LOAN AGREEMENT FOR

                               SECURED BRIDGE LOAN

                                  March 9, 2005

                                      AMONG

                        LORETTA BAKING MIX PRODUCTS LTD.

                                 (as "Borrower")

                                     - and -

                             LORETTA FOOD GROUP INC.

                                   ("Parent")

                                     - and -

                      CAITHNESS FINANCIAL SERVICES LIMITED

                                  (as "Lender")

                                     - and -

                                    AL BURGIO

                                  (as "Burgio")

<PAGE>

                                TABLE OF CONTENTS

ARTICLE    1 - INTERPRETATION...............................................2
         1.1    Definitions.................................................2
         1.2    Headings...................................................10
         1.3    Number.....................................................10
         1.4    Accounting Principles......................................10
         1.5    Accounting Practices.......................................10
         1.6    Determinations by Obligors.................................10
         1.7    Permitted Encumbrances.....................................11
         1.8    Currency...................................................11
         1.9    Conflicts..................................................11
         1.10   Non-Business Days..........................................11
         1.11   Statutory References.......................................11
         1.12   Schedules..................................................12

ARTICLE    2 - THE LOAN....................................................12
         2.1    Loan.......................................................12
         2.2    Purpose of the Loan........................................12
         2.3    Right of First Refusal.....................................12

ARTICLE    3 - CONDITIONS PRECEDENT........................................13
         3.1    Conditions Precedent to the First Loan.....................13
         3.2    Waiver.....................................................16

ARTICLE    4 - PAYMENTS OF INTEREST AND BONUS..............................16
         4.1    Interest...................................................16
         4.2    General Interest Rules.....................................16
         4.3    Bonus......................................................17

ARTICLE    5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES....................17
         5.1    Repayment of Principal.....................................17
         5.2    Mandatory Prepayment of Principal..........................17
         5.3    Voluntary Repayment of Principal...........................18
         5.4    Manner of Payment of Principal, Interest and Fees..........18

ARTICLE    6 - REPRESENTATIONS AND WARRANTIES..............................18
         6.1    Representations and Warranties.............................18
                6.1.1   Existence and Qualification........................18
                6.1.2   Power and Authority................................18
                6.1.3   Execution, Delivery, Performance and
                        Enforceability of Documents........................19
                6.1.4   Loan Documents Comply with Applicable Law,
                        Organizational Documents and Contractual
                        Obligations .......................................19
                6.1.5   Consent Respecting Loan Documents..................19
                6.1.6   Enforceable Obligations............................19
                6.1.7   Taxes..............................................20
                6.1.8   Judgments, Etc.....................................20
                6.1.9   Absence of Litigation..............................20
                6.1.10  Debt and Non Arm's Length Transactions.............20
                6.1.11  Ownership..........................................20
                6.1.12  Insurance..........................................21
                6.1.13  Compliance with Law................................21
                6.1.14  No Event of Default or Pending Event of Default....22
                6.1.15  Relevant Jurisdictions.............................22
                6.1.16  Material Contracts and Material Licences...........22
                6.1.17  Fiscal Year........................................23

                                      (i)

<PAGE>

                6.1.18  Financial Information..............................23
                6.1.19  No Material Adverse Effect.........................23
                6.1.20  Insolvency.........................................23
                6.1.21  Full Disclosure....................................23
         6.2    Survival and Repetition of Representations and Warranties..24

ARTICLE    7 - COVENANTS...................................................24
         7.1    Positive Covenants.........................................24
                7.1.1   Timely Payment.....................................24
                7.1.2   Conduct of Business, Maintenance of Existence,
                        Compliance with Law................................24
                7.1.3   Access to Information..............................24
                7.1.4   Obligations and Taxes..............................25
                7.1.5   Use of the Loan....................................25
                7.1.6   Insurance..........................................25
                7.1.7   Notice of Event of Default or Pending Event
                        of Default.........................................25
                7.1.8   Notice of Material Adverse Effect..................25
                7.1.9   Notice of Litigation...............................26
                7.1.10  Other Notices......................................26
                7.1.11  Security...........................................26
                7.1.12  Maintenance of Property............................27
                7.1.13  Landlord Consents and Non-Disturbance Agreements...27
                7.1.14  Material Contracts.................................27
                7.1.15  Expenses...........................................27
                7.1.16  Revision or Update of Schedules....................27
         7.2    Reporting Requirements.....................................28
                7.2.1   Financial Information..............................28
                7.2.2   Information to be Presented to Directors...........28
                7.2.3   Other Information..................................28
         7.3    Negative Covenants.........................................29
                7.3.1   Restrictions on Business Activities................29
                7.3.2   Operation of Business..............................29
                7.3.3   Disposition of Property............................29
                7.3.4   Capital Expenditures...............................29
                7.3.5   No Debt............................................29
                7.3.6   No Encumbrances....................................29
                7.3.7   No Distributions...................................29
                7.3.8   No Repayment of Other Debt.........................29
                7.3.9   No Consolidation, Amalgamation, etc................30
                7.3.10  No Change of Name..................................30
                7.3.11  No Continuance.....................................30
                7.3.12  No Share Issuance..................................30
                7.3.13  Ownership of Subsidiaries..........................30
                7.3.14  Amendments to Organizational Documents.............30
                7.3.15  Amendments to other Material Contracts and
                        Material Licences..................................30
                7.3.16  Location of Assets in Other Jurisdictions..........30
                7.3.17  Burgio Restriction.................................31

ARTICLE    8 - SECURITY....................................................31
         8.1    Form of Security...........................................31
         8.2    Insurance Assignment.......................................32
         8.3    After Acquired Property and Further Assurances.............32
         8.4    Registration...............................................32
         8.5    Release of Security........................................33

ARTICLE    9 - DEFAULT.....................................................33
         9.1    Events of Default..........................................33
         9.2    Acceleration and Termination of Rights.....................35

                                      (ii)

<PAGE>

         9.3    Remedies Cumulative........................................36
         9.4    Saving.....................................................36
         9.5    Perform Obligations........................................36
         9.6    Set-Off or Compensation....................................36
         9.7    Application of Payments....................................37

ARTICLE    10 - COSTS, EXPENSES AND INDEMNIFICATION........................37
         10.1   Costs and Expenses.........................................37
         10.2   Indemnification by the Borrower............................38
         10.3   Specific Third Party Claim Indemnification.................38

ARTICLE    11 - TAXES, CHANGE OF CIRCUMSTANCES.............................39
         11.1   Change in Law..............................................39
         11.2   Illegality.................................................40
         11.3   Taxes......................................................41

ARTICLE    12 - SUCCESSORS AND ASSIGNS AND ADDITIONAL LENDERS..............41
         12.1   Successors and Assigns.....................................41
         12.2   Assignments................................................42

ARTICLE    13 - GENERAL....................................................42
         13.1   Exchange and Confidentiality of Information................42
         13.2   Notices....................................................43
         13.3   Governing Law..............................................44
         13.4   Consent to Jurisdiction....................................44
         13.5   Severability...............................................45
         13.6   Entire Agreement...........................................45
         13.7   Further Assurances.........................................45
         13.8   Waiver of Jury Trial.......................................45
         13.9   Non-Merger.................................................46
         13.10  Time of the Essence........................................46
         13.11  Counterparts...............................................46
         13.12  Amendments and Waivers.....................................46

                                     ADDENDA

Schedule 1.1.1 (a)
Schedule 1.1.1 (b)
Schedule 1.1.1 (c)
Schedule 1.1.49
Schedule 2.1
Schedule 2.2
Schedule 6.1.9
Schedule 6.1.11
Schedule 6.1.12
Schedule 6.1.15
Schedule 6.1.16

                                     (iii)

<PAGE>

                                 LOAN AGREEMENT

         THIS AGREEMENT is made as of 9th day of March, 2005,

B E T W E E N:

 LORETTA BAKING MIX PRODUCTS LTD., a corporation incorporated under the laws of
              the state of Michigan (hereinafter referred to as the
                  (hereinafter referred to as the "Borrower")

                                     - and -

          LORETTA FOOD GROUP INC., a corporation incorporated under the
    laws of the state of Delaware (hereinafter referred to as the "Parent")

                                     - and -

       CAITHNESS FINANCIAL SERVICES LTD., a corporation incorporated under
  the laws of the Province of Ontario (hereinafter referred to as the "Lender")

                                     - and -

         AL BURGIO of the Province of Ontario, as a guarantor ("Burgio")

RECITALS:

A. The Borrower is in the business of manufacturing  and selling baking mixes at
wholesale.

B. The Borrower will use the proceeds of this Loan to acquire from Monroe Bank &
Trust  ("Monroe")  substantially  all of the  business  assets  (excluding  real
property)  ("Acquired  Assets")  formerly-owned  by Amendt  Corporation  (Monroe
having  acquired  title to said  assets by virtue of a  voluntary  surrender  by
Amendt Corporation of said assets to Monroe and a sale by Monroe pursuant to the
provisions  Article 9 of the Uniform  Commercial  Code as adopted in  Michigan),
pursuant to the terms of an asset  purchase  agreement  dated as of December 24,
2004 (the "Asset Purchase Agreement").

C. The Borrower is a wholly-owned subsidiary of the Parent.

D. The Parent and Burgio, the Parent's principal, are willing to unconditionally
guaranty the  obligations of the Borrower under this Loan Agreement and the Loan
Documents.

     NOW THEREFORE,  in consideration of the covenants and agreements  contained
in this Agreement, the Parties agree as follows:

<PAGE>

                           ARTICLE 1 - INTERPRETATION

1.1 Definitions

     In this  Agreement  unless  something  in the subject  matter or context is
inconsistent therewith:

1.1.1    "Acquired  Assets"  means the  property to be acquired by the  Borrower
         pursuant to the Asset  Purchase  Agreement,  the closing of which is to
         occur   contemporaneously  with  the  completion  of  the  transactions
         hereunder  on the  Closing  Date  including,  without  limitation,  the
         following property:

         (a) The Equipment listed in Schedule 1.1.1(a) attached hereto;

         (b) The Inventory listed in Schedule 1.1.1(b) attached hereto; and

         (c) The  Accounts  Receivable  listed  in  Schedule  1.1.1(c)  attached
         hereto.

1.1.2    "Additional  Compensation"  has the  meaning  ascribed  to that term in
         Section 11.1(a)(iii);

1.1.3    "Affiliate"  has the  meaning  ascribed  to that  term in the  Business
         Corporations  Act  (Ontario)  and  for  greater  certainty  includes  a
         directly or indirectly held Subsidiary of any of the Obligors;

1.1.4    "Agreement" means this agreement, including its attached schedules, and
         all amendments made to it in accordance with its provisions as amended,
         revised, replaced, supplemented or restated from time to time;

1.1.5    "Applicable Law" means, in respect of a Person, property,  transaction,
         event or other  matter,  as  applicable,  all  present  or  future  Law
         relating or applicable to that Person, property,  transaction, event or
         other matter,  including any  interpretation of Law by any Governmental
         Authority;

1.1.6    "Applicable  Order"  means any  applicable  domestic or foreign  order,
         judgment, award or decree of any Governmental Authority;

1.1.7    Intentionally Deleted;

1.1.8    "Arm's  Length"  has  the  meaning   specified  in  the  definition  of
         "Non-Arm's Length";

1.1.9    "Asset Purchase Agreement" means the asset purchase agreement dated the
         24th  day  of  December,  2004  between  the  Borrower  and  MB  Monroe
         Properties Inc. as purchasers and Monroe as vendor;

                                       2

<PAGE>

1.1.10   "Borrower" has the meaning  ascribed  thereto in the first paragraph of
         this Agreement;

1.1.11   "Borrower's  Counsel" means the firm of Himelfarb Prozanski LLP or such
         other  firm of legal  counsel  as the  Borrower  may from  time to time
         designate;

1.1.12   "Business" means the business as now carried on by the Obligors, namely
         the business of  manufacturing  and selling baking mixes and other food
         product  mixes at  wholesale  and/or  at  retail  and all  business  or
         activities  related or ancillary  thereto,  and  including the business
         acquired as a result of the  completion of the purchase of the Acquired
         Assets;

1.1.13   "Business Day" means any day other than Saturday, Sunday and holidays;

1.1.14   "Canadian Dollars", and "CDN$" mean the lawful money of Canada;

1.1.15   "Change of Control" means the failure of the Parent to own, directly or
         indirectly,  legally and beneficially,  100% of the outstanding  voting
         stock of the Borrower or any direct Subsidiary acquired or incorporated
         by the Borrower after the Closing Date (as may be permitted  under this
         Agreement)  free  and  clear  of  all  Encumbrances   (other  than  the
         Encumbrances  created  by the  Security)  or  shall  otherwise  fail to
         Control the Borrower.

1.1.16   "Closing Date" means the 9th day of March,  2005; or such other date as
         agreed to by the parties

1.1.17   "Control"  (including with correlative  meanings the terms  "controlled
         by" and "under common  control  with") in respect of a corporation  has
         the meaning  given thereto in the Business  Corporations  Act (Ontario)
         and in respect of any other  Person  means the power to direct or cause
         the  direction of the  management  and policies of any Person,  whether
         through the  ownership of shares or voting  interests or by contract or
         otherwise;

1.1.18   "Disposition" means any sale, assignment,  transfer, conveyance, lease,
         license or other  disposition  of any nature or kind  whatsoever of any
         Property or of any right, title or interest in or to any Property,  and
         the verb "Dispose" shall have a correlative meaning;

1.1.19   "Distribution" means, with respect to any Person, any payment, directly
         or indirectly, by that Person:

         (a) of any dividends on any shares of its capital,

         (b) on account of, or for the purpose of setting apart any property for
         a sinking  or other  analogous  fund  for,  the  purchase,  redemption,
         retirement  or other  acquisition  of any shares of its  capital or any
         warrants, options or rights to acquire any such shares;

                                       3

<PAGE>

         (c) in respect of any shares of its capital;

         (d) of any  principal of or interest or premium on, or of any amount in
         respect  of,  a  sinking  or  analogous  fund or  defeasance  fund  for
         Subordinated  Debt or other  indebtedness  or  liability of such Person
         ranking, at law or by contract,  in right of payment subordinate to any
         liability of such Person under the Loan Documents or otherwise; or

         (e) of any  management,  consulting or similar fee or any bonus payment
         or  comparable  payment,  or by way of gift or other  gratuity,  to any
         Affiliate  of such Person or to any  director or officer of such Person
         or  Affiliate  of such  Person,  or to any Person not  dealing at Arm's
         Length with such first Person or Affiliate, director or officer;

1.1.20   "Encumbrance" means, in respect of any Person, any mortgage, debenture,
         pledge,  hypothec,  lien,  charge,   assignment  by  way  of  security,
         hypothecation or security  interest granted or permitted by that Person
         or  arising by  operation  of law,  in respect of any of that  Person's
         Property, or any consignment of Property by that Person as consignee or
         lessee or any other security agreement, trust or arrangement having the
         effect  of  security  for  the  payment  of  any  debt,   liability  or
         obligation,   and   "Encumbrances",   "Encumbrancer",   "Encumber"  and
         "Encumbered" shall have corresponding meanings;

1.1.21   "Equity"  means,  in respect of any Person at any time,  the  aggregate
         amount of

         (a) the  stated  capital  of all of the  outstanding  shares  or  other
         ownership interest of that Person;

         (b) that Person's accumulated retained earnings;

         (c) the amount, without duplication,  of any contributed surplus all as
         set forth in the financial  statements for that Person as at the end of
         its most recently completed fiscal quarter; and

         (d) the amount of any loans from shareholders of that Person which have
         been fully  subordinated  and postponed to the Obligations on terms and
         conditions satisfactory to the Lender;

1.1.22   "Event  of  Default"   has  the  meaning   ascribed  to  that  term  in
         Section 9.1;

1.1.23   "Financial  Assistance" means,  without duplication and with respect to
         any Person, all loans granted by that Person and guarantees incurred by
         that  Person for the  purpose  of, or having  the effect of,  providing
         financial assistance to another Person or Persons,  including,  without
         limitation,  letters of guarantee,  letters of credit,  legally binding
         comfort  letters  or  indemnities   issued  in  connection  with  them,
         endorsements of bills of exchange (other than for collection or deposit
         in the ordinary  course of business),  obligations  to purchase  assets
         regardless  of  the  delivery  or  non-delivery  of  those  assets  and
         obligations to make advances or otherwise provide financial  assistance
         to any other  entity,  and for  greater  certainty  shall  include  any
         guarantee of any third party lease obligations;

                                       4

<PAGE>

1.1.24   "Fiscal Year" means the fiscal year of the Borrower  ending on December
         31 in each calendar year;

1.1.25   "GAAP" means those accounting  principles which are recognized as being
         generally  accepted  and  which are in  effect  from  time to time,  as
         published  in the  Handbook  of the  Canadian  Institute  of  Chartered
         Accountants;

1.1.26   "Governmental  Authority" means the government of any nation, province,
         territory,  municipality,  state or other political  subdivision of any
         nation,  any  entity  exercising  executive,   legislative,   judicial,
         regulatory or administrative  functions of or pertaining to government,
         or the application,  enforcement,  or interpretation of Law,  including
         any  central  bank,  and any  corporation  or  other  entity  owned  or
         controlled  (through stock or capital ownership or otherwise) by any of
         the foregoing;

1.1.27   "Guarantors" means collectively, the Parent and Burgio, and "Guarantor"
         shall mean any one of them;

1.1.28   "Information" has the meaning ascribed to that term in Section 13.1(b);

1.1.29   "ITA" means the Income Tax Act (Canada);

1.1.30   "Law" means all laws, (including the common law), by-laws,  ordinances,
         rules, statutes,  regulations,  treaties,  orders, rules, judgments and
         decrees,  and all  official  directives,  rules,  guidelines,  notices,
         approvals,  orders, policies and other requirements of any Governmental
         Authority whether or not they have force of law;

1.1.31   "Leases" has the meaning ascribed thereto in Section 6.1.11;

1.1.32   "Lender"  has the meaning  ascribed  thereto in the first  paragraph of
         this Agreement;

1.1.33   "Lender's Counsel" means the firm of Kavanagh Bateman & Baek LLP or any
         other  firm of legal  counsel  that the  Lender  may from  time to time
         designate;

                                       5

<PAGE>

1.1.34   "Loan Amount" means the sum of US $880,000;

1.1.35   "Loan  Documents"  means this  Agreement,  the  Security  and all other
         documents,  certificates and instruments executed or delivered or to be
         executed or  delivered by an Obligor to the Lender  pursuant  hereto or
         thereto, as the same may be modified,  amended,  extended,  restated or
         supplemented  from time to time and "Loan  Document" shall mean any one
         of the Loan Documents;

1.1.36   "Material Adverse Effect" means:

         (a) a material adverse effect on the business , operations, properties,
         assets, condition (financial or otherwise) or prospects of any Obligor;

         (b) an adverse effect on the legality,  validity or  enforceability  of
         any of the Loan Documents which could reasonably be considered material
         having regard to the Loan  Documents  considered as a whole,  including
         the validity, enforceability, perfection or priority of any Encumbrance
         created or intended to be created under any of the Security which could
         reasonably  be  considered  material  having  regard  to  the  Security
         considered as a whole;

         (c) an  adverse  effect on the  right,  entitlement  or  ability of any
         Obligor to pay or perform any of its Obligations  under any of the Loan
         Documents which could  reasonably be considered  material having regard
         to the Obligors as a whole; or

         (d) an  adverse  effect on the  right,  entitlement  or  ability of the
         Lender to enforce any of the  Obligations  of any  Obligor  which could
         reasonably be considered material having regard to the Obligors, or any
         one of them, or to exercise or enforce any of its rights, entitlements,
         benefits or remedies under any of the Loan Documents;

1.1.37   "Material Contract" means any agreement,  arrangement or understanding,
         whether written or oral, which:

         (a) materially affects the business,  operations,  assets or prospects,
         financial or otherwise, of the Borrower,  including without limitation,
         the Business; or

         (b) is  from  time  to  time  designated  by  the  Lender  in its  sole
         discretion,  acting reasonably, as a Material Contract, provided notice
         of such  designation  is  delivered to the Borrower by the Lender (and,
         for greater  certainty,  the contracts  listed in  Schedule 6.1.16  are
         deemed to be so designated);

                                       6

<PAGE>

1.1.38   "Material  Licence"  means any licence,  franchise,  permit or approval
         issued by any Governmental  Authority to the Borrower,  and which is at
         any time on or after the date of this Agreement,

         (a)  necessary  or  material  to the  business  and  operations  of the
         Borrower,  including  without  limitation,  the Business or the breach,
         default or  revocation  of which  would  result in a  Material  Adverse
         Effect, or

         (b) is  from  time  to  time  designated  by  the  Lender  in its  sole
         discretion,  acting reasonably,  as a Material Licence, provided notice
         of such  designation  is  delivered to the Borrower by the Lender (and,
         for greater  certainty,  the  licences  listed in  Schedule 6.1.16  are
         deemed to be so designated);

1.1.39   "Maturity Date" means March 1, 2006;

1.1.40   "Net Proceeds" means,  with respect to any  Disposition,  the aggregate
         fair  market  value  of  proceeds  of that  Disposition  (whether  such
         proceeds  are in the form of cash or other  Property  or part  cash and
         part other  Property) net of reasonable,  bona fide direct  transaction
         costs and expenses incurred in connection with that Disposition;

1.1.41   "Non-Arm's  Length" and  similar  phrases  have the meaning  attributed
         thereto for the purposes of the ITA; and "Arm's  Length" shall have the
         opposite meaning;

1.1.42   "Obligations"  means, with respect to an Obligor, all of that Obligor's
         present and future indebtedness, liabilities and obligations of any and
         every  kind,  nature  or  description  whatsoever  (whether  direct  or
         indirect,   joint  or  several  or  joint  and  several,   absolute  or
         contingent,  matured  or  unmatured,  in any  currency  and  whether as
         principal  debtor,  guarantor,  surety or otherwise,  including without
         limitation  any interest that accrues  thereon or would accrue  thereon
         but for the  commencement  of any  case,  proceeding  or other  action,
         whether   voluntary  or   involuntary,   relating  to  the  bankruptcy,
         insolvency or  reorganization  whether or not allowed or allowable as a
         claim in any such  case,  proceeding  or other  action)  to the  Lender
         under, in connection  with,  relating to or with respect to each of the
         Loan Documents, and any unpaid balance thereof;

1.1.43   "Obligors"  means,  collectively,  the Borrower and the  Guarantors and
         their respective  successors and assigns and "Obligor" means any one of
         them;

1.1.44   "Organizational  Documents"  means,  with  respect to any Person,  that
         Person's  articles  or  other  charter  documents,  by-laws,  unanimous
         shareholder agreement,  partnership agreement, joint venture agreement,
         operating agreement or trust agreement, as applicable,  and any and all
         other similar  agreements,  documents and instruments  relative to that
         Person;

                                       7

<PAGE>

1.1.45   "Parent"  has the meaning  ascribed  thereto in the first  paragraph of
         this Agreement;

1.1.46   "Parties"  means the Borrower,  the Lender,  the Parent,  and any other
         Person that may become a party to this Agreement;

1.1.47   "Pending  Event  of  Default"  means  an  event  which,   but  for  the
         requirement  for the giving of notice,  lapse of time,  or both, or but
         for the  satisfaction of any other condition  subsequent to that event,
         would constitute an "Event of Default";

1.1.48   "Permitted Distributions" means:

         (a) routine employee salaries,  bonuses, and benefits,  all paid in the
         normal course of business;

         (b) redemption,  out of the earned funds of the Borrower,  of up to One
         Thousand  (1,000)  shares  of  Class  A  Preferred  Stock  of  Borrower
         originally  issued to and held by Monroe at a  redemption  price of One
         Hundred ($100) Dollars per share on December 31, 2005.

1.1.49   "Permitted Encumbrances" means, with respect to any Person:

         (a) the Security;

         (b) the Encumbrances  described in  Schedule 1.1.49  to this Agreement;
         and

         (c) any other Encumbrances as agreed to in writing by the Lender;

1.1.50   "Person" is to be broadly  interpreted  and includes an  individual,  a
         corporation,  a  limited  liability  company,  an  unlimited  liability
         company, a partnership, a trust, an incorporated organization,  a joint
         venture, the government of a country or any political  subdivision of a
         country,  or an agency or department of any such government,  any other
         Governmental Authority and the executors, administrators or other legal
         representatives of an individual in such capacity;

1.1.51   "Property"  means,  with  respect to any Person,  all or any portion of
         that Person's undertaking, property and assets, both real and personal,
         including,  for  greater  certainty,  any  share  in the  capital  of a
         corporation or ownership interest in any other Person;

1.1.52   "Relevant  Jurisdiction"  means, from time to time, with respect to any
         Person that is granting Security under this Agreement,  any province or
         territory  of  Canada,  any  state of the  United  States  or any other
         country or political  subdivision thereof, in which that Person has its
         chief executive  office or chief place of business or has Property and,
         for greater  certainty,  includes the  provinces  and states set out in
         Schedule 6.1.15;

                                       8

<PAGE>

1.1.53    Intentionally Omitted.

1.1.54   "Requirements   of  Law"  means,   in  respect  of  any   Person,   the
         Organizational Documents of such Person and any Applicable Law, in each
         case  applicable  to or binding upon such Person or any of its business
         or Property or to which such Person or any of its  business or Property
         is subject;

1.1.55   "Security" means all security held from time to time by or on behalf of
         the  Lender,  securing or  intended  to secure  directly or  indirectly
         repayment of the  Obligations  and  includes all security  described in
         Article 8;

1.1.56   "Senior Officer" means, in respect of any Person, the chairperson,  the
         chief  executive  officer,  the  chief  operating  officer,  the  chief
         financial officer, the president,  or any vice-president of such Person
         or any person holding a similar office;

1.1.57   "Subordinated  Debt"  means  indebtedness  owing by any  Obligor to any
         Person,  which  indebtedness  (including  the payment of principal  and
         interest) and any security  granted in respect of that  indebtedness is
         fully and absolutely  postponed and subordinated to the full, final and
         indefeasible  repayment  of  the  Obligations  pursuant  to  a  written
         agreement in form and substance  satisfactory to the Lender in its sole
         discretion, acting reasonably;

1.1.58   "Subsidiary"  means,  with respect to a  corporation,  a subsidiary  as
         defined in the  Business  Corporations  Act  (Ontario)  or the Michigan
         Business Corporations Act, MCLA 450.1101,  et. seq. as in effect on the
         date hereof,  and any partnership,  joint venture or other organization
         which  is  Controlled  by  the  corporation  or any  Subsidiary  of the
         corporation;

1.1.59   "Tax" or "Taxes" means all taxes,  charges,  fees, levies,  imposts and
         other assessments of any kind or nature  whatsoever,  including without
         limitation all income,  sales,  use,  goods and services,  value added,
         capital,  capital gains,  alternative,  net worth,  transfer,  profits,
         withholding, payroll, employer health, excise, franchise, real property
         and personal property taxes, and any other taxes, customs duties, fees,
         assessments, royalties, duties, deductions, compulsory loans or similar
         charges  in the  nature of a tax,  including  Canada  Pension  Plan and
         provincial pension plan  contributions,  employment  insurance payments
         and workers compensation premiums,  together with any instalments,  and
         any  interest,  fines  and  penalties,   imposed  by  any  Governmental
         Authority, whether disputed or not; and

                                       9

<PAGE>

1.1.60   "United States Dollars",  and "US$" mean the lawful money of the United
         States of America.

1.2 Headings

     The division of this Agreement into Articles and Sections and the insertion
of  headings  are for  convenience  of  reference  only and shall not affect the
construction or  interpretation  of this Agreement.  The term "this  Agreement",
refers to this  Agreement  in its entirety  and not to any  particular  Article,
Section  or  other  portion  of  this   Agreement  and  includes  any  agreement
supplemental to this Agreement.  Unless otherwise indicated,  references in this
Agreement  to  Articles  and  Sections  are to  Articles  and  Sections  of this
Agreement.

1.3 Number

     Words  importing the singular number only shall include the plural and vice
versa,  words  importing  the  masculine  gender shall  include the feminine and
neuter genders and vice versa.

1.4 Accounting Principles

     Where the character or amount of any asset or liability, or item of revenue
or  expense,  is  required  to be  determined,  or any  consolidation  or  other
accounting  computation is required to be made for the purpose of this Agreement
or any Loan Document,  that  determination  or calculation  shall, to the extent
applicable  and except as otherwise  specified in this Agreement or as otherwise
agreed in writing by the Parties, be made in accordance with GAAP.

1.5 Accounting Practices

     All  calculations  for the  purpose  of  determining  compliance  with  the
financial  ratios and financial  covenants  contained in this Agreement shall be
made  on a  basis  consistent  with  GAAP in  existence  as at the  date of this
Agreement.  In the event of a change in GAAP,  the Borrower and the Lender shall
negotiate in good faith to revise (if appropriate) those ratios and covenants to
reflect GAAP as then in effect,  in which case all subsequent  calculations made
for the purpose of determining  compliance with those ratios and covenants shall
be made on a basis  consistent  with GAAP in  existence  as at the date of those
revisions.

1.6 Determinations by Obligors

     All provisions  contained herein or under any other Loan Document requiring
any Obligor to make a  determination  or assessment of any event or circumstance
or other  matter to the best of its  knowledge  shall be deemed to require  such
Obligor to make all due  inquiries  and  investigations  as may be  necessary or
prudent in the circumstances before making any such determination or assessment.

                                       10

<PAGE>

1.7 Permitted Encumbrances

     The inclusion of reference to Permitted  Encumbrances  in any Loan Document
is not  intended to  subordinate,  and shall not  subordinate,  any  Encumbrance
created by any of the Security to any Permitted Encumbrance.

1.8 Currency

     Unless  otherwise  specified in this  Agreement,  all  references to dollar
amounts (without further  description)  shall mean United States Dollars and all
payments shall be made in United States Dollars.

1.9 Conflicts

     In the event of a conflict or inconsistency  between the application of any
of the provisions of this Agreement and the application of any of the provisions
of any of the other Loan  Documents,  the  provisions  giving the Lender greater
rights or remedies shall govern (to the maximum  extent  permitted by Applicable
Law), it being  understood that the purpose of this Agreement and any other Loan
Document is to add to, and not detract  from,  the rights  granted to the Lender
under the Loan Documents.

1.10 Non-Business Days

     Unless otherwise expressly provided in this Agreement, whenever any payment
is stated to be due on a day other than a Business Day, the payment will be made
on the  immediately  preceding  Business  Day.  In the case of  interest or fees
payable pursuant to the terms of this Agreement, the extension or contraction of
time will be considered in determining  the amount of interest and fees.  Unless
otherwise expressly provided in this Agreement,  whenever any action to be taken
is stated or scheduled to be required to be taken on, or (except with respect to
the  calculation  of interest or fees) any period of time is stated or scheduled
to commence or terminate on, a day other than a Business Day, the action will be
taken or the period of time will commence or  terminate,  as the case may be, on
the immediately preceding Business Day.

1.11 Statutory References

     Any  reference  in this  Agreement  to any Law, or to any section of or any
definition in any Law,  shall be deemed to be a reference to such Law or section
or definition as amended, supplemented, substituted, replaced or re-enacted from
time to time.

                                       11

<PAGE>

1.12 Schedules

     The  following  are  the  Schedules  annexed  hereto  and  incorporated  by
reference and deemed to be part hereof:

        Schedule 1.1.1(a)       -     Equipment
        Schedule 1.1.1(b)       -     Inventory
        Schedule 1.1.1(c)       -     Accounts Receivable
        Schedule 1.1.49         -     Permitted Encumbrances
        Schedule 2.1            -     Senior Secured Promissory Note
        Schedule 2.2            -     Asset Purchase Agreement
        Schedule 6.1.9          -     Absence of Litigation
        Schedule 6.1.11         -     Description of Real Property
        Schedule 6.1.12         -     Insurance Policies
        Schedule 6.1.15         -     Relevant Jurisdictions
        Schedule 6.1.16         -     Material Contracts and Material Licenses

                              ARTICLE 2 - THE LOAN

2.1 Loan

     Subject to the terms and conditions, and during the term of this Agreement,
the Lender agrees to lend to the Borrower and the Borrower agrees to borrow from
the Lender the  principal  sum of EIGHT  HUNDRED  EIGHTY  THOUSAND AND NO/100THS
UNITED STATES  DOLLARS (US$ 880,000) (the "Loan").  The Lender shall advance the
Loan Amount to the Borrower on the Closing Date.  The loan shall be evidenced by
a promissory  note (the "Note")  substantially  in the form  attached  hereto as
Schedule 2.1.

2.2 Purpose of the Loan

     Except for the payment of the bonus  contemplated  by Section 4.3 (a),  the
Borrower shall use the Loan Amount solely to pay the purchase price of Purchased
Assets acquired from Monroe pursuant to the Asset Purchase  Agreement (a copy of
which is attached hereto as Schedule "2.2"). The Borrower shall not use the Loan
Amount for any other purpose.

2.3 Right of First Refusal

     The Lender shall have the right of first refusal to provide to the Borrower
any subsequent  financing of any kind,  including without limitation debt, lease
facility, convertible debt, rights or equity until the Loan is fully repaid. The
Borrower shall provide Lender with fifteen (15) days prior written notice of any
proposed  subsequent  funding  during  which time Lender may match the terms and
conditions thereof or this right of first refusal shall terminate.

                                       12

<PAGE>

                        ARTICLE 3 - CONDITIONS PRECEDENT

3.1 Conditions Precedent to the First Loan

     The  obligations  of the Lender  under this  Agreement  (including  without
limitation, the obligation to make the first Loan hereunder) are subject to, and
conditional upon, all of the following  conditions  precedent being satisfied as
at the Closing Date:

     (a) receipt by the Lender of a copy of the  following  documents  (together
         with this Agreement and such other  documents as may be required by the
         Lender  hereunder  from time to time,  collectively  referred to as the
         "Loan  Documents"),  each duly executed and delivered,  and in form and
         substance satisfactory to the Lender in the Lender's sole discretion:

         (i) this Loan Agreement;

         (ii) the Note (attached hereto as Schedule 2.1);

         (iii)  Assignment of Lease or Leasehold Deed of Trust,  at the Lender's
         discretion,  covering the tenant's  interest in the Leased Premises for
         security purposes;

         (iv) Attornment and  Non-Disturbance  Agreement made by the landlord of
         the Leased Premises in favor of the Lender; and

         (v)  Subordination  and  Postponement  Agreement among the Lender,  the
         Borrower and Monroe;

     (b) receipt by the Lender of  certified  true copies of the  Organizational
         Documents of each Obligor,  the resolutions  authorizing the execution,
         delivery and performance of each Obligor's respective obligations under
         the Loan Documents and the transactions contemplated in this Agreement,
         as  well as  certificates  of the  incumbency  of the  officers  of the
         Obligors,  and any other  documents to be provided  under the terms and
         conditions of this Agreement;

     (c) receipt by the Lender of  certificates  of status or good standing,  as
         applicable, for all Relevant Jurisdictions of each Obligor;

     (d) compliance  by each Obligor in all material  respects with all Material
         Contracts and Material  Licenses to the  satisfaction  of the Lender in
         its sole discretion,  acting reasonably, and a receipt by the Lender of
         copies of all Material  Contracts and Material  Licences of each of the
         Obligors;

     (e) completion  by the  Lender of its due  diligence  with  respect  to the
         Obligors,  the  Acquired  Assets and the  Business,  including  but not
         limited to a review of all Material  Contracts  and Material  Licenses,
         the  results of which shall be  satisfactory  to the Lender in its sole
         discretion, acting reasonably;

                                       13

<PAGE>

     (f) receipt by the Lender of copies,  if any, of all required  shareholder,
         regulatory,  governmental,  and other approvals, necessary or desirable
         in connection with the execution and delivery of the Loan Documents and
         the  consummation  of  the   transactions   contemplated  by  the  Loan
         Documents;

     (g) receipt by the Lender of copies of all  documentation  to be  delivered
         under the terms of the Asset Purchase  Agreement  including the bill of
         sale by Monroe on the closing of the purchase of the  Acquired  Assets,
         certified by a Senior Officer of the Borrower to be true and correct in
         full force and effect;

     (h) all representations and warranties of the Borrower or any Guarantor set
         forth in any Loan  Document  shall be true and correct in all  material
         respects on the Closing Date;

     (i) completion by the Borrower,  to the  satisfaction  of the Lender in its
         sole  discretion,  acting  reasonably,  of the purchase of the Acquired
         Assets  free and  clear of all  Encumbrances  and all  other  rights or
         claims of any other Person, except for Permitted Encumbrances,  and the
         transactions otherwise contemplated in, and substantially in accordance
         with the terms and conditions (without any waiver or variation thereof)
         of, the Asset  Purchase  Agreement,  including,  without  limitation an
         opinion of the Borrower's  counsel with respect to the Acquired  Assets
         addressed to the Lender;

     (j) delivery to the Lender of any releases, discharges,  subordinations and
         postponements   (in  registerable   form  where   appropriate)  of  all
         Encumbrances  affecting the collateral encumbered by the Security which
         are not Permitted Encumbrances;

     (k) delivery to the Lender of subordination or non sheltering agreements in
         form  satisfactory  to  the  Lender  in  its  sole  discretion,  acting
         reasonably,   obtained  from  all  secured   Parties  under   Permitted
         Encumbrances designated by the Lender;

     (l) the  non-existence  of any continuing Event of Default or Pending Event
         of  Default  on the  Closing  Date,  including  any Event of Default or
         Pending Event of Default that would result from making the Loan;

     (m) the non-existence of any Material Adverse Effect;

     (n) delivery to the Lender of duly executed copies of the Security, and the
         due  registration,   filing  and  recording  of  the  Security  in  all
         applicable   offices  or  places  of   registration   in  all  Relevant
         Jurisdictions;

     (o) delivery to the Lender of a  currently-dated  letters of opinion of the
         Borrower's Counsel that encompasses all Obligors, in form and substance
         satisfactory  to the  Lender  and the  Lender's  Counsel  in their sole
         discretion;

                                       14

<PAGE>

     (p) receipt by the Lender of copies of  certificates  of  insurance  of the
         Obligors  evidencing  general  comprehensive   liability  and  property
         insurance meeting the requirements set forth in the Loan Documents, all
         in accordance with Section 7.1.6;

     (q) receipt by the Lender from the  Borrower of a statement  of sources and
         uses of funds covering all payments  reasonably  expected to be made by
         the Borrower in connection with the purchase of the Acquired Assets and
         otherwise on the Closing date of the first Loan,  including an estimate
         of all fees, expenses and other closing costs; and

     (r) payment  in full on or before  the  Closing  Date to the  Lender of the
         aggregate  amount of the Lender's  actual and estimated  legal fees and
         other out-of-pocket fees and expenses (including any goods and services
         tax, provincial sales tax or any commodity taxes thereon) in connection
         with its due  diligence  review,  preparation  of the  Indicative  Term
         Sheet, Loan Documents and all related documentation;

     (s) delivery to the Lender of executed  copies of all other Loan  Documents
         not  specifically  referenced in this  Section 3.1,  including  written
         acknowledgements and consents to assignment to the Lender signed by all
         counterparties to the Material Contracts;

     (t) the  Approved  Budget  shall have been  finalized  and  approved by the
         Lender, and a copy delivered to the Lender at Closing;

     (u) prior to the advance of the Loan,  the Lender shall have  reviewed each
         lease and memorandum of lease over the Leased Premises,  and shall have
         determined  in its sole  discretion  that each is in form and substance
         satisfactory to the Lender in all respects. The Leases shall be in full
         force and  effect  and no party  shall be in  breach  of or in  default
         thereunder,  nor shall an event have occurred which with the passage of
         time or the  giving  of  notice or both  would  constitute  an event of
         default thereunder;

     (v) Monroe  shall  have  executed  and  delivered  a final  Asset  Purchase
         Agreement,  bill of sale and/or such other documents as in the Lender's
         reasonable  judgment are necessary and  appropriate for the acquisition
         by the Borrower of the Acquired  Assets,  and the sole  contingency  to
         closing of the sale of the Acquired  Assets shall be the advance of the
         Loan;

     (w) delivery  to the Lender of  evidence  that the Loan Amount will be used
         solely for the purpose provided for in Section 2 hereof;

     (x) the  Borrower  has  delivered  a cheque in the  amount  of CDN  $15,000
         payable to the Borrower's Counsel; and

                                       15

<PAGE>

     (y) receipt  by the  Lender  of  such  additional  evidence,  documents  or
         undertakings  as the Lender shall  reasonably  request to establish the
         consummation of the transactions contemplated by this Agreement, and to
         satisfy the Lender in its sole discretion,  acting reasonably, that all
         proceedings  in  connection  with this  Agreement  are  being  taken in
         compliance with the conditions set out in this Agreement;

     provided that all documents delivered pursuant to this Section 3.1 shall be
     in full  force and  effect and in form and  substance  satisfactory  to the
     Lender in its sole discretion, acting reasonably.

3.2 Waiver

     The  conditions set forth in Sections 3.1 are inserted for the sole benefit
of the  Lender  and may be waived by the  Lender,  in whole or in part  (with or
without terms or conditions) in respect of the Loan.

                   ARTICLE 4 - PAYMENTS OF INTEREST AND BONUS

4.1 Interest

     The  Borrower  shall pay  interest on the amount of  outstanding  principal
under this Loan  Agreement  from time to time at a rate of 12% per annum (net of
any  withholding or other similar  taxes).  Interest shall be payable monthly in
arrears on the last Business Day of each month (net of any  withholding or other
similar taxes). Notwithstanding the foregoing, if an Event of Default shall have
occurred and be continuing,  interest shall accrue at a rate of 15% per annum on
the amount of outstanding principal and any other amount payable under this Loan
Agreement.

4.2 General Interest Rules.

     (a) All  interest  payments to be made under this  Agreement  shall be paid
         without  allowance  or  deduction,  both before and after  maturity and
         before and after judgment, if any, until payment. Interest shall accrue
         on overdue interest, if any, compounded monthly.

     (b) Unless otherwise stated,  wherever in this Agreement  reference is made
         to a rate  of  interest  or  rate  of fees  "per  annum"  or a  similar
         expression  is used,  such  interest or fees will be  calculated on the
         basis of a calendar  year of 365 days or 366 days,  as the case may be,
         and using the  nominal  rate  method  of  calculation,  and will not be
         calculated  using the effective  rate method of  calculation  or on any
         other basis that gives effect to the principle of deemed  re-investment
         of interest.

     (c) In  calculating  interest or fees payable under this  Agreement for any
         period, unless otherwise specifically stated, the first day of a period
         shall be included and the last day of a period shall be excluded.

                                       16

<PAGE>

4.3 Bonus

     The Borrower  shall pay to the Lender the  following  non-refundable  bonus
payments (net of any withholding or other similar taxes):

     (a) US $80,000 on the Closing Date; (to be paid out of the Loan Amount);

     (b) 2% of the principal amount outstanding at 12:01 AM on December 1, 2005;

     (c) 2% of the principal amount  outstanding at 12:01 AM on January 1, 2006;
         and

     (d) 5% of the principal amount outstanding at 12:01 AM on February 1, 2006.

     The  Borrower  hereby  irrevocably  authorizes  and  directs  the Lender to
withhold  from the advance of the Loan Amount the sum of US  $80,000.00  (net of
any  withholding  or other similar taxes) in  satisfaction  of its bonus payment
obligation under Section 2.4 (a).

              ARTICLE 5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES

5.1 Repayment of Principal

     Unless the Borrower is required to repay the Loan Amount at an earlier date
pursuant  to this Loan  Agreement,  the  Borrower  shall repay to the Lender the
outstanding  principal  amount of the Loan together  with all accrued  interest,
fees and other amounts then unpaid by it in full on the Maturity Date.

5.2 Mandatory Prepayment of Principal

     (a) The Borrower shall pay to the Lender:

         (i) 75% of any proceeds from the sale, assignment, licence, transfer or
         disposition  of  any  asset  (including   insurance  proceeds)  whether
         tangible or intangible (except for Excluded Proceeds); and

         (ii) 100% of any  proceeds  from the  issuance or sale of any equity or
         debt of the Borrower or its subsidiary or any other financing  activity
         of the Borrower or its subsidiary.

     (b) "Excluded  Proceeds"  means proceeds from  dispositions in the ordinary
         course of the Borrower's business of inventory or other assets that are
         customarily  sold by the Borrower on  an-on-going  basis as part of the
         normal operation of its business. 5.3 Voluntary Repayment of Principal

                                       17

<PAGE>

5.3 Voluntary Repayment of Principal

     The  Borrower  may prepay the  outstanding  Loan Amount at any time without
bonus or penalty upon fifteen (15) days' prior written notice to the Lender.

5.4 Manner of Payment of Principal, Interest and Fees

     All payments of principal,  interest,  bonus or any other amount payable by
the Borrower under any Loan Document shall be made to the Lender at the Lender's
address set out in Section  13.2 of this  Agreement  or such other  location the
Lender may specify in writing.

                   ARTICLE 6 - REPRESENTATIONS AND WARRANTIES

6.1 Representations and Warranties

     The Obligors jointly and severally make the following  representations  and
warranties to the Lender, and acknowledge and confirm that the Lender is relying
upon  such  representations  and  warranties  (for  greater  certainty,  and for
purposes  of the  representations  and  warranties  made by the  Obligors on the
Closing Date for purposes of satisfying the  conditions  precedent to obtain the
Loan, the Obligors also make the following  representations  and warranties with
respect to the Acquired  Assets,  as if the purchase  contemplated  by the Asset
Purchase  Agreement had been fully completed  immediately  before the time these
representations and warranties are made):

6.1.1 Existence and Qualification

     Each of the Borrower and the Parent:

     (a) has been duly incorporated,  amalgamated,  merged or continued,  as the
         case  may  be,  and  is  validly  subsisting  under  the  laws  of  its
         jurisdiction of formation,  amalgamation, merger or continuance, as the
         case may be; and

     (b) is duly  qualified and has all required  Material  Licenses to carry on
         its business in each  jurisdiction  in which the nature of its business
         requires qualification.

6.1.2 Power and Authority

     (a) Each Obligor has the power and authority to enter into, and to exercise
         its rights and perform its  obligations  under,  the Loan  Documents to
         which it is a party and all other instruments and agreements  delivered
         by it pursuant to any of the Loan Documents.

     (b) The  Borrower  has the  power and  authority  to have  implemented  and
         completed the purchase of the Acquired Assets and to enter into, and to
         exercise its rights and perform its obligations  under, all instruments
         and agreements delivered by it in connection with that purchase.

                                       18

<PAGE>

     (c) The Borrower has the power and  authority to own its Property and carry
         on its business as currently  conducted and as currently proposed to be
         conducted by it (including in the case of the Borrower, the Business).

6.1.3 Execution, Delivery, Performance and Enforceability of Documents

     The  execution,  delivery and  performance of each of the Loan Documents to
which each Obligor is a party, and every other instrument or agreement delivered
by an Obligor pursuant to any Loan Document, or in connection with the purchase,
have been duly  authorized.  Each of such  documents  has been duly executed and
delivered.

6.1.4 Loan Documents  Comply with Applicable Law,  Organizational  Documents and
      Contractual Obligations

     None of the execution or delivery of, the  consummation of the transactions
contemplated in, or compliance with the terms,  conditions and provisions of any
of, the Loan  Documents  or any of the  agreements  or  documents  delivered  in
connection  therewith or in connection with the purchase of the Acquired Assets,
by the Borrower, conflicts with or will conflict with, or results or will result
in any  breach  of, or  constitutes  a default  under or  contravention  of, any
Requirement of Law or any Material Contract or Material  License,  or results or
will result in the creation or  imposition  of any  Encumbrance  upon any of its
Property.

6.1.5 Consent Respecting Loan Documents

     Each  Obligor  has  obtained,  made,  or  taken  all  consents,  approvals,
authorizations,  declarations, registrations, filings, notices and other actions
whatsoever  required (except for  registrations or filings which may be required
in respect of the Security) in connection  with the execution and delivery by it
of each of the Loan Documents to which it is a party,  and the  consummation  of
the  transactions  contemplated  in  the  Loan  Documents,  the  completion  and
implementation of the purchase,  and the execution and delivery by it of each of
the instruments and agreements  delivered by it in connection with the purchase,
and the  consummation of the  transactions  contemplated in such instruments and
agreements.

6.1.6 Enforceable Obligations

     This  Agreement  and the other Loan  Documents  have been duly executed and
delivered and constitute  legal,  valid and binding  obligations of each Obligor
(with regard to each agreement or instrument to which it is a party) enforceable
in  accordance  with  their  respective  terms,  except  as  may be  limited  by
bankruptcy,  reorganization,  moratorium  or  insolvency  laws or  similar  laws
affecting creditors' rights generally and by general equitable principles.

                                       19

<PAGE>

6.1.7 Taxes

     Each Obligor has filed,  or caused to be filed,  all income tax returns and
other  material  returns in respect of Taxes  required  to be filed,  has either
paid, or made adequate provision for the payment of, all Taxes which are due and
payable, or has accrued such amounts in its financial statements for the payment
of such  Taxes,  except  for  charges,  fees or dues which are not  material  in
amount,  and which are not  delinquent or if delinquent  are being  contested in
good faith and through appropriate proceedings, and there is no material action,
suit, proceeding,  investigation,  audit or claim now pending, or to the best of
the knowledge of either the Borrower or Parent  threatened  by any  Governmental
Authority  regarding any Taxes,  nor has any of the Obligors  agreed to waive or
extend any statute of  limitations  with respect to the payment or collection of
Taxes.  There is no material  tax  liability  that will arise to an Obligor as a
result of the completion of the purchase of the Acquired Assets.

6.1.8 Judgments, Etc.

     No Obligor is subject to any judgment,  order, writ, injunction,  decree or
award,  or to any  restriction,  rule or  regulation  (other than  customary  or
ordinary course restrictions,  rules and regulations  consistent or similar with
those imposed on other Persons engaged in similar businesses) which has not been
stayed,  or of  which  enforcement  has not  been  suspended,  which  restrains,
prohibits or delays the purchase of the Acquired Assets.

6.1.9 Absence of Litigation

     There are no actions,  suits or proceedings pending or, to the best of each
Obligor's   knowledge  and  belief,   after  due  inquiry  and  all   reasonable
investigation,  threatened  against or affecting  any Obligor or the Property of
any Obligor except for those actions set out in Schedule 6.1.9.

6.1.10 Debt and Non Arm's Length Transactions

     Neither  Loretta  Food Group,  Inc. nor the Borrower has any debt except as
set out in Schedule 6.1.10.

6.1.11 Ownership

     (a) The  Borrower  has good  and  marketable  title to all of its  material
         Property,  in each case subject to no Encumbrances other than Permitted
         Encumbrances.

     (b) The Borrower will purchase the Acquired  Assets from Monroe pursuant to
         the Asset  Purchase  Agreement  and upon  completion  of that  purchase
         transaction  Purchaser  will  have  good  and  marketable  title to the
         Acquired Assets free and clear of any Encumbrances other than Permitted
         Encumbrances.

                                       20

<PAGE>

     (c) The Borrower  enjoys  peaceful and  undisturbed  possession  of all its
         occupied  real property and there is no pending or, to the knowledge of
         the  Borrower,  threatened  condemnation  or  expropriation  proceeding
         relating  to any such real  property.  The leases  with  respect to the
         Borrower's  leased property,  together with any leases of real property
         entered into by any the Borrower  after the Closing Date,  are referred
         to  collectively  as the  "Leases".  All of the real  property  and the
         structures  thereon and other tangible assets owned,  leased or used by
         any the  Borrower in the  conduct of its  business  (including  without
         limitation the Business) are

         (i) insured to the extent,  and in a manner customary,  in the industry
         in which the Borrower is engaged;

         (ii) structurally sound with no known material defects;

         (iii) in good operating condition and repair,  subject to ordinary wear
         and tear and casualty;

         (iv) not in need of maintenance or repair except for ordinary,  routine
         maintenance  and repair the cost of which would not be material or as a
         result of casualty;

         (v)  sufficient  for the  operation  of the business of the Borrower as
         presently conducted thereon; and

         (vi) in  conformity  with all  Applicable  Law and  other  requirements
         (including  applicable  zoning,  environmental,  motor vehicle  safety,
         occupational safety and health laws and regulations)  relating thereto,
         except where the failure to comply or conform with any of the foregoing
         could not reasonably be expected to have a Material Adverse Effect.

6.1.12 Insurance

     The  Borrower  maintains  insurance  which is in full  force and effect and
which complies with all of the  requirements of this  Agreement.  The details of
all existing  insurance  policies  maintained  by the Borrower as of the date of
this Agreement are outlined as to carrier, policy number,  expiration date, type
and amount in Schedule 6.1.12.

6.1.13 Compliance with Law

     None of the Obligors  has violated or failed to comply with any  Applicable
Law,  or any  Applicable  Order  of any  self  regulatory  organization,  or any
judgment,  decree or order of any court,  applicable to its business  (including
the Business)  except where the aggregate of all such  violations or failures to
comply could not reasonably be expected to have a Material  Adverse Effect.  The
conduct  of the  business  of each of the  Obligors  is in  conformity  with all
securities,  commodities, energy, public utility, zoning, building code, health,

                                       21

<PAGE>


occupational  health  and safety and  environmental  requirements  and all other
foreign,  federal,  state,  provincial  and local  governmental  and  regulatory
requirements and requirements of any self regulatory organizations, except where
such  non-conformities  could not  reasonably  be  expected  to have a  Material
Adverse Effect. None of the Obligors has received any notice to the effect that,
or otherwise been advised that, it is not in compliance with any Applicable Law,
and none of the Obligors knows of any currently existing  circumstances that are
likely to result in the violation of any Applicable Law, which non-compliance or
violation could reasonably be expected to have a Material Adverse Effect.

6.1.14 No Event of Default or Pending Event of Default

     No Event of Default or Pending  Event of Default has  occurred and no event
has occurred  that (with the giving of notice,  the lapse of time or both) would
constitute  an Event of Default or Pending  Event of  Default.  No Obligor is in
default under any agreement, guarantee, indenture or instrument to which it is a
party or by which it is bound,  the breach of which could reasonably be expected
to cause a Material  Adverse  Effect or affect its ability to perform any of its
obligations under any Loan Document to which it is a party.

6.1.15 Relevant Jurisdictions

     (a) The   Relevant   Jurisdictions   for  each   Obligor  are  set  out  in
         Schedule 6.1.15.

     (b) The Obligors' chief  executive  offices are at the locations set out in
         Schedule  6.1.15,  and the books and  records of the  Obligors  and all
         chattel  paper and all  records of  accounts  are  located at the chief
         executive   offices  of  the   Obligors  or  as   otherwise   noted  in
         Schedule 6.1.15.

     (c) All other  locations  where the  Obligors  keep,  store or maintain any
         Property are set out in Schedule 6.1.15.

6.1.16 Material Contracts and Material Licences

     (a) Schedule 6.1.16,  (as amended from time to time with the consent of the
         Lender),  accurately  sets  out all  Material  Contracts  and  Material
         Licences.

     (b) No event has occurred and is continuing which would constitute a breach
         of, or a default under, any Material Contract or Material Licence.

     (c) Each Material Contract,  to which an Obligor is a party is binding upon
         that  Obligor  and, to its  knowledge,  is a binding  agreement of each
         other Person who is a party to the Material Contract.

     (d) Each of the Obligors has obtained  all  necessary  consents,  including
         consents of landlords,  to the granting of a security  interest in each
         Material Contract and Material Licence.

                                       22

<PAGE>

6.1.17 Fiscal Year

     The Fiscal Year end of the Borrower is December 31.

     The Fiscal Year end of Loretta Food Group Inc. is December 31.

6.1.18 Financial Information

     All  financial  statements  which have been  furnished  to the  Lender,  in
connection  with this  Agreement  or the  purchase  of the  Acquired  Assets are
complete in all material  respects and such financial  statements fairly present
the financial  position of the Obligors,  as applicable as of the dates referred
to therein and have been prepared in accordance  with GAAP. All other  financial
information (including, without limitation, budgets and projections) provided to
the  Lender  is  complete  in all  material  respects  and  based on  reasonable
assumptions and expectations.

6.1.19 No Material Adverse Effect

     Since  the date of the most  recent  financial  statements  of  either  the
Borrower or the Parent  which have been  furnished  to the Lender in  connection
with this  Agreement,  there has been no  development  or event  relating  to or
affecting the Borrower or the Parent,  the Acquired Assets or the Business which
has had or could reasonably be expected to have a Material Adverse Effect.

6.1.20 Insolvency

     No Obligor nor any of their predecessors where applicable

     (a) has committed any act of bankruptcy,

     (b) is  insolvent,  or has  proposed,  or given notice of its  intention to
         propose, a compromise or arrangement to its creditors generally,

     (c) has any petition for a receiving order in bankruptcy  filed against it,
         made a voluntary  assignment in bankruptcy,  taken any proceeding  with
         respect to any compromise or arrangement,  taken any proceeding to have
         itself  declared  bankrupt or wound-up,  taken any proceeding to have a
         receiver  appointed of any part of its assets, has had any encumbrancer
         take possession of any of its Property, or

     (d) has had an execution or distress become enforceable or become levied on
         any of its Property.

6.1.21 Full Disclosure

     All information furnished by or on behalf of the Obligors to the Lender for
purposes of, or in connection with, this Agreement or any Loan Documents, or any
other  transaction  contemplated  by this  Agreement,  including any information
furnished  in the  future,  is or will  be true  and  accurate  in all  material

                                       23

<PAGE>

respects on the date as of which such information is dated or certified, and not
incomplete  by  omitting  to state  any  material  fact  necessary  to make such
information not misleading at such time in light of then-current  circumstances.
There  is no fact now  known  to any of the  Obligors  which  has had,  or could
reasonably be expected to have, a Material Adverse Effect.

6.2 Survival and Repetition of Representations and Warranties

     The representations and warranties set out in Section 6.1 will be deemed to
be repeated by the Obligors as of the Closing Date.

                              ARTICLE 7 - COVENANTS

7.1 Positive Covenants

     So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise  permitted by the prior written consent of
the Lender,  each of the Borrower and Parent makes and shall maintain,  or cause
the other Obligors to maintain, as applicable, the following covenants:

7.1.1 Timely Payment

     The Borrower shall make due and timely payment of the Obligations  required
to be paid by it under this Agreement or any other Loan Document.

7.1.2 Conduct of Business, Maintenance of Existence, Compliance with Law

     The  Borrower  shall  engage in  business of the same  general  type as the
Business now  conducted by it; carry on and conduct its business and  operations
in a proper, efficient and businesslike manner, in accordance with good business
practice;  preserve,  renew and keep in full force and effect its existence; and
take all  reasonable  action to maintain all rights,  privileges  and franchises
necessary or desirable in the normal conduct of its business and comply with all
Material Contracts, Material Licenses and Requirements of Law.

7.1.3 Access to Information

     Each  Obligor  shall  promptly  provide  the  Lender  with all  information
requested by the Lender from time to time concerning its financial condition and
Property, and during normal business hours and from time to time upon reasonable
notice, permit  representatives of the Lender to inspect any of its Property and
to examine and take  extracts  from its  financial  books,  accounts and records
including but not limited to accounts and records  stored in computer data banks
and computer software systems,  and to discuss its financial  condition with its
Senior  Officers and (in the presence of such of its  representatives  as it may
designate) its auditors.

                                       24

<PAGE>

7.1.4 Obligations and Taxes

     Each Obligor  shall pay or  discharge,  or cause to be paid or  discharged,
before they become delinquent:

     (a) all Taxes  imposed  upon it or upon its income or profits or in respect
         of its business,  including the Business,  or Property and file all tax
         returns in respect thereof;

     (b) all lawful claims for labour, materials and supplies;

     (c) all required payments under any of its debt; and

     (d) all other obligations;

provided,  however  that no Obligor  shall be required to pay or discharge or to
cause to be paid or  discharged,  any such  amount  so long as its  validity  or
quantum is contested in good faith by appropriate proceedings, and a reserve has
been  established in its books and records in accordance  with GAAP in an amount
satisfactory to the Lender in its sole discretion, acting reasonably.

7.1.5 Use of the Loan

     The  Borrower  shall  use  the  proceeds  of the  Loan as  contemplated  by
Section 2.2.

7.1.6 Insurance

     The Borrower will keep in force upon all of its  properties  and operations
policies of insurance carried with responsible companies covering all such risks
in the minimum  amount of $2,000,000,  with other terms and conditions  that are
customary  in the  industry  and are  otherwise  satisfactory  to Lender,  or as
otherwise  required in the Loan Documents.  The Borrower will on request furnish
to the Lender  certificates of insurance or duplicate  policies  evidencing such
coverage.

7.1.7 Notice of Event of Default or Pending Event of Default

     The Borrower  shall  promptly  notify the Lender of any Event of Default or
Pending Event of Default.

7.1.8 Notice of Material Adverse Effect

     The  Borrower  shall  promptly  notify the Lender of any  Material  Adverse
Effect  that  would  apply  to it,  or  any  other  Obligor,  or  any  event  or
circumstance that is likely to give rise to a Material Adverse Effect.

                                       25

<PAGE>

7.1.9 Notice of Litigation

     The  Borrower  shall  promptly  notify  the  Lender  of the  occurrence  or
threatened  occurrence of any litigation,  dispute,  arbitration,  proceeding or
other  circumstance  the result of which,  if determined  adversely,  would be a
judgment  or award  against  it or the other  Obligors  that  would  result in a
Material  Adverse  Effect  to it or the  other  Obligors,  and from time to time
provide the Lender with all information  requested by the Lender  concerning any
such proceeding.

7.1.10 Other Notices

     The Borrower shall promptly give notice to the Lender of:

     (a) any notice of expropriation, or material action or proceeding affecting
         the business of an Obligor, including the Business;

     (b) any violation of any  Applicable Law which results or could result in a
         Material Adverse Effect;

     (c) any entering  into,  termination  of or amendment of or default under a
         Material Contract;

     (d) any  Encumbrance  registered  against  any  property  or  assets  of an
         Obligor, other than a Permitted Encumbrance;

     (e) any material  change or proposed  material change in the business of an
         Obligor from that of the Business;

     (f) any material change in, or amendment to, any Material Contract.

7.1.11 Security

     With respect to the Security, each Obligor shall:

     (a) provide and cause each of its  Subsidiaries to provide,  as applicable,
         to the Lender  the  Security  required  from time to time  pursuant  to
         Article 8  in   accordance   with  the   provisions  of  that  Article,
         accompanied  by supporting  resolutions,  certificates  and opinions in
         form and substance  satisfactory to the Lender and the Lender's Counsel
         in their sole discretion, acting reasonably; and

     (b) do,  execute  and  deliver  all  such  things,   documents,   security,
         agreements  and assurances as may from time to time be requested by the
         Lender to ensure that the Lender holds at all times valid, enforceable,
         perfected  first  priority  Encumbrances  (subject  only  to  Permitted
         Encumbrances) from the Obligors meeting the requirements of Article 8.

                                       26

<PAGE>

7.1.12 Maintenance of Property

     Each Obligor  shall keep all Property  useful and necessary in its business
in good working  order and  condition,  normal wear and tear excepted and do and
cause to be done all things  necessary  to  preserve  and keep in full force all
intellectual  property  and  registrations  thereof  necessary  to  carry on its
business.

7.1.13 Landlord Consents and Non-Disturbance Agreements

     Except in respect of such  premises  as the Lender  shall agree in writing,
each Obligor shall:

     (a) obtain a consent  agreement  from each  landlord of  premises  that are
         leased  by such  landlord  at any  time  and  from  time to time to any
         Obligor,  in form and  content  satisfactory  to the Lender in its sole
         discretion, acting reasonably;

     (b) obtain a  non-disturbance  agreement  from each  mortgagee  of any such
         leased  premises and an  acknowledgement  by each such mortgagee of any
         applicable landlord's consent in respect of such premises; and

     (c) file a  Memorandum  of  Lease  relating  to  leased  premises  and  any
         memorandum of Landlord's consent and Non-Disturbance  Agreement against
         title to the  applicable  real or  leasehold  property  with the Monroe
         County Register of Deeds.

7.1.14 Material Contracts

     Except in respect of such  Material  Contracts as the Lender shall agree in
writing,  each Obligor  shall obtain the consent of each Person  (other than the
other  Obligor)  which is party to a Material  Contract to the assignment of any
applicable  Obligor's  interest  therein to the Lender pursuant to the Security,
such form to be  satisfactory  in content to the Lender in its sole  discretion,
acting reasonably.

7.1.15 Expenses

     The  Borrower  shall pay  promptly all  reasonable  fees and  disbursements
(including  Taxes)  incurred  or paid  by the  Lender  in  connection  with  the
preparation,   negotiation,  execution,  delivery,  maintenance,  amendment  and
enforcement  (including  any  workouts  in  connection  with  or in  lieu of any
enforcement) of the Loan Documents,  and in connection with the  consummation of
the  transactions  contemplated  by the Loan Documents,  and including,  without
limitation,  all  court  costs  and all  reasonable  fees and  disbursements  of
lawyers, auditors, consultants and accountants.

7.1.16 Revision or Update of Schedules

     The Borrower shall,  if any of the  information or disclosures  provided in
any of the Schedules attached to this Agreement becomes outdated or incorrect in

                                       27

<PAGE>

any  material  respect,  deliver to the Lender any  revisions or updates to such
Schedule(s) as may be necessary or appropriate to update or correct the outdated
Schedule(s),  which  revisions  shall be  effective  from the date  accepted  in
writing  by  the  Lender,  such  acceptance  not  to be  unreasonably  withheld;
provided,  that no  revisions or updates to any  Schedule(s)  shall be deemed to
have cured any breach of warranty or  misrepresentation  occurring  prior to the
delivery  of  that   revision  or  update  by  reason  of  the   inaccuracy   or
incompleteness  of  the  relevant  Schedule(s)  at the  time  that  warranty  or
representation previously was made or deemed to have been made.

7.2 Reporting Requirements

     So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise  permitted by the prior written consent of
the Lender, the Borrower and the Parent shall perform,  or shall cause the other
Obligors to perform, as applicable, the following covenants:

7.2.1 Financial Information

     The Borrower  will  deliver to Lender (a) as soon as  available  and in any
event  within 90 days after the end of each  fiscal  year of the  Borrower,  the
balance  sheet of the Borrower as of the end of such fiscal year and the related
statements of income and retained earnings and statement of changes in financial
position of the Borrower for such year,  accompanied by the audit report thereon
by independent  certified public accountants  satisfactory to Lender; and (b) as
soon as  available  and in any event within 30 days after the end of each month,
the unaudited balance sheet and statement of income and retained earnings of the
Borrower  as of the end of such month  (including  the fiscal year to the end of
such month),  accompanied by a certificate of the chief financial officer of the
Borrower that such unaudited  balance sheet and statement of income and retained
earnings have been prepared in accordance  with  generally  accepted  accounting
principles  consistently  applied and present fairly the financial  position and
the results of  operations  of the Borrower as of the end of and for such month;
and (c) all other  statements,  reports  and  other  information  as Lender  may
request concerning the financial condition and business affairs of the Borrower.

7.2.2 Information to be Presented to Directors

     The Borrower shall deliver to the Lender  unedited copies of all materials,
reports and other  information  to be  furnished  or  presented  to the Board of
Directors  of the  Borrower or its  management  at all  meetings of the Board of
Directors or management of the Borrower at least five business days prior to any
such meeting.

7.2.3 Other Information

     The  Borrower and the Parent  shall  promptly  provide the Lender with such
other  information  as  it  may  reasonably  request  respecting  the  Obligors,
(including, without limitation, an aged list of accounts receivable and accounts
payable for each Obligor).

                                       28

<PAGE>

7.3 Negative Covenants

     So long as this Agreement is in effect, and until the Obligations have been
paid in full, and except as otherwise  permitted by the prior written consent of
the Lender, the Borrower and the Parent shall maintain the following covenants:

7.3.1 Restrictions on Business Activities

     The Borrower shall not carry on any business other than the Business.

7.3.2 Operation of Business

     The  Borrower  shall  not  operate  its  business  in a manner  that  would
reasonably be expected to result in a Material Adverse Effect.

7.3.3 Disposition of Property

     The  Borrower  shall not dispose of, or permit any of its  Subsidiaries  to
dispose of, Property in any Fiscal Year except for  dispositions in the ordinary
course of business of any inventory or other assets that are customarily sold by
the  Borrower  on an  on-going  basis  as part of the  normal  operation  of its
business.

7.3.4 Capital Expenditures

     Other  than   expenditures  for  fixed  or  capital  assets  in  excess  of
Twenty-Five  Thousand  ($25,000) Dollars per fiscal year, the Borrower shall not
make any  expenditure  for a fixed or capital  asset  without the prior  written
consent of Lender.

7.3.5 No Debt

     The Borrower shall not create,  incur,  assume or permit any debt to remain
outstanding,  other than the  current  operating  line in place with the Bank of
Montreal.

7.3.6 No Encumbrances

     The  Borrower  shall  not  create,  incur,  assume  or  permit to exist any
Encumbrance upon any of its Property, except Permitted Encumbrances.

7.3.7 No Distributions

     The   Borrower   shall   not  make  any   Distribution   except   Permitted
Distributions.

7.3.8 No Repayment of Other Debt

     Borrower  shall not make any repayment of principal  indebtedness  owing to
Borrower's  shareholder(s).  Repayment of the principal of all such indebtedness
is subordinated to the repayment in full of the Loan, as set forth more fully in
the Subordination Agreement.

                                       29

<PAGE>

7.3.9 No Consolidation, Amalgamation, etc.

     The  Borrower  shall not  consolidate,  amalgamate  or merge with any other
Person, enter into any corporate reorganization or other transaction intended to
effect  or  otherwise  permit a change  in its  existing  corporate  or  capital
structure,  liquidate,  wind-up or dissolve  itself,  or permit any liquidation,
winding-up or dissolution.

7.3.10 No Change of Name

     No Obligor  shall change its name without  providing the Lender with thirty
(30) days prior written notice  thereof.  Borrower may operate under the Assumed
Name  Amendt  Milling  Co.  by filing a  Certificate  of  Assumed  Name with the
Michigan  Corporation,  Securities,  and Land  Development  Bureau and providing
written  notice to Lender within ten (10) days after the  Certificate of Assumed
Name is filed.

7.3.11 No Continuance

     No Obligor shall continue into any other jurisdiction.

7.3.12 No Share Issuance

     The  Borrower  shall not issue any  securities  without  the prior  written
consent of the Lender.

7.3.13 Ownership of Subsidiaries

     The Borrower shall not sell,  transfer or otherwise  dispose of, any of its
shares of the capital stock of a Subsidiary or permit any of its Subsidiaries to
issue  securities,  or sell or otherwise dispose of, any shares of capital stock
of any its other Subsidiaries.

7.3.14 Amendments to Organizational Documents

     The  Borrower  shall  not amend any of its  Organizational  Documents  in a
manner that would be  prejudicial  to the interests of the Lender under the Loan
Documents.

7.3.15 Amendments to other Material Contracts and Material Licences

     The Borrower shall not amend, vary or alter in any material way, consent to
any  assignment  or  transfer  of, or waive or  surrender  any of its  rights or
entitlements which could be considered material under, any Material Contracts or
Material Licences.

7.3.16 Location of Assets in Other Jurisdictions

     No Obligor  shall,  except in the case of  Property  being  delivered  to a
customer in the ordinary  course of business as part of the  performance  of its
obligations,  or the  provision of its services,  under a contract  entered into
with that  customer,  (1) move any  Property  from a  jurisdiction  in which the
Encumbrance  of the Security over such  Property is perfected to a  jurisdiction

                                       30

<PAGE>

where that  Encumbrance  is not  perfected  or where,  after a temporary  period
allowing for registration in such other  jurisdiction,  that  Encumbrance  could
become  unperfected,  or (2)  suffer or permit  in any other  manner  any of its
Property to not be subject to that  Encumbrance  or to be or become located in a
jurisdiction in which that Encumbrance is not perfected, unless:

     (a) the  Obligor  has first given  thirty  (30) days prior  written  notice
         thereof to the Lender; and

     (b) the  applicable  Obligor has first executed and delivered to the Lender
         all  Security  and all  financing  or  registration  statements  deemed
         necessary or admissible by, and in form and substance  satisfactory  to
         the  Lender or the  Lender's  Counsel  in its sole  discretion,  acting
         reasonably,  to ensure  that the  Security at all times  constitutes  a
         perfected  first  priority   Encumbrance  (subject  only  to  Permitted
         Encumbrances)  over such Property in such  jurisdiction,  together with
         any supporting certificates,  resolutions, opinions and other documents
         as the Lender or the Lender's  Counsel may deem  necessary or desirable
         in its sole  discretion,  acting  reasonably,  in connection  with such
         security and registrations.

7.3.17 Burgio Restriction

     Burgio  shall not  transfer or sell any personal  property  aggregating  in
value over $100,000 until the Loan is repaid in full.

                              ARTICLE 8 - SECURITY

8.1 Form of Security

     (a) As general and continuing  security for the due payment and performance
         of the  Obligations  of the  Obligors  to the  Lender  under  the  Loan
         Documents, the following Security shall be granted to the Lender:

         (i) a general  security  agreement  from the  Borrower in favour of the
         Lender,  constituting  a  first-priority  Encumbrance  (subject only to
         Permitted  Encumbrances)  on all of the present and future  Property of
         the Borrower (including without limitation, the Acquired Assets);

         (ii) an unconditional  unlimited  guarantee and a postponement of claim
         from Monaco, guaranteeing the due payment and performance to the Lender
         of all present and future  obligations  of the Borrower  under the Loan
         Documents (the "LORETTA FOOD GROUP INC. Guaranty");

         (iii) a general  security  agreement  from Loretta Food Group,  Inc. in
         favour of the Lender,  as security for its Obligations,  constituting a
         first-priority  Encumbrance (subject only to Permitted Encumbrances) on
         all of the present  and future  Property  of Loretta  Food Group,  Inc.
         including  without  limitation the shares of the Borrower and all other
         subsidiaries of Loretta Food Group Inc. ;

                                       31

<PAGE>

         (iv) an unconditional  unlimited  guarantee and a postponement of claim
         from Burgio, guaranteeing the due payment and performance to the Lender
         of all present and future  obligations  of the Borrower  under the Loan
         Documents (the "Burgio Guaranty"); and

         (v) such further  security  agreements,  deeds or other  instruments of
         conveyance,  assignment,  transfer,  mortgage,  pledge or charge as the
         Lender may reasonably  request to effectively  secure the  undertaking,
         property and assets of the Obligors  (including  without limitation the
         Acquired Assets) in the manner contemplated by the security referred to
         in (i) through (iv) above.

     (b) The  Borrower  acknowledges  and agrees  that it shall  continue  to be
         liable for the obligations of the Loan,  despite any action or inaction
         by the Lender in  selling  or  disposing  of the  Security  or any part
         thereof. The Lender may grant extensions or other indulgences, take and
         give up the Security or any part thereof,  accept  compositions,  grant
         releases and  discharges,  and  otherwise  deal with  Borrower and with
         other parties, guarantors,  indemnitors or securities as the Lender may
         see fit,  without  prejudice  to the rights of the Lender in respect of
         the Security.

8.2 Insurance Assignment

     Each Obligor,  or the appropriate  Obligor if blanket insurance polices are
held,  will cause the Lender to be shown as a loss payee,  as its  interest  may
appear, with respect to all insurance on the Property of each Obligor.

8.3 After Acquired Property and Further Assurances

     The  Borrower  and the Parent  shall from time to time execute and deliver,
and  shall  cause  each of the other  Obligors  from  time to time  execute  and
deliver, all such further deeds or other instruments of conveyance,  assignment,
transfer,  mortgage,  pledge or charge in connection with all assets acquired by
any Obligor and intended to be subject to the Security,  including any insurance
on those assets as may be requested by the Lender from time to time.

8.4 Registration

     The  Borrower  shall,  at its  expense,  cause to be  registered,  filed or
recorded the Security in all offices in each  Relevant  Jurisdiction  where such
registration,  filing or recording is necessary or of advantage to the creation,
perfection  and  preserving  of the Security  applicable  to it and/or any other
Obligor.  The Borrower  shall renew such  registrations,  filings and recordings
from time to time as and when required to keep them in full force and effect and
shall,  from  time to time as  reasonably  required,  provide  to the  Lender an
opinion of the  Borrower's  Counsel  that all such  registrations,  filings  and
recordings  have been made and perfect  the  security  interests  created by the
Security.

                                       32

<PAGE>

8.5 Release of Security

     At  such  time  as  the  Borrower  has  satisfied  all  of  its  respective
indebtedness,  liabilities  and obligations in relation to the Agreement in full
and shall have terminated the same, the Lender shall, at the expense and request
of the Borrower, without any representations, warranties or recourse of any kind
whatsoever, enter into such agreements and other instruments as may be necessary
to release,  reassign,  reconvey and discharge  the Security;  provided that any
asset which is disposed of by the  Borrower or any other  Obligor in  accordance
with the terms of this  Agreement  shall be  released  from the  Security by the
Lender following a written request by, and at the expense of, the Borrower.

                               ARTICLE 9 - DEFAULT

9.1 Events of Default

     The  occurrence of any one or more of the following  events (each an "Event
of Default") shall constitute a default under this Agreement:

     (a) the failure of an Obligor to pay any amount of  principal  of the Loan,
         or to pay interest, fees or other Obligations when due and payable;

     (b) the occurrence of a Material Adverse Effect;

     (c) the  failure  of an Obligor to  observe  or  perform  any  covenant  or
         obligation  applicable to it under this  Agreement or any Loan Document
         (other  than a  covenant  or  condition  whose  breach  or  default  in
         performance is specifically  dealt with elsewhere in this Section 9.1),
         if that  Obligor  fails to remedy  such  default  within the earlier of
         twenty (20) days from the date:

         (i) it becomes aware of the default; and

         (ii) the Lender delivers written notice of the default to the Borrower;

     (d) any  representation  or warranty made by any Obligor in this Agreement,
         any other Loan Document or in any  certificate or other document at any
         time  delivered  hereunder to the Lender was incorrect or misleading in
         any material respect; or

     (e) the  cessation  or  threatened  cessation by an Obligor of its business
         generally or the  admission by an Obligor of its  inability to, or, its
         actual failure to, pay its debts generally;

                                       33

<PAGE>

     (f) the denial by any Obligor of its  obligations  under any Loan Document,
         or the claim by any Obligor  that any of the Loan  Documents is invalid
         or has been withdrawn in whole or in part;

     (g) the  enactment of any  legislation  or the entering or obtaining of any
         decree or order of a court, statutory board or commission which renders
         any of the Loan  Documents  or any  material  provision  of any of them
         unenforceable,  unlawful or otherwise changed, if any Obligor does not,
         within  ten (10) days of  receipt  of notice  of the Loan  Document  or
         material  provision  becoming  unenforceable,   unlawful  or  otherwise
         changed, replace the Loan Document with a new agreement that is in form
         and substance satisfactory to the Lender in its sole discretion, acting
         reasonably,  or amend  the Loan  Document  to the  satisfaction  of the
         Lender in its sole discretion, acting reasonably;

     (h) the  entering  into or  obtaining  of a  decree  or order of a court of
         competent jurisdiction adjudging an Obligor a bankrupt or insolvent, or
         approving as properly  filed a petition  seeking the  winding-up  of an
         Obligor under the Companies'  Creditors  Arrangement Act (Canada),  the
         Bankruptcy and Insolvency  Act (Canada),  the United States  Bankruptcy
         Code or the  Winding Up and  Restructuring  Act  (Canada)  or any other
         bankruptcy,  insolvency or analogous laws or issuing  sequestration  or
         process of execution  against any substantial  part of the assets of an
         Obligor or ordering the winding up or liquidation of its affairs;

     (i) the  insolvency  of an  Obligor,  or the  making  by an  Obligor  of an
         assignment in  bankruptcy,  or any other  assignment for the benefit of
         creditors,  or any proposal  under the  Bankruptcy  and  Insolvency Act
         (Canada) or any  comparable  law,  or the  seeking of relief  under the
         Companies'  Creditors  Arrangement  Act  (Canada),  the  United  States
         Bankruptcy Code, the Winding Up and  Restructuring  Act (Canada) or any
         other bankruptcy,  insolvency or analogous law, the Obligor is adjudged
         bankrupt,  files a petition or proposal to take advantage of any act of
         insolvency,  consents to or acquiesces in the appointment of a trustee,
         receiver,   receiver  and   manager,   interim   receiver,   custodian,
         sequestrator or other Person with similar powers of itself or of all or
         any substantial portion of its assets, or files a petition or otherwise
         commences  any  proceeding  seeking  any  reorganization,  arrangement,
         composition   or   readjustment   under  any   applicable   bankruptcy,
         insolvency,  moratorium,  reorganization or other similar law affecting
         creditor'  rights or consents to, or acquiesces in, the filing of such
         a petition;

     (j) the  filing or  instituting  of any  proceeding  or  against an Obligor
         seeking to have an order for relief  entered  against  that  Obligor as
         debtor  or  to  adjudicate   it  bankrupt  or  insolvent,   or  seeking
         liquidation,  winding-up,  reorganization,  arrangement,  adjustment or
         composition   under  any  law  relating  to   bankruptcy,   insolvency,
         reorganization or relief or debtors (including, without

                                       34

<PAGE>

         limitation,  the Bankruptcy and Insolvency Act (Canada),  the Companies
         Creditors  Arrangement Act (Canada),  the United States Bankruptcy Code
         and  the  Winding-Up  and  Restructuring   Act  (Canada),   or  seeking
         appointment of a receiver, trustee, custodian or other similar official
         for such  Obligor  or for any  substantial  part of its  properties  or
         assets unless the same is being  contested  actively and  diligently in
         good faith by  appropriate  and timely  proceedings  and is  dismissed,
         vacated or permanently stayed within thirty (30) days of institution;

     (k) the  taking of  possession  by an  Encumbrancer,  by  appointment  of a
         receiver,  receiver and manager, or otherwise,  of any material portion
         of the Property of any Obligor;

     (l) the loss by any of the Security of its status as a valid and  perfected
         first   priority   security   interest   subject   only  to   Permitted
         Encumbrances, if the Obligors have failed to remedy this default within
         the earlier of ten (10) days from the date:

         (i) an Obligor  becomes aware,  using  reasonable due diligence of such
         default; and

         (ii) the Lender delivers written notice of the default to the Borrower;

     (m) the  occurrence of an event of default  under any Material  Contract or
         Material  Licence  of an  Obligor  (other  than  an  event  of  default
         specifically  dealt with in this section),  if that event of default is
         not remedied  within thirty (30) days after an Obligor becomes aware of
         it;

     (n) the occurrence of a Change of Control; or

     (o) the   inclusion  in  any  report  of  an  Obligor's   auditors  of  any
         qualification   which  is  unacceptable  to  the  Lender  in  its  sole
         discretion, acting reasonably.

9.2      Acceleration and Termination of Rights

     If any Event of Default occurs, all Obligations shall, at the option of the
Lender,  become immediately due and payable with interest,  at the rate or rates
determined as provided in this  Agreement,  to the date of their actual payment,
all without notice,  presentment,  protest,  demand,  notice of dishonour or any
other demand or notice  whatsoever,  all of which are hereby expressly waived by
each Obligor In that event the Security shall become immediately enforceable and
the Lender may, in its sole  discretion,  exercise any right or recourse  and/or
proceed by any action, suit, remedy or proceeding against any Obligor authorized
or permitted by law for the recovery of all the  Obligations  of the Obligors to
the Lender,  and proceed to exercise any and all rights  hereunder and under the
Security,  and no such  remedy for the  enforcement  of the rights of the Lender
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.

                                       35

<PAGE>

9.3 Remedies Cumulative

     For  greater  certainty,  it is  expressly  understood  and agreed that the
rights and remedies of the Lender  under this  Agreement or under any other Loan
Document are cumulative and are in addition to, and not in substitution for, any
rights or  remedies  provided  by Law or by  equity;  and any  single or partial
exercise  by the  Lender of any right or remedy  for a default  or breach of any
term, covenant, condition or agreement contained in this Agreement or other Loan
Document shall not be deemed to be a waiver of or to alter,  affect or prejudice
any other right or remedy or other rights or remedies to which the Lender may be
lawfully entitled for such default or breach.

9.4 Saving

     The Lender shall have no  obligation to the Obligors or any other Person to
realize any  collateral  or enforce the Security or any part thereof or to allow
any of the  collateral  to be sold,  dealt with or  otherwise  disposed  of. The
Lender  shall not be  responsible  or liable to the Obligors or any other Person
for any loss or damage upon the  realization or  enforcement  of, the failure to
realize or enforce the  collateral  or any part  thereof or the failure to allow
any of the collateral to be sold, dealt with or otherwise disposed of or for any
act or  omission  on their  respective  parts  or on the  part of any  director,
officer,  agent,  servant or adviser in  connection  with any of the  foregoing,
except  that the  Lender  may be  responsible  or liable  for any loss or damage
arising from the wilful misconduct or gross negligence of the Lender.

9.5 Perform Obligations

     If an Event of Default has occurred and is  continuing,  and if any Obligor
has failed to perform any of its covenants or agreements in the Loan  Documents,
the Lender may, but shall be under no obligation  to, perform any such covenants
or agreements in any manner deemed fit by the Lender without thereby waiving any
rights to enforce the Loan  Documents.  The reasonable  expenses  (including any
legal  costs)  incurred  by the Lender in respect of the  foregoing  shall be an
Obligation and shall be secured by the Security.

9.6 Set-Off or Compensation

     In  addition  to, and not in  limitation  of,  any rights now or  hereafter
granted  under   Applicable  Law,  if  repayment  is  accelerated   pursuant  to
Section 9.2,  the Lender may, at any time  without  notice to any Obligor or any
other  Person,  the right to receive any notice being  expressly  waived by each
Obligor,  set-off  and  compensate  and apply any and all  deposits,  general or
special,  time or demand,  provisional or final,  matured or unmatured,  and any
other  indebtedness  at any time  owing by the Lender to or for the credit of or
the  account  of  an  Obligor,  against  and  on  account  of  the  Obligations,
notwithstanding that any of them are contingent or unmatured.

                                       36

<PAGE>

9.7 Application of Payments

     Notwithstanding   any  other  provisions  of  this  Agreement,   after  the
occurrence and during the continuance of an Event of Default,  all payments made
by an Obligor under this  Agreement or from the proceeds of  realization  of any
Security, or otherwise collected or received by the Lender on account of amounts
outstanding  with  respect  to any of the  Obligations,  shall  be paid  over or
delivered to make the following payments (as the same become due at maturity, by
acceleration or otherwise):

     (a) first, to payment of any fees owed to the Lender hereunder or under any
         other Loan Document;

     (b) second,  to the  payment  of all  reasonable  out-of-pocket  costs  and
         expenses  (including without  limitation  reasonable legal fees) of the
         Lender in connection  with enforcing the rights of the Lender under the
         Loan Documents;

     (c) third,  to  the  payment  of  all  Obligations  consisting  of  default
         interest;

     (d) fourth,  to the  payment  of all  Obligations  consisting  of  interest
         payable to the Lender hereunder;

     (e) fifth, to the payment of the outstanding  principal amount of the Loan;
         and

     (f) sixth, to all other Obligations.

                ARTICLE 10 - COSTS, EXPENSES AND INDEMNIFICATION

10.1 Costs and Expenses

     The  Borrower  shall pay promptly  upon receipt of written  notice from the
Lender all  reasonable  costs and expenses in connection  with the  preparation,
execution and delivery of this Agreement, the other Loan Documents and the other
instruments,  certificates and documents to be delivered under this Agreement or
the other Loan Documents,  whether or not a closing has occurred or the Loan has
been made under this Agreement,  including,  without limitation,  the reasonable
fees and out-of-pocket expenses of the Lender's Counsel with respect thereto and
with respect to advising the Lender as to its rights and responsibilities  under
this  Agreement  and  the  other  Loan  Documents  to be  delivered  under  this
Agreement.  The Borrower further agrees to pay all reasonable costs and expenses
in connection with the preparation or review of waivers, consents and amendments
requested by the Borrower, questions of interpretation of this Agreement, and in
connection with the  establishment  of the validity and  enforceability  of this
Agreement and the preservation or enforcement of rights of the Lender under this
Agreement, and other documents to be delivered under this Agreement,  including,
without limitation, all reasonable costs and expenses sustained by the Lender as
a result of any  failure by any of the  Obligors  to  perform or observe  any of
their respective obligations under this Agreement, together with interest at the
rate of 15% per annum from and after the 10th  Business Day of having been given
notice  from the  Lender,  if payment  is not made by that time.  Such costs and
expenses shall be payable whether or not a Loan is made under this Agreement.

                                       37

<PAGE>

10.2 Indemnification by the Borrower

     (a) In  addition  to any  liability  of an Obligor to the Lender  under any
         other provision of this Agreement,  the Obligors  jointly and severally
         covenant to indemnify the Lender and hold the Lender  harmless  against
         any reasonable loss or expense incurred by the Lender as a result of:

         (i) any Obligor's failure to fulfil any of its Obligations;

         (ii) any Obligor's failure to pay any other amount, including,  without
         limitation,  any interest or fee, when due under this  Agreement or any
         other Loan Document; or

         (iii) any Obligor s  failure to give any notice required to be given by
         it to the Lender under this Agreement

     (b) A  certificate  of the  Lender  as to the  amount  of any such  loss or
         expense shall be prima facie evidence as to the amount thereof,  in the
         absence of manifest error.  The agreements in this  Section 10.2  shall
         survive  the  termination  of  this  Agreement  and  repayment  of  the
         Obligations.

10.3 Specific Third Party Claim Indemnification

     In addition to any  liability  of an Obligor  under any other  provision of
this  Agreement,  the Obligors  jointly and severally  covenant to indemnify and
hold   harmless  the  Lender  and  its   directors,   officers,   employees  and
representatives  (collectively  the  "Indemnified  Parties" and  individually an
"Indemnified Party") from and against any and all actions, proceedings,  claims,
assessments in respect of required  withholding  losses,  damages,  liabilities,
expenses  and  obligations  of any kind that may be  incurred  by,  or  asserted
against, any of them by any third party,  including any Governmental  Authority,
as a result of, or in connection  with,  the entering into of this  Agreement or
the other Loan Documents or the transactions  therein  contemplated,  other than
any  claim  arising  from  the  gross  negligence  or  wilful  misconduct  of an
Indemnified Party.  Whenever any such claim arises, an Indemnified Party (if not
the  Lender)  shall  promptly  notify the Lender,  and the Lender  shall in turn
promptly  notify  the  Borrower,  of  the  claim  and,  when  known,  the  facts
constituting the basis for the claim, and if known, the amount or an estimate of
the amount of the claim.  The failure of an  Indemnified  Party to promptly give
notice of a claim shall not adversely  affect the Indemnified  Party's rights to
indemnity,  except to the extent such failure adversely affects the right of the

                                       38

<PAGE>

Borrower to assert any reasonable  defence to the claim.  An  Indemnified  Party
shall  not  settle  or  compromise  any  claim by a third  party for which it is
entitled to  indemnification  under this Section 10.3  without the prior written
consent of the Borrower (which consent shall not be unreasonably withheld).  The
Borrower,  at its  sole  cost and  expense,  may,  upon  written  notice  to the
applicable  Indemnified  Parties,  assume  the  defence of any such claim or any
legal  proceeding  resulting   therefrom,   with  counsel  satisfactory  to  the
applicable Indemnified Parties in their sole discretion,  acting reasonably, but
shall not settle or compromise any such claim or any legal proceeding  resulting
therefrom  without  the prior  written  consent  of the  applicable  Indemnified
Parties  (which  consent shall not be  unreasonably  withheld).  The  applicable
Indemnified  Parties shall be entitled to  participate  in (but not control) the
defence of any action,  with their own counsel and at their own expense.  If the
Borrower  does not  assume  the  defence  of any claim or  litigation  resulting
therefrom,  the applicable  Indemnified Parties may defend against that claim or
litigation using one set of counsel for those Indemnified Parties, in the manner
as it deems appropriate and at the expense of the Borrower,  including,  but not
limited  to,  settling  the  claim or  litigation,  after  giving  notice of the
proposed  settlement  to, and  receiving  the  consent of, the  Borrower  (which
consent shall not be unreasonably  withheld). In that case the Borrower shall be
entitled to participate in (but not control) the defence of the action, with its
own  counsel and at its own  expense.  The  defense  and  indemnity  obligations
contained  throughout  this  Agreement  shall  survive the  termination  of this
Agreement and repayment of the Obligations.

                   ARTICLE 11 - TAXES, CHANGE OF CIRCUMSTANCES

11.1     Change in Law

     (a) In the  event of any  change  after the date of this  Agreement  in any
         Applicable Law or in the  interpretation or application  thereof by any
         court or by any Governmental Authority which now or hereafter:

         (i) subjects the Lender to any Tax or changes the basis of taxation, or
         increases any existing Tax, on payments of principal, interest, fees or
         other  amounts  payable by any  Obligor  to the  Lender  under any Loan
         Document (except for Taxes on the overall net income of the Lender);

         (ii) imposes, modifies or deems applicable any reserve, special deposit
         or similar  requirements  against assets held by, or deposits in or for
         the  account  of or loans by or any other  acquisition  of funds by, an
         office of the Lender; or

         (iii)  imposes on the Lender or requires  there to be maintained by the
         Lender any  capital  adequacy or  additional  capital  requirements  in
         respect of any Loans  hereunder or any other  condition with respect to
         any Loan Document

         with the result of an increase  in the cost to, or a  reduction  in the
         amount of  principal,  interest or other amount  received or receivable
         by, or the  effective  return of, the Lender  under this  Agreement  in
         respect of making,  maintaining  or funding the Loan,  the Lender shall
         determine  that amount of money which shall  compensate  the Lender for
         such  increase  in cost or  reduction  in  income  (in  this  Agreement
         referred to as "Additional Compensation").

                                       39

<PAGE>

     (b) Upon the Lender  having  determined  that it is entitled to  Additional
         Compensation the Lender shall promptly notify the Borrower.  The Lender
         shall  provide to the Borrower a photocopy  of the relevant  Applicable
         Law,  and a  certificate  of a duly  authorized  officer  of the Lender
         setting forth the Additional  Compensation and the basis of calculation
         therefore,  which  shall  be  conclusive  evidence  of such  Additional
         Compensation in the absence of manifest  error.  The Borrower shall pay
         or shall cause the  applicable  Obligor to pay to the Lender within ten
         (10) Banking Days of the giving of such notice the Lender's  Additional
         Compensation  calculated to the date of such  notification.  The Lender
         shall be entitled to be paid such Additional  Compensation from time to
         time to the extent that the  provisions of this  Section 11.1  are then
         applicable,  notwithstanding  that the Lender has previously  been paid
         Additional  Compensation.  The  Lender  shall  endeavour  to limit  the
         incidence of any Additional  Compensation,  including  seeking recovery
         for the account of the applicable  Obligor, by appealing any assessment
         at the  expense  of the  applicable  Obligor  upon the  request  of the
         Borrower and will not seek Additional  Compensation from the applicable
         Obligor  except to the  extent it seeks  Additional  Compensation  from
         other Obligors, if any, similarly affected.

11.2 Illegality

     If,  after the date of this  Agreement,  the  adoption  of or change to any
Applicable Law, or any change in the  interpretation  or application  thereof by
any court or by any Governmental  Authority,  now or hereafter makes it unlawful
or  impossible  for the  Lender to make,  fund or  maintain  the Loan or to give
effect to its  obligations in respect of such a Loan, the Lender may, by written
notice to the  Borrower,  declare its  obligations  under this  Agreement  to be
terminated, whereupon the same shall forthwith terminate, and the Borrower shall
prepay within the time required by such Law (or at the end of such longer period
as the Lender at its  discretion has agreed) the principal of such Loan together
with accrued interest, any Additional Compensation that may be applicable to the
date of such payment and all costs,  losses and expenses  incurred by the Lender
by reason of the liquidation or  re-employment of deposits or other funds or for
any other reason  whatsoever  resulting  from the  repayment of such Loan or any
part  thereof . If any such change  shall only affect a portion of the  Lender's
obligations  under this Agreement which is, in the opinion of the Lender and the
Lender's Counsel in their sole discretion, acting reasonably, severable from the
remainder of this  Agreement,  so that the  remainder of this  Agreement  may be
continued  in full  force and  effect  without  otherwise  affecting  any of the
obligations of the Lender or the Obligors under this Agreement, the Lender shall
only declare its obligations under that portion so terminated.

                                       40

<PAGE>

11.3     Taxes

     All payments to be made to the Lender  pursuant to the Loan Documents shall
be made free and clear of,  and  without  reduction  for or on  account  of, any
present  or future  Taxes;  provided,  however,  if any Taxes  are  required  by
Applicable  Law or the  interpretation  or  application  thereof by any court or
Government Authority to be withheld from any interest or other amount payable to
the Lender under any Loan Document, the amount so payable to the Lender shall be
increased to the extent  necessary to yield to the Lender,  on a net basis after
payment of all Taxes  (including  all Taxes  imposed on any  additional  amounts
payable under this subsection),  interest or any such other amount payable under
such Loan Document at the rate or in the amount specified in such Loan Document.
Each  Obligor  shall be fully  liable and  responsible  for and shall,  promptly
following receipt of a request from the Lender,  pay to the Lender on its behalf
or on behalf of the other  Obligors,  any and all Taxes in the  nature of sales,
use,  and  goods  and  services  Taxes  payable  under the laws of Canada or any
Province  of  Canada,  or  payable  under  the  laws  of any  other  country  or
jurisdiction with respect to any and all goods and services made available under
the Loan Documents to any Obligor by the Lender.  Whenever any Taxes are payable
by an Obligor,  as promptly as possible  thereafter  that Obligor  shall send or
cause to be sent to the Lender, a certified copy of an original official receipt
showing  payment of such Taxes. If an Obligor fails to pay any Taxes when due or
if an Obligor fails to remit to the Lender the required  documentary evidence of
such  payment,  the  Borrower,  the Parent and Burgio shall  indemnify  and save
harmless the Lender from any Taxes or other  liabilities that may become payable
by the Lender or to which the Lender  may be  subjected  as a result of any such
failure.  A  certificate  of the  Lender as to the  amount of any such Taxes and
containing  reasonable details of the calculation of such Taxes shall be, absent
manifest error, prima facie evidence of the amount of such Taxes.

           ARTICLE 12 - SUCCESSORS AND ASSIGNS AND ADDITIONAL LENDERS

12.1 Successors and Assigns

     (a) The Loan  Documents  shall be binding  upon and enure to the benefit of
         the Lender, the Obligors and their successors and assigns,  except that
         no Obligor shall assign any rights or obligations  with respect to this
         Agreement or any of the other Loan Documents.

     (b) The  rights and  obligations  of the Lender  under this  Agreement  are
         assignable  and the Lender  shall be  entitled to assign its rights and
         obligations  hereunder,  all in accordance  with the provisions of this
         Section 12.1,  Section 12.2 and the other terms of this Agreement.  The
         Borrower  and  the  Parent  hereby  consent  to the  disclosure  of any
         Information to any potential assignee or participant  provided that the
         potential  assignee  or  participant  agrees  in  writing  to keep  the
         Information confidential.

                                       41

<PAGE>

12.2     Assignments

     (a) No  Guarantor or Borrower  may assign its rights or  obligations  under
         this  Agreement.  The  Lender  may  assign or  transfer  its rights and
         obligations under this Agreement to any Affiliate of the Lender without
         any  obligation  to obtain  any  consent of the  Borrower  or the other
         Obligors.  The Lender may assign its rights or  obligations  under this
         Agreement to any other Person with the written consent of the Borrower,
         such consent not to be unreasonably withheld or delayed.

     (b) Following  the  occurrence of an Event of Default or a Pending Event of
         Default that is continuing,  the prior written  consent of the Borrower
         to the  assignment  by the Lender of any of its rights and  obligations
         under this Agreement shall not be required.

                              ARTICLE 13 - GENERAL

13.1     Exchange and Confidentiality of Information

     (a) The  Borrower  and the Parent  agree that the  Lender may  provide  any
         assignee or  participant  pursuant to Article 12  with any  information
         concerning the financial condition of the Obligors.

     (b) Subject to  Section 13.1(a),  the Lender  acknowledges the confidential
         nature of the financial,  operational  and other  information  and data
         provided and to be provided to it by the  Obligors,  or any one of them
         pursuant to this  Agreement  (the  "Information")  and agree to use all
         reasonable efforts to prevent its disclosure provided, however, that:

         (i) it may  disclose  all or any  part of the  Information  if,  in its
         opinion,  such  disclosure is required in connection with any actual or
         threatened judicial, administrative or governmental proceeding; and

         (ii) it shall  incur no  liability  in  respect  of any  disclosure  of
         Information to any, or pursuant to the  requirements  of any,  judicial
         authority, law enforcement agency or taxation authority.

     (c) No  Guarantor  or the  Borrower  will  disclose  any aspect of the Loan
         including  the name of the Lender in any press  release or other public
         disclosure,  except as required  by law or  applicable  stock  exchange
         rules or  policies,  or as may be  approved  by the Lender in  writing,
         previously obtained.

     (d) Each  Guarantor and the Borrower  consents to the  collection,  use and
         disclosure  by Lender  and its  agents of any and all  personal  and/or
         proprietary  information regarding the Guarantor or the Borrower as may
         be  reasonably  necessary to fully  exercise  the  Lender's  rights and
         remedies contained in any Loan Document.

                                       42

<PAGE>

     (e) The  Borrower  and the Parent  agree that the  Lender may  provide  any
         assignee or  participant  pursuant to Article 12  with any  information
         concerning the financial condition of the Borrower and the Parent.

     13.2 Notices

     (a) Any notice or other  communication  required or  permitted  to be given
         hereunder  shall be in  writing  and  shall  be  delivered  in  person,
         transmitted  by  facsimile  or  similar  means of  recorded  electronic
         communication or sent by registered mail, charges prepaid, addressed as
         follows:

                 (i)          if to the Lender:

                              Caithness Financial Services Limited
                              141 Adelaide Street West, Suite 500
                              Toronto, ON
                              Canada M5H 3L5

                              Attention:        President
                              Fax No.: (416) 363-0456

                 (ii)         if to the Borrower:

                              Loretta Baking Mix Products Ltd.
                              2405 Lucknow Drive
                              Mississauga, Ontario
                              Canada, L5S 1H9

                              Attention:        President
                              Fax No.:  (905) 678-0733

                 (iii)        if to the Parent: - (Please provide)

                              Loretta Food Group Inc.
                              2405 Lucknow Drive
                              Mississauga, Ontario
                              Canada, L5S 1H9

                              Attention:        President
                              Fax No.:          (905) 678-0733

                                       43

<PAGE>

                 (iv)         if to Burgio:

                              Al Burgio
                              c/o Loretta Food Group Inc.
                              2405 Lucknow Drive
                              Mississauga, Ontario
                              Canada, L5S 1H9

                              Fax No.:  (905) 678-0733

     (b) Any such  notice  or other  communication  shall be deemed to have been
         given and received on the day on which it was delivered or  transmitted
         (or, if such day is not a Banking  Day, on the next  following  Banking
         Day) or, if mailed,  on the third  Banking  Day  following  the date of
         mailing;  provided,  however,  that if at the time of mailing or within
         three Banking Days  thereafter  there is or occurs a labour  dispute or
         other event that might  reasonably  be expected to disrupt the delivery
         of documents by mail, any notice or other communication hereunder shall
         be  delivered   or   transmitted   by  means  of  recorded   electronic
         communication as aforesaid.

     (c) Any Party may at any time change its  address for service  from time to
         time by giving  notice to the other  Parties  in  accordance  with this
         Section 13.1(c).

13.3 Governing Law

     This  Agreement  shall be governed by and construed in accordance  with the
laws of the  State of  Michigan  and the laws of the  United  States  applicable
therein,  without  prejudice  to or  limitation  of any other rights or remedies
available under the laws of any jurisdiction  where Property or assets of any of
the Obligors may be found.

13.4 Consent to Jurisdiction

     (a) The parties hereto irrevocably submit to the non-exclusive jurisdiction
         of the courts of the State of  Michigan  and hereby  irrevocably  agree
         that all claims in respect of such  action or  proceeding  may be heard
         and determined in such court. The Obligors hereby irrevocably waive, to
         the  fullest  extent  it may  effectively  do  so,  the  defence  of an
         inconvenient forum to the maintenance of such action or proceeding.

     (b) The parties hereto hereby irrevocably consent to the service of any and
         all  process  in such  action or  proceeding  by the  delivery  of such
         process  to  either  Obligor  at the  Borrower's  address  provided  in
         accordance with Section 13.1(c).

                                       44

<PAGE>


13.5 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.

13.6 Entire Agreement

     This Agreement,  including all its attached Schedules,  along with the Loan
Documents,  constitutes the entire agreement between the Parties with respect to
the subject matter hereof and supersedes all prior  agreements,  understandings,
negotiations and discussions,  whether written or oral. There are no conditions,
covenants, agreements, representations,  warranties or other provisions, express
or implied, collateral,  statutory or otherwise,  relating to the subject matter
hereof expect as herein  provided.  No reliance is placed by any Party hereto on
any warranty,  representation,  opinion, advice or assertion of fact made by any
Party hereto or its directors, officers, employees or agents, to any other Party
hereto or its directors, officers, employees or agents except to the extent that
the same has been reduced to writing and included in this Agreement.

13.7 Further Assurances

     Each of the Obligors and the Lender shall  promptly  cure any default by it
in the execution and delivery of this Agreement, the Loan Documents or any other
agreements  provided for in this Agreement to which it is a party. The Borrower,
at its own expense,  shall or shall cause the other Obligors, as applicable,  to
promptly  execute  and deliver to the Lender,  upon  request by the Lender,  all
further  documents,   agreements,  opinions,  certificates  and  instruments  in
compliance  with,  or  accomplishment  of the  covenants  and  agreements of the
Obligors  under this  Agreement  or the other Loan  Documents,  or more fully to
state the  obligations  of such Obligor as set forth in this  Agreement or other
Loan Documents or to make any recording,  file any notice or obtain any consent,
all as may be  reasonably  necessary  or  appropriate  in  connection  with this
Agreement or the other Loan Document from time to time.

13.8 Waiver of Jury Trial

     THE PARTIES HERETO HEREBY KNOWINGLY,  VOLUNTARILY,  AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY  LITIGATION  BASED
ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER
CREDIT  DOCUMENT,  OR ANY  COURSE  OF  CONDUCT,  COURSE OF  DEALING,  STATEMENTS
(WHETHER  ORAL OR  WRITTEN)  OR ACTIONS OF THE  LENDER OR OF THE  OBLIGORS.  THE
PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EVERY OTHER PROVISION OF EACH OTHER CREDIT
DOCUMENT  TO  WHICH  IT IS A  PARTY)  AND  THAT  THIS  PROVISION  IS A  MATERIAL
INDUCEMENT  FOR THE LENDER  ENTERING  INTO THIS  AGREEMENT AND EACH OTHER CREDIT
DOCUMENT.

                                       45

<PAGE>

13.9 Non-Merger

     The representations,  warranties and covenants contained in this Agreement,
including any schedule hereto, and in any other Loan Document to be executed and
delivered  pursuant to this  Agreement or pursuant to such other Loan  Documents
shall  not  merge  on  closing  or  at  the  time  of  the  Loan  hereunder  and
notwithstanding such closing or the Loan, and notwithstanding any investigations
made by or on  behalf of the  Lender,  shall,  subject  to  Section 6.2  hereto,
continue in full force and effect.

13.10 Time of the Essence

     Time shall be of the essence of this Agreement.

13.11 Counterparts

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed  to be an  original  and all of which  taken  together  shall be
deemed to constitute one and the same instrument,  and it shall not be necessary
in making  proof of this  Agreement to produce or account for more than one such
counterpart.

13.12 Amendments and Waivers

     No amendment,  modification of any provision of this Agreement or any other
Loan  Document,  or consent by the Lender to any departure from any provision of
this Agreement or other Loan Document,  is in any way effective  unless it is in
writing  and signed by the Lender,  the  Borrower,  Burgio and the  Parent.  Any
waiver by the Lender of the strict  observance,  performance or compliance  with
any term, covenant, condition or other matter contained in this Agreement or any
other Loan Document and any indulgence granted, by the Lender shall be effective
only if in writing and in the specific instance and for the purpose for which it
was given and shall be deemed not to be a waiver of any rights and  remedies  of
the  Lender  under  this  Agreement  or any other Loan  Document  or  instrument
executed  pursuant to this  Agreement as a result of any other default or breach
under this Agreement or any other Loan Document.

                                       46

<PAGE>

     IN WITNESS WHEREOF the Parties hereto have executed this Agreement.

                                       LORETTA BAKING MIX PRODUCTS LTD.,
                                       a Michigan corporation
                                       Per:
                                       -----------------------------------------
                                       Title President
                                       Per:
                                       -----------------------------------------
                                       Title


                                       LORETTA FOOD GROUP INC.
                                       Per:
                                       -----------------------------------------
                                       Title
                                       Per:
                                       -----------------------------------------
                                       Title

                                       CAITHNESS FINANCIAL SERVICES LIMITED
                                       Per:
                                       -----------------------------------------
                                       Title
                                       Per:
                                       -----------------------------------------
                                       Title
--------------
Signature
                         -------------------------------------
                         AL BURGIO, in his individual capacity

Print Name


Address:

                                       47

<PAGE>

                                SCHEDULE 1.1.1(a)

                                    EQUIPMENT



                              (Please see attached)

<PAGE>

                                SCHEDULE 1.1.1(b)

                                    INVENTORY

                              (Please see attached)


<PAGE>

                                SCHEDULE 1.1.1(c)

                               ACCOUNTS RECEIVABLE

                              (Please see attached)


<PAGE>

                                 SCHEDULE 1.1.49

                             PERMITTED ENCUMBRANCES

NONE.

<PAGE>

                                 SCHEDULE 6.1.9

                                   LITIGATION

NONE.

<PAGE>

                                  SCHEDULE 2.1

                         SENIOR SECURED PROMISSORY NOTE

                              (Please see attached)

<PAGE>

                                  SCHEDULE 2.2

                            ASSET PURCHASE AGREEMENT

                              (Please see attached)

<PAGE>

                                 SCHEDULE 6.1.11

                          DESCRIPTION OF REAL PROPERTY

                              (Please see attached)

<PAGE>

                                 SCHEDULE 6.1.12

                               INSURANCE POLICIES

                 (Please see attached Certificate of Insurance)

<PAGE>

                                 SCHEDULE6.1.15

                             RELEVANT JURISDICTIONS

Borrower

1.       State of Michigan

2.       State of Delaware

<PAGE>

                                 SCHEDULE 6.1.16

                         MATERIAL CONTRACTS AND LICENSES

NONE.

<PAGE>