interest on Prime Based Loans and USBR Loans is calculated daily and payable
monthly in arrears based on the number of days  the subject loan is outstanding
unless otherwise provided in the Rate and Payment Terms Notice.
 
The Stamping Fee is calculated based on the amount and the term of the B/A and
payable upon acceptance by the Bank of the B/A. The net proceeds received by the
Borrower on a B/A advance will be equal to the Face Amount of the B/A discounted
at the Bank's then prevailing B/A discount rate for CDN$ B/As or US$ B/As as the
case may be, for the specified term of the B/A less the B/A Stamping Fee.
 
Interest on LIBOR Loans is calculated and payable on the earlier of contract
maturity or quarterly in arrears, for the number of days in the LIBOR interest
period.
 
L/C and L/G fees are payable at the time set out in the Letter of Credit
Indemnity Agreement applicable to the issued L/C or L/G.
 
Interest on Fixed Rate Term Loans is compounded monthly and payable monthly in
arrears unless otherwise provided in the Rate and Payment Terms Notice.
 
Interest is payable both before and after maturity or demand, default and
judgment.
 
Each payment under this Agreement shall be applied first in payment of costs and
expenses, then interest and fees and the balance, if any, shall be applied in
reduction of principal.
 
For loans not secured by real property, all overdue amounts of principal and
interest and all amounts outstanding in excess of the Credit Limit shall bear
interest from the date on which the same became due or from when the excess was
incurred, as the case may be, until the date of payment or until the date the
excess is repaid at 21% per annum, or such lower interest rate if the Bank
agrees to a lower interest rate in writing.  Nothing in this clause shall be
deemed to authorize the Borrower to incur loans in excess of the Credit Limit.
 
3. DRAWDOWN PROVISIONS
 
Prime Based and USBR Loans
There is no minimum amount of drawdown by way of Prime Based Loans and USBR
Loans, except as stated in the section of the Agreement titled "Business Credit
Services Agreement", if that section of the Agreement has not been deleted. The
Borrower shall provide the Bank with 3 Business Days' notice of a requested
Prime Based Loan or USBR Loan over $1,000,000.
 
B/As
The Borrower shall advise the Bank of the requested term or maturity date for
B/As issued hereunder.  The Bank shall have the discretion to restrict the term
or maturity dates of B/As. In no event shall the term of the B/A exceed the
Contractual Term Maturity Date. The minimum amount of a drawdown by way of B/As
is $1,000,000 and in multiples of $100,000 thereafter. The Borrower shall
provide the Bank with 3 Business Days' notice of a requested B/A drawdown.
 
The Borrower shall pay to the Bank the full amount of the B/A  at the maturity
date of the B/A.
 
The Borrower appoints the Bank as its attorney to and authorizes the Bank to (i)
complete, sign, endorse, negotiate and deliver B/As on behalf of the Borrower in
handwritten form, or by facsimile or mechanical signature or otherwise, (ii)
accept such B/As, and (iii) purchase, discount, and/or negotiate B/As.
 
LIBOR
The Borrower shall advise the Bank of the requested LIBOR contract maturity
period.  The Bank shall have the discretion to restrict the LIBOR contract
maturity.  In no event shall the term of the LIBOR contract exceed the
Contractual Term Maturity Date.  The minimum amount of a drawdown by way of a
LIBOR Loan is $1,000,000, and shall be in multiples of $100,000 thereafter. The
Borrower will provide the Bank with 3 Business Days' notice of a requested LIBOR
Loan.
 
L/C and/or L/G
The Bank shall have the discretion to restrict the maturity date of L/Gs or
L/Cs.
 
B/A - Prime Conversion
The Borrower will provide the Bank with at least 3 Business Days' notice of its
intention either to convert a B/A to a Prime Based Loan or vice versa, failing
which, the Bank may decline to accept such additional B/As or may charge
interest on the amount of Prime Based Loans resulting from maturity of B/As at
the rate of 115% of the rate applicable to Prime Based Loans for the 3 Business
Day period immediately following such maturity.  Thereafter, the rate shall
revert to the rate applicable to Prime Based Loans.
 
Notice
Prior to each drawdown and at least 10 days prior to each Rate Term Maturity,
the Borrower will advise the Bank of its selection of drawdown options from 
those made available by the Bank.  The Bank will, after each drawdown, other
than drawdowns by way of BA, LIBOR Loan or under the operating loan, send a Rate
and Payment Terms Notice to the Borrower.
 
4. PREPAYMENT
 
(a)     10% Prepayment Option Chosen.  If the Borrower has elected a 10%
Prepayment Option for a Facility the following shall apply to all Fixed Rate
Loans made under that Facility.  Each calendar year, ("Year"), the Borrower may
prepay in one lump sum, once each Year, an amount outstanding under a Fixed Rate
Term Loan not exceeding 10% of the original amount of the Fixed Rate Term Loan
being prepaid, upon payment of all interest accrued to the date of prepayment
("Prepayment Date") without paying any prepayment charge, provided that an Event
of Default has not occurred.  This privilege is not cumulative from Year to
Year.
 
(b)     10% Prepayment Option Not Chosen or Borrower Prepaying More than 10%. 
During each Year, the Borrower may, provided that an Event of Default has not
occurred:
 
if it has not chosen the 10% Prepayment Option, prepay all or any part of the
principal then outstanding under Fixed Rate Term Loans, or,
if it has chosen the 10% Prepayment Option, prepay more than 10% of the original
amount of the Fixed Rate Term Loan being prepaid, in any Year,
 
in either case, upon payment of all interest accrued to the Prepayment Date and
prepayment charges equal to the greater of:
 
(a)     three months' interest on the amount of the prepayment (and in the case
where the Borrower has chosen the 10% Prepayment Option, the amount of
prepayment is the amount of prepayment exceeding the 10% limit) using the
interest rate applicable to the Fixed Rate Term Loan being prepaid; and
 
(b)     the Interest Rate Differential, being the amount by which:
 
the total amount of interest on the amount of the prepayment using the interest
rate applicable to the Fixed Rate Term Loan being prepaid calculated for the
period of time equal to the Remaining Term, exceeds
the total amount of interest on the amount being prepaid using the interest rate
applicable to a fixed rate term loan that the Bank would make to a borrower for
a comparable facility on the Prepayment Date, calculated for the period of time
from the Prepayment Date until the Rate Term Maturity Date for the Fixed Rate
Term Loan being prepaid ("Remaining Term").
 
5. STANDARD DISBURSEMENT CONDITIONS
 
The obligation of the Bank to permit any drawdowns hereunder at any time is
subject to the following conditions precedent:
a)         The Bank shall have received the following documents which shall be
in form and substance satisfactory to the Bank:
            i)          A copy of a duly executed resolution of the Board of
Directors of the Borrower empowering the Borrower to enter into this Agreement; 
            ii)          A copy of any necessary government approvals
authorizing the Borrower to enter into this Agreement;
            iii)         All of the Bank Security and supporting resolutions and
solicitors' letter of opinion required hereunder;
            iv)         The Borrower's compliance certificate certifying
compliance with all terms and conditions hereunder;
            v)         all operation of account documentation; and
            vi)         For drawdowns under the Facility by way of L/C or L/G,
the Bank’s standard form Letter of Credit Indemnity Agreement
b)         The representations and warranties contained in this Agreement are
correct.
c)         No event has occurred and is continuing which constitutes an Event of
Default or would constitute an Event of Default, but for the requirement that
notice be given or time elapse or both.
d)         The Bank has received the arrangement fee payable hereunder (if any)
and the Borrower has paid all legal and other expenses incurred by the Bank in
connection with the Agreement or the Bank Security.
 
6.  STANDARD REPRESENTATIONS AND WARRANTIES
 
The Borrower hereby represents and warrants, which  representations and
warranties shall be deemed to be continually repeated so long as any amounts
remain outstanding and unpaid under this Agreement or so long as any commitment
under this Agreement remains in effect, that:
a)         The Borrower is a duly incorporated corporation, a limited
partnership, partnership, or sole proprietorship, duly organized, validly
existing and in good standing under the laws of the jurisdiction where the
Branch/Centre is located and each other jurisdiction where the Borrower has
property or assets or carries on business and the Borrower has adequate
corporate power and authority to carry on its business, own property, borrow
monies and enter into agreements therefore, execute and deliver the Agreement,
the Bank Security, and documents required hereunder, and observe and perform the
terms and provisions of this Agreement.
b)         There are no laws, statutes or regulations applicable to or binding
upon the Borrower and no provisions in its charter documents or in any by-laws,
resolutions, contracts, agreements, or arrangements which would be contravened,
breached, violated as a result of the execution, delivery, performance,
observance, of any terms of this Agreement.
c)         No Event of Default has occurred nor has any event occurred which,
with the passage of time or the giving of notice, would constitute an Event of
Default under this Agreement or which would constitute a default under any other
agreement.
d)         There are no actions, suits or proceedings, including appeals or
applications for review, or any knowledge of pending actions, suits, or
proceedings against the Borrower and its subsidiaries, before any court or
administrative agency which would result in any material adverse change in the
property, assets, financial condition, business or operations of the Borrower.
e)         All material authorizations, approvals, consents, licenses,
exemptions, filings, registrations and other requirements of governmental,
judicial and public bodies and authorities required to carry on its business
have been or will be obtained or effected and are or will be in full force and
effect.
f)          The financial statements and forecasts delivered to the Bank fairly
present the present financial position of the Borrower, and have been prepared
by the Borrower and its auditors in accordance with Canadian  Generally Accepted
Accounting Principles consistently applied.
g)         All of the remittances required to be made by the Borrower to the
federal government and all provincial and municipal governments have been made,
are currently up to date and there are no outstanding arrears.  Without limiting
the foregoing, all employee source deductions (including income taxes,
Employment Insurance and Canada Pension Plan), sales taxes (both provincial and
federal), corporate income taxes, corporate capital taxes, payroll taxes and
Workers' Compensation dues are currently paid and up to date.
 
7. STANDARD POSITIVE COVENANTS
 
So long as any amounts remain outstanding and unpaid under this Agreement or so
long as any commitment under this Agreement remains in effect, the Borrower
will, and will ensure that its subsidiaries and each of the Guarantors will:
a)         Pay all amounts of principal, interest and fees on the dates, times
and place specified herein, under the Rate and Payment Terms Notice, and under
any other agreement between the Bank and the Borrower.
b)         Advise the Bank of any change in the amount and the terms of any
credit arrangement made with other lenders or any action taken by another lender
to recover amounts outstanding with such other lender.
c)         Advise promptly after the happening of any event which will result in
a material adverse change in the financial condition, business, operations, or
prospects of the Borrower or the occurrence of any Event of Default or default
under this Agreement or under any other agreement for borrowed money.
d)         Do all things necessary to maintain in good standing its corporate
existence and preserve and keep all material agreements, rights, franchises,
licenses, operations, contracts or other arrangements in full force and effect.
e)         Take all necessary actions to ensure that the Bank Security and its
obligations hereunder will rank ahead of all other indebtedness of and all other
security granted by the Borrower.
f)          Pay all taxes, assessments and government charges unless such taxes,
assessments, or charges are being contested in good faith and appropriate
reserves shall be made with funds set aside in a separate trust fund.
g)         Provide the Bank with information and financial data as it may
request from time to time.
h)         Maintain property, plant and equipment in good repair and working
condition.
i)          Inform the Bank of any actual or probable litigation and furnish the
Bank with copies of details of any litigation or other proceedings, which might
affect the financial condition, business, operations, or prospects of the
Borrower.
j)          Provide such additional security and documentation as may be
required from time to time by the Bank or its solicitors.
k)          Continue to carry on the business currently being carried on by the
Borrower its subsidiaries and each of the Guarantors at the date hereof.
l)          Maintain adequate insurance on all of its assets, undertakings, and
business risks.
m)        Permit the Bank or its authorized representatives full and reasonable
access to its premises, business, financial and computer records and allow the
duplication or extraction of pertinent information therefrom and
n)         Comply with all applicable laws.
 
8. STANDARD NEGATIVE COVENANTS
 
So long as any amounts remain outstanding and unpaid under this Agreement or so
long as any commitment under this Agreement remains in effect, the Borrower will
not and will ensure that its subsidiaries and each of the Guarantors will not:
 
a)         Create, incur, assume, or suffer to exist, any mortgage, deed of
trust, pledge, lien, security interest, assignment, charge, or encumbrance
(including without limitation, any conditional sale, or other title retention
agreement, or finance lease) of any nature, upon or with respect to any of its
assets or undertakings, now owned or hereafter acquired, except for those
Permitted Liens, if any, set out in the Letter.
b)         Create, incur, assume or suffer to exist any other indebtedness for
borrowed money (except for indebtedness resulting from Permitted Liens, if any)
or guarantee or act as surety or agree to indemnify the debts of any other
Person.
c)         Merge or consolidate with any other Person, or acquire all or
substantially all of the shares, assets or business of any other Person.
d)         Sell, lease, assign, transfer, convey or otherwise dispose of any of
its now owned or hereafter acquired assets (including, without limitation,
shares of stock and indebtedness of subsidiaries, receivables and leasehold
interests), except for inventory disposed of in the ordinary course of business.
e)         Terminate or enter into a surrender of any lease of any property
mortgaged under the Bank Security.
f)          Cease to carry on the business currently being carried on by each of
the Borrower, its subsidiaries, and the Guarantors at the date hereof.
g)         Permit any change of ownership or change in the capital structure of
the Borrower.
 
9. ENVIRONMENTAL
 
The Borrower represents and warrants (which representation and warranty shall
continue throughout the term of this Agreement) that the business of the
Borrower, its subsidiaries and each of the Guarantors is being operated in
compliance with applicable laws and regulations respecting the discharge,
omission, spill or disposal of any hazardous materials and that any and all
enforcement actions in respect thereto have been clearly conveyed to the Bank.
 
The Borrower shall, at the request of the Bank from time to time, and at the
Borrower's expense, obtain and provide to the Bank an environmental audit or
inspection report of the property from auditors or inspectors acceptable to the
Bank.
 
The Borrower hereby indemnifies the Bank, its officers, directors, employees,
agents and shareholders, and agrees to hold each of them harmless from all loss,
claims, damages and expenses (including legal and audit expenses) which may be
suffered or incurred in connection with the indebtedness under this Agreement or
in connection with the Bank Security.
 
10. STANDARD EVENTS OF DEFAULT
 
The Bank may accelerate the payment of principal and interest under any
committed credit facility hereunder and cancel any undrawn portion of any
committed credit facility hereunder, at any time after the occurrence of any one
of the following Events of Default:
a)         Non-payment of principal outstanding under this Agreement when due or
non-payment of interest or fees outstanding under this Agreement within 3
Business Days of when due.
b)         If any representation, warranty or statement made hereunder or made
in connection with the execution and delivery of this Agreement or the Bank
Security is false or misleading at any time.
c)         If there is a breach or non-performance or non-observance of any term
or condition of this Agreement or the Bank Security and, if such default is
capable to being remedied, the default continues unremedied for 5 Business Days
after the occurrence.
d)         If the Borrower, any one of its subsidiaries, or, if any of the
Guarantors makes a general assignment for the benefit of creditors, files or
presents a petition, makes a proposal or commits any act of bankruptcy, or if
any action is taken for the winding up, liquidation or the appointment of a
liquidator, trustee in bankruptcy, custodian, curator, sequestrator, receiver or
any other officer with similar powers or if a judgment or order shall be entered
by any court approving a petition for reorganization, arrangement or composition
of or in respect of the Borrower, any of its subsidiaries, or any of the
Guarantors or if the Borrower, any of its subsidiaries, or any of the Guarantors
is insolvent or declared bankrupt.
e)         If there exists a voluntary or involuntary suspension of business of
the Borrower, any of its subsidiaries, or any of the Guarantors.
f)          If action is taken by an encumbrancer against the Borrower,  any of
its subsidiaries, or any of the Guarantors to take possession of property or
enforce proceedings against any assets.
g)         If any final judgment for the payment of monies is made against the
Borrower, any of its subsidiaries, or any of the Guarantors and it is not
discharged within 30 days from the imposition of such judgment.
h)         If there exists an event, the effect of which with lapse of time or
the giving of notice, will constitute an event of default or a default under any
other agreement for borrowed money in excess the Cross Default Threshold entered
into by the Borrower, any of its subsidiaries, or any of the Guarantors.
i)          If the Bank Security is not enforceable or if any party to the Bank
Security shall dispute or deny any liability or any of its obligations under the
Bank Security.
j)          If, in the Bank's determination, a material adverse change occurs in
the financial condition, business operations or prospects of the Borrower, any
of the Borrower's subsidiaries, or any of the Guarantors.
 
11. ACCELERATION
 
If the Bank accelerates the payment of principal and interest hereunder, the
Borrower shall immediately pay to the Bank all amounts outstanding hereunder,
including without limitation, the amount of unmatured B/As and LIBOR Loans and
the amount of all drawn and undrawn  L/Gs and  L/Cs.  All cost to the Bank of
unwinding LIBOR Loans and all loss suffered by the Bank in re-employing amounts
repaid will be paid by the Borrower.
 
The Bank may demand the payment of principal and interest under the Operating
Loan (and any other uncommitted facility) hereunder and cancel any undrawn
portion of the Operating Loan (and any other uncommitted facility) hereunder, at
any time whether or not an Event of Default has occurred.
 
12. CURRENCY INDEMNITY
 
US$ loans must be repaid with US$ and CDN$ loans must be repaid with CDN$ and
the Borrower shall indemnify the Bank for any loss suffered by the Bank if US$
loans are repaid with CDN$ or vice versa, whether such payment is made pursuant
to an order of a court or otherwise.
 
13. TAXATION ON PAYMENTS
 
All payments made by the Borrower to the Bank will be made free and clear of all
present and future taxes (excluding the Bank's income taxes), withholdings or
deductions of whatever nature.  If these taxes, withholdings or deductions are
required by applicable law and are made, the Borrower, shall, as a separate and
independent obligation, pay to the Bank all additional amounts as shall fully
indemnify the Bank from any such taxes, withholdings or deductions.
 
14. REPRESENTATION
 
No representation or warranty or other statement made by the Bank concerning any
of the credit facilities shall be binding on the Bank unless made by it in
writing as a specific amendment to this Agreement.
 
15. ADDED COST
 
If the introduction of or any change in any present or future law, regulation,
treaty, official or unofficial directive, or regulatory requirement, (whether or
not having the force of law) or in the interpretation or application thereof,
relates to:
i)          the imposition or exemption of taxation of payments due to the Bank
or on reserves or deemed reserves in respect of the undrawn portion of any
Facility or loan made available hereunder; or,
ii)          any reserve, special deposit, regulatory or similar requirement
against assets, deposits, or loans or other acquisition of funds for loans by
the Bank; or,
iii)         the amount of capital required or expected to be maintained by the
Bank as a result of the existence of the advances or the commitment made
hereunder;
 
and the result of such occurrence is, in the sole determination of the Bank, to
increase the cost of the Bank or to reduce the income received or receivable by
the Bank hereunder, the Borrower shall, on demand by the Bank, pay to the Bank
that amount which the Bank estimates will compensate it for such additional cost
or reduction in income and the Bank's estimate shall be conclusive, absent
manifest error.
 
16. EXPENSES
 
The Borrower shall pay, within 5 Business Days following notification, all fees
and expenses (including but not limited to all legal fees) incurred by the Bank
in connection with the preparation, registration and ongoing administration of
this Agreement and the Bank Security and with the enforcement of the Bank's
rights and remedies under this Agreement and the Bank Security whether or not
any amounts are advanced under the Agreement. These  fees and expenses shall
include, but not be limited, to all outside counsel fees and expenses and all
in-house legal fees and expenses, if in-house counsel are used, and all outside
professional advisory fees and expenses. The Borrower shall pay interest on
unpaid amounts due pursuant to this paragraph at the All-In Rate plus 2% per
annum.
 
17. NON WAIVER
 
Any failure by the Bank to object to or take action with respect to a breach of
this Agreement or any Bank Security or upon the occurrence of an Event of
Default shall not constitute a waiver of the Bank's right to take action at a
later date on that breach. No course of conduct by the Bank will give rise to
any reasonable expectation which is in any way inconsistent with the terms and
conditions of this Agreement and the Bank Security or the Bank's rights
thereunder.
 
18. EVIDENCE OF INDEBTEDNESS
 
The Bank shall record on its records the amount of all loans made hereunder,
payments made in respect thereto, and all other amounts becoming due to the Bank
under this Agreement.  The Bank's records constitute, in the absence of manifest
error, conclusive evidence of the indebtedness of the Borrower to the Bank
pursuant to this Agreement.
 
The Borrower will sign the Bank’s standard form Letter of Credit Indemnity
Agreement for all L/Cs and  L/Gs issued by the Bank.
 
With respect to chattel mortgages taken as Bank Security, this Agreement is the
Promissory Note referred to in same chattel mortgage, and the indebtedness
incurred hereunder is the true indebtedness secured by the chattel mortgage.
 
19. ENTIRE AGREEMENTS
 
This Agreement replaces any previous letter agreements dealing specifically with
terms and conditions of the credit facilities described in the Letter.
Agreements relating to other credit facilities made available by the Bank
continue to apply for those other credit facilities.  This Agreement, and if
applicable, the Letter of Credit Indemnity Agreement, are the entire agreements
relating to the Facilities described in this Agreement.
 
20. ASSIGNMENT
 
The Bank may assign or grant participation in all or part of this Agreement or
in any loan made hereunder without notice to and without the Borrower's consent.
 
The Borrower may not assign or transfer all or any part of its rights or
obligations under this Agreement. 
 
21. RELEASE OF INFORMATION        
 
The Borrower hereby irrevocably authorizes and directs the Borrower's
accountant, (the "Accountant") to deliver all financial statements and other
financial information concerning the Borrower to the Bank and agrees that the
Bank and the Accountant may communicate directly with each other.
 
22.  FX CLOSE OUT
 
The Borrower hereby acknowledges and agrees that in the event any of the
following occur: (i) Default by the Borrower under any forward foreign exchange
contract ("FX Contract"); (ii) Default by the Borrower in payment of monies
owing by it to anyone, including the Bank; (iii) Default in the performance of
any other obligation of the Borrower under any agreement to which it is subject;
or (iv) the Borrower is adjudged to be or voluntarily becomes bankrupt or
insolvent or admits in writing to its inability to pay its debts as they come
due or has a receiver appointed over its assets, the Bank shall be entitled
without advance notice to the Borrower to close out and terminate all of the
outstanding FX Contracts entered into hereunder, using normal commercial
practices employed by the Bank, to determine the gain or loss for each
terminated FX contract.  The Bank shall then be entitled to calculate a net
termination value for all of the terminated FX Contracts which shall be the net
sum of all the losses and gains arising from the termination of the FX Contracts
which net sum shall be the "Close Out Value" of the terminated FX Contracts. 
The Borrower acknowledges that it shall be required to forthwith pay any
positive Close Out Value owing to the Bank and the Bank shall be required to pay
ant negative Close Out Value owing to the Borrower, subject to any rights of
set-off to which the Bank is entitled or subject.
 
23. SET-OFF
 
In addition to and not in limitation of any rights now or hereafter granted
under applicable law, the Bank may at any time and from time to time without
notice to the Borrower or any other Person, any notice being expressly waived by
the Borrower, set-off and compensate and apply any and all deposits, general or
special, time or demand, provisional or final, matured or unmatured, in any
currency, and any other indebtedness or amount payable by the Bank (irrespective
of the place of payment or booking office of the obligation), to or for the
credit of or for the Borrower's account, including without limitation, any
amount owed by the Bank to the Borrower under any FX Contract or other treasury
or derivative product, against and on account of the indebtedness and liability
under this Agreement notwithstanding that any of them are contingent or
unmatured or in a different currency than the indebtedness and liability under
this Agreement.
 
When applying a deposit or other obligation in a different currency than the
indebtedness and liability under this Agreement to the indebtedness and
liability under this Agreement, the Bank will convert the deposit or other
obligation to the currency of the indebtedness and liability under this
Agreement using the Bank's noon spot rate of exchange for the conversion of such
currency.
 
24.  USE OF INFORMATION
 
The word "Information" means the Borrower's business and credit information and
the Guarantor's personal, business and credit information.  It includes
information provided to the Bank by the Borrower and Guarantors, including
through the products and services the Borrower and Guarantor(s) uses, and
information obtained from others.
 
The Borrower and the Guarantor agree to the use of its Information as follows:
Use of Information - The Bank may use Information to establish and serve the
Borrower as its customer, determine whether any products or services of the TD
Bank Financial Group are suitable for the Borrower and offer them to the
Borrower, or when required or permitted by law. The Bank may share Information
within the TD Bank Financial Group where permitted by law; 
Collection and Use of Credit Information - THE BANK MAY OBTAIN INFORMATION FROM
PARTIES OUTSIDE THE TD BANK FINANCIAL GROUP, INCLUDING THROUGH A CREDIT CHECK,
AND VERIFY INFORMATION WITH THEM.  THE BORROWER AND THE GUARANTOR AUTHORIZE
THOSE PARTIES TO GIVE THE BANK INFORMATION.  The Bank may disclose Information
to other lenders and credit bureaus.
 
The Borrower and the Guarantor may obtain the Bank’s Privacy Code - "Protecting
Your Privacy" or review its options for refusing or withdrawing this consent,
including its option not to be contacted about offers of products or services,
by contacting the Branch or calling the Bank at 1-800-9TD BANK.
 
25. MISCELLANEOUS
 
i)          The Borrower has received a signed copy of this Agreement;
ii)          If more than one Person, firm or corporation signs this Agreement
as the Borrower, each party is jointly and severally liable hereunder, and the
Bank may require payment of all amounts payable under this Agreement from any
one of them, or a portion from each, but the Bank is released from any of its
obligations by performing that obligation to any one of them;
iii)         Accounting terms will (to the extent not defined in this Agreement)
be interpreted in accordance with accounting principles established from time to
time by the Canadian Institute of Chartered Accountants (or any successor)
consistently applied, and all financial statements and information provided to
the Bank will be prepared in accordance with those principles;
iv)         This Agreement is governed by the law of the Province or Territory
where the Branch/Centre is located.
v)         Unless stated otherwise, all amounts referred to herein are in
Canadian dollars
 
26. DEFINITIONS
 
Capitalized Terms used in this Agreement shall have the following meanings:
"All-In Rate" means the greater of the Interest Rate that the Borrower pays for
Prime Based Loans (which for greater certainty includes the percent per annum
added to the Prime Rate) or the highest fixed rate paid for Fixed Rate Term
Loans.
"Agreement" means the agreement between the Bank and the Borrower set out in the
Letter and this Schedule "A" - Standard Terms and Conditions.
"Business Day" means any day (other than a Saturday or Sunday) that the
Branch/Centre is open for business.
"Branch/Centre" means The Toronto-Dominion Bank branch or banking centre noted
on the first page of the Letter, or such other branch or centre as may from time
to time be designated by the Bank.
"Contractual Term Maturity Date" means the date set out in the Letter under the
heading "Contractual Term".
"Face Amount" means, in respect of:
(i)         a B/A, the amount payable to the holder thereof on its maturity;
(ii)         A L/C or L/G, the maximum amount payable to the beneficiary
specified therein or any other Person to whom payments may be required to be
made pursuant to such L/C or L/G.
"Fixed Rate Term Loan" means any drawdown in Canadian dollars under a Credit
Facility at an interest rate which is fixed for a Rate Term at such rate as is
determined by the Bank as its sole discretion. 
"Inventory Value" means, at any time of determination, the total value (based on
the lower of cost or market) of the Borrower's inventories that are subject to
the Bank Security (other than (i) those inventories supplied by trade creditors
who at that time have not been fully paid therefore and would have a right to
repossess all or part of such inventories if the Borrower were then either
bankrupt or in receivership, (ii) those inventories comprising work in process
and (iii) those inventories that the Bank may from time to time designate in its
sole discretion) minus the total amount of any claims, liens or encumbrances on
those inventories having or purporting to have priority over the Bank.
"Letter" means the letter from the Bank to the Borrower to which this Schedule
"A" -  Standard Terms and Conditions is attached.
"Letter of Credit" or "L/C" means a documentary letter of credit or similar
instrument in form and substance satisfactory to the Bank.
"Letter of Guarantee" or "L/G" means a stand-by letter of guarantee or similar
instrument in form and substance satisfactory to the Bank.
"Person" includes any individual, sole proprietorship, corporation, partnership,
joint venture, trust, unincorporated association, association, institution,
entity, party, or government (whether national, federal, provincial, state,
municipal, city, county, or otherwise and including any instrumentality,
division, agency, body, or department thereof).
"Purchase Money Security Interest" means a security interest on equipment which
is granted to a lender or to the seller of such equipment in order to secure the
purchase price of such equipment or a loan to acquire such equipment, provided
that the amount secured by the security interest does not exceed the cost of the
equipment, the Borrower provides written notice to the Bank prior to the
creation of the security interest, and the creditor under the security interest
has, if requested by the Bank, entered into an inter-creditor agreement with the
Bank, in a format acceptable to the Bank. 
 
"Rate Term" means that period of time as selected by the Borrower from the
options offered to it by the Bank, during which a Fixed Rate Term Loan will bear
a particular interest rate.  If no Rate Term is selected, the Borrower will be
deemed to have selected a Rate Term of 1 year.
"Rate Term Maturity" means the last day of a Rate Term which day may never
exceed the Contractual Term Maturity Date.
"Rate and Payment Terms Notice" means the notice sent by the Bank setting out
the interest rate and payment terms for a particular drawdown.
"Receivable Value" means, at any time of determination, the total value of those
of the Borrower's trade accounts receivable that are subject to the Bank
Security other than (i) those accounts then outstanding for 90 days, (ii) those
accounts owing by Persons, firms or corporations affiliated with the Borrower,
(iii) those accounts that the Bank may from time to time designate in its sole
discretion, (iv) those accounts subject to any claim, liens, or encumbrance
having or purporting to have priority over the Bank, (v) those accounts which
are subject to a claim of set-off by the obligor under such account, MINUS the
total amount of all claims, liens, or encumbrances on those receivables having
or purporting to have priority over the Bank.
"Receivables/Inventory Summary" means a summary of the Customer's trade account
receivables and inventories, in form as the Bank may require and certified by a
senior officer/representative of the Borrower.
"US$ Equivalent" means, on any date, the equivalent amount in United States
Dollars after giving effect to a conversion of a specified amount of  Canadian
Dollars to United States Dollars at the Bank's noon spot rate of exchange for
Canadian Dollars to United States Dollars established by the Bank for the day in
question.