Exhibit 10.3 - Continuing and Unlimited Guaranty Agreement


    Exhibit
      10.3

     

     

    

     

    CONTINUING
      AND UNLIMITED GUARANTY AGREEMENT

                                                                             

    THIS
      CONTINUING AND UNLIMITED GUARANTY AGREEMENT
      (this "Guaranty") made as of January 12, 2007 by and between LSI
      INDUSTRIES INC., a corporation organized and existing under the laws of
      the State of Ohio with its primary offices at 10000 Alliance Road,
      Cincinnati, Ohio 45242 (the "Guarantor") and FIFTH THIRD BANK,
      an Ohio banking corporation with its primary offices located at 38 Fountain
      Square Plaza, Cincinnati, Ohio 45263 ("Beneficiary").

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      Beneficiary has agreed to extend credit
      and financial accommodations to LSI Saco Technologies Inc., a corporation
      incorporated under the law of Canada with its primary offices located at 7801
      TransCanada Highway, Montreal, Quebec H4S1L3 (the "Borrower"), pursuant to
      that
      certain promissory note, dated as of January 12, 2007 in the maximum principal
      amount of $7,000,000.00 and made payable by the Borrower to the Beneficiary(the
      "Note") and all agreements, instruments and documents executed or delivered
      in
      connection with any ofthe foregoing or otherwise related thereto (together
      with
      any amendments, modifications, or restatements thereof, the "Loan Documents");
      and

     

    WHEREAS,
      Borrower is a wholly owned subsidiary of
      the Guarantor and, as such, shall be benefited directly by the transaction
      contemplated by the Loan Documents, and shall execute this Guaranty in order
      to
      induce Beneficiary to enter into such transaction.

     

    NOW,
      THEREFORE, in consideration of the foregoing
      premises and other good and valuable consideration, the receipt and sufficiency
      of which are hereby acknowledged, Guarantor hereby guarantees, promises and
      undertakes as follows:

     

    1.
                 
GUARANTY.

     

    (a)          
      Guarantor hereby unconditionally, absolutely and irrevocably guarantees to
      Beneficiary the full and prompt payment and performance when due (whether at
      maturity by acceleration or otherwise) of any and all loans, advances,
      indebtedness and each and every other obligation or liability of Borrower owed
      to Beneficiary and any affiliate of Fifth Third Bancorp arising under the Loan
      Documents,  of every kind and description, whether now existing or
      hereafter arising and whether direct or indirect, absolute or contingent, due
      or
      to become due, liquidated or unliquidated, matured or unmatured, participated
      in
      whole or in part, whether or not secured by additional collateral and all
      agreements, instruments and documents evidencing, securing or otherwise executed
      in connection with any of the foregoing, together with any amendments,
      modifications, and restatements thereof, and all expenses and attorneys' fees
      reasonably incurred, including such fees and expenses incurred in collection
      or
      enforcement of the obligations of other guarantors, if any,or other sums
      disbursed by Beneficiary or any affiliate of Fifth Third Bancorp under this
      Guaranty or any other document, instrument or agreement related to any of the
      foregoing (collectively, the "Obligations") regardless of any defense, right
      of
      set-off or claims which Borrower or Guarantor may have against
      Beneficiary.

     

    (b)          
      This Guaranty is an absolute, present andcontinuing guaranty of payment, and
      not
      merely of collection, that shall remain in full force and effect until expressly
      terminated in writing by Beneficiary, notwithstanding the fact that no
      Obligations may be outstanding from time to time. Such termination by
      Beneficiary shall be applicable only to transactions having their inception
      after the effective date thereof, and shall not affect the enforceability of
      this Guaranty with regard to any Obligations arising out of transactions having
      their inception prior to such effective date, even if such Obligations shall
      have been modified, renewed, compromised, extended, otherwise amended or
      performed by Beneficiary subsequent to such termination. In the absence of
      any
      termination of this Guaranty as provided above, Guarantor agrees that
      Guarantor's obligations hereunder shall not be deemed discharged or satisfied
      until the Obligations are fully paid and performed, and no such payments or
      performance with regard to the Obligations is subject to any right on the part
      of any person whomsoever, including but not limited to any trustee in
      bankruptcy, to recover any of such payments. If any such payments are so set
      aside or settled without

     

     

    
       

      
        
        

        
          

        

      

      
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    litigation,
      all of
      which is within Beneficiary's discretion, Guarantor shall be liable for the
      full
      amount Beneficiary is required to repay, plus costs, interest, reasonable
      attorneys' fees and any and all expenses that Beneficiary reasonably paid or
      incurred in connection therewith, including such fees and expenses incurred
      in
      collection or enforcement of the obligations of other guarantors, if any. A
      successor of Borrower, including Borrower in its capacity as debtor in a
      bankruptcy reorganization case, shall not be considered to be a different person
      than Borrower; and this Guaranty shall apply to all Obligations incurred by
      such
      successor.

    (c)          
      Guarantor agrees that Guarantor is directly and primarily liable to Beneficiary
      and that the Obligations hereunder are independent of the Obligations of
      Borrower, or of any other guarantor.  The liability of Guarantor hereunder
      shall survive discharge or compromise of any Obligation of Borrower in
      bankruptcy or otherwise. Beneficiary shall not be required to prosecute or
      seek
      to enforce any remedies against Borrower or any other party liable to
      Beneficiary on account of the Obligations, or to seek to enforce or resort
      to
      any remedies with respect to any collateral granted to Beneficiary by Borrower
      or any other party on account of the Obligations, as a condition to payment
      or
      performance by Guarantor under this Guaranty. 

     

    (d)          
      Beneficiary may, without notice or demand and without affecting its rights
      hereunder, from time to time: (i) renew, extend, accelerate or otherwise change
      the amount of, the time for payment of, or other terms relating to, any or
      all
      of the Obligations, or otherwise modify, amend or change the terms of the Loan
      Documents or any other document or instrument evidencing, securing or otherwise
      relating to the Obligations,(ii) take and hold collateral for the payment of
      the
      Obligations guaranteed hereby, and exchange, enforce, waive, and release any
      such collateral, and apply such collateral and direct the order or manner of
      sale thereof as Beneficiary in its discretion may determine. Accordingly,
      Guarantor hereby waives notice of any and all of the foregoing.

     

    (e)          
      Guarantor hereby waives all defenses, counterclaims and off-sets of any kind
      or
      nature, whether legal or equitable, that may arise: (i) directly or indirectly
      from the present or future lack of validity, binding effect or enforceability
      of
      the Loan Documents or any other document or instrument evidencing, securing
      or
      otherwise relating to the Obligations, (ii) from Beneficiary's impairment of
      any
      collateral, including the failure to record or perfect the Beneficiary's
      interest in the collateral, or (iii) by reason of any claim or defense based
      upon an election of remedies by Beneficiary in the event such election may,
      in
      any manner, impair, affect, reduce, release, destroy or extinguish any right
      of
      contribution or reimbursement of Guarantor, or any other rights of the Guarantor
      to proceed against any other guarantor, or against any other person or any
      collateral. 

     

                           
      (f)            Guarantor
      hereby waives all presentments, demands for performance or payment, notices
      of
      nonperformance, protests, notices of protest, notices of dishonor, notices
      of
      default or nonpayment, notice of acceptance of this Guaranty, and notices of
      the
      existence, creation, or incurring of new or additional Obligations, and all
      other notices or formalities to which Guarantor may be entitled, and Guarantor
      hereby waives all suretyship defenses, including but not limited to all defenses
      set forth in the Uniform Commercial Code, as revised from time to time (the
      "UCC") to the full extent such a waiver is permitted thereby.

     

    2.            
      REPRESENTATIONS, WARRANTIES AND COVENANTS.  Guarantor
      hereby represents, warrants and covenants as follows:

     

    (a)          
      Guarantor is duly organized, validly existing and in good standing under the
      laws of the state of its organization, has the power and authority to carry
      on
      its business and to enter into and perform this Guaranty, and is qualified
      and
      licensed to do business in each jurisdiction in which such qualification or
      licensing is required.

     

    (b)          
The
      execution, delivery and performance by Guarantor of this Guaranty have been
      duly
      authorized by all necessary company action, and shall not violate any provision
      of law or regulation applicable to Guarantor, or the articles of organization
      or
      operating agreement of Guarantor, or any writ or decree of any court or
      governmental instrumentality, or any instrument or agreement to which Guarantor
      is a party or by which Guarantor may be bound; this Guaranty is a legal, valid
      and binding obligation of said Guarantor, enforceable in accordance with its
      terms; and there is no action or proceeding before any court or governmental
      body agency now pending that may materially adversely affect the condition
      (financial or otherwise) of Guarantor.  

     

    3.            
      AFFIRMATIVE COVENANTS.  Guarantorcovenants with, and
      represents and warrants to, Beneficiary that, from and after the execution
      date
      of the Loan Documents until the Obligations are paid and satisfied in
      full:

     

    (a)          
      Access to Business Information.  Guarantorshall maintain
      proper books of accounts and records and enter therein complete and accurate
      entries and records of all of its transactions in accordance with reasonable
      cash accounting methods consistently applied in accordance with past
      practicesand give representatives

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
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    of
      Beneficiary access thereto at all reasonable times, including permission to:
      (a)
      examine, copy and make abstracts from any such books and records and such other
      information which might be helpful to Beneficiary in evaluating the status
      of
      the Obligations as it may reasonably request from time to time, and (b)
      communicate directly with any of Guarantor'sofficers, employees, agents,
      accountants or other financial advisors with respect to the business, financial
      conditions and other affairs of the Guarantor.

     

    (b)          
      Financial Statements. Guarantor shall maintain a standard and
      modern system for accounting and shall furnish to Beneficiary:

     

    (i)           
      Promptly following Beneficiay’s request therefor, copies of Guarantor's
      financial statements in a form reasonably acceptable to Beneficiary, certified
      as complete and correct, subject to changes resulting from year-end adjustments,
      by the principal financial officer of Guarantor;

     

    (ii)          
      With the statements submitted above, a certificate signed by the principal
      financial officer of Guarantor stating he is familiar with all documents
      relating to Beneficiary and that no Event of Default specified herein or in
      the
      Loan Documents, nor any event which upon notice or lapse of time, or both would
      constitute such an Event of Default, has occurred, or if any such condition
      or
      event existed or exists, specifying it and describing what action Guarantorhas
      taken or proposes to take with respect thereto;

     

    All
      of the statements referred to above shall be in
      conformance with reasonable accrual accounting methods consistently applied
      in
      accordance with past practicesand give representatives of Beneficiary access
      thereto at all reasonable times, including permission to examine, copy and
      make
      abstracts from any such books and records and such other information which
      might
      be helpful to Beneficiary in evaluating the status of the loans as it may
      reasonably request from time to time.

     

    (c)          
      Taxes. Guarantor shall pay when due all taxes, assessments and
      other governmental charges imposed upon it or its assets, franchises, business,
      income or profits before any penalty or interest accrues thereon, and all claims
      (including, without limitation, claims for labor, services, materials and
      supplies) for sums which by law might be a lien or charge upon any of its
      assets, provided that (unless any material item or property would be lost,
      forfeited or materially damaged as a result thereof) no such charge or claim
      need be paid if it is being diligently contested in good faith, if
      Guarantorestablishes an adequate reserve or other appropriate provision required
      by generally accepted accounting principles and deposits with Beneficiary cash
      or bond in an amount acceptable to Beneficiary.

     

    (d)          
      Existence; Business. Guarantor shall (a) maintain its existence
      as a corporation, and (b) continue to engage primarily in business of the same
      general character as that now conducted, 

     

    (e)          
      Compliance with Laws.  Guarantor shall comply with all
      federal, state and local laws, regulations and orders applicable to it or its
      assets including but not limited to all Environmental Laws, in all respects
      material to its business, assets or prospects Guarantorshall obtain and maintain
      any and all licenses, permits, franchises, governmental authorizations, patents,
      trademarks, copyrights or other rights necessary for the ownership of its
      properties and the advantageous conduct of its business and as may be required
      from time to time by applicable law.

     

    (f)           
      Notice of Default. Guarantor shall, within
ten
      (10)
      days of its knowledge thereof, give
      written notice to Beneficiary of: (a) the occurrence of any event or the
      existence of any condition which would be, after notice or lapse of applicable
      grace periods, an Event of Default, and (b) the occurrence of any event or
      the
      existence of any condition which would prohibit or limit the ability of
      Guarantorto reaffirm any of the representations or warranties, or to perform
      any
      of the covenants, set forth in the Agreementor herein.

     

    (g)          
      Costs. Guarantor shall reimburse Beneficiary for any and all
      fees, costs and expenses including, without limitation, reasonable attorneys'
      fees, other professionals' fees, appraisal fees, , expert fees, court costs,
      litigation and other expenses (collectively, the "Costs") incurred or paid
      by
      Beneficiary or any of its officers, employees or agents in connection with:
      (a)
      the preparation, negotiation, procurement, review, administration or enforcement
      of the Obligation or any instrument, agreement, document, policy, consent,
      waiver, subordination, release of lien, termination statement, satisfaction
      of
      mortgage, financing statement or other lien search, recording or filing related
      thereto (or any amendment, modification or extension to, or any replacement
      or
      substitution for, any of the foregoing), whether or not any particular portion
      of the transactions contemplated during such negotiations is ultimately
      consummated, and (b) the defense, preservation and protection of Beneficiary’s
      rights and remedies

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
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    thereunder,
      including without limitation, its security interest in the Collateral or any
      other property pledged to secure the Obligation, whether incurred in bankruptcy,
      insolvency, foreclosure or other litigation or proceedings or otherwise. The
      Costs shall be due and payable upon demand by Beneficiary. If Guarantor fails
      to
      pay the Costs when upon such demand, Beneficiary is entitled to disburse such
      sums as Obligations. Thereafter, the Costs shall bear interest from the date
      incurred or disbursed at the highest rate set forth in the Note(s). This
      provision shall survive the termination of this Agreement and/or the repayment
      of any amounts due or the performance of any
      Obligation. 

            
      (h)           Other Amounts
      Deemed Loans. If Borrower fails to pay any tax, assessment,
      governmental charge or levy or to maintain insurance within the time permitted
      or required by this Agreement, or to discharge any Lien prohibited hereby,
      or to
      comply with any other Obligation, Lender may, but shall not be obligated to,
      pay, satisfy, discharge or bond the same for the account of Borrower, and to
      the
      extent permitted by law and at the option of Lender, all monies so paid by
      Lender on behalf of Borrower shall be deemed Obligations.

     

    (i)           
      Further Assurances. Borrower shall execute, acknowledge and
      deliver, or cause to be executed, acknowledged or delivered, any and all such
      further assurances and other agreements or instruments, and take or cause to
      be
      taken all such other action, as shall be reasonably necessary from time to
      time
      to give full effect to the Loan Documents and the transactions contemplated
      thereby.

     

    4.            
      EVENTS OF DEFAULT. Any of the following occurrences shall
      constitute an "Event of Default" under this Guaranty:

     

    (a)          
An
      Event of Default occurs under the terms of the Loan Documents or any other
      document or instrument evidencing, securing or otherwise relating to the
      Obligations, as "Event of Default" shall be defined therein.

     

    (b)          
      Demand is made under any of the Obligations which have a demand feature and
      remains unpaid for a period of thirty (30) days from the date of such
      demand.

     

    (c)          
      Guarantor shall fail to observe or perform any covenant, condition, or agreement
      under this Guaranty for a period of thirty (30) days from the date of such
      breach, or any representation or warranty of Guarantor set forth in this
      Guaranty shall be materially inaccurate or misleading when made or
      delivered.

     

    (d)          
      The legal
      dissolutionof Guarantor,or of any endorser or other
      guarantor of the
      Obligations, or the merger or consolidation of any of the foregoing with a
      third
      party, or the lease, sale or other conveyance of a material part of the assets
      or business of any of the foregoing to a third party outside the ordinary course
      of its business, or the lease, purchase or other acquisition of a material
      part
      of the assets or business of a third party by any of the foregoing.

     

    (e)          
      The default by Guarantor under the terms of any indebtedness of Guarantor now
      or
      hereafter existing, which default has not been cured within any time period
      permitted pursuant to the terms and conditions of such indebtedness or the
      occurrence of an event which gives any creditor the right to accelerate the
      maturity of any such indebtedness.

     

    (f)           
      The commencement by Guarantor of a voluntary case under any applicable
      bankruptcy, insolvency or other similar law now or hereafter in effect; or
      the
      entry of a decree or order for relief in respect of Guarantor in a case under
      any such law or appointing a receiver, liquidator, assignee, custodian, trustee,
      sequestrator (or other similar official) of Guarantor or for any substantial
      part of Guarantor's property, or ordering the wind-up or liquidation of
      Guarantor's affairs; or the filing and pendency for 30 days without dismissal
      of
      a petition initiating an involuntary case under any such bankruptcy, insolvency
      or similar law; or the making by Guarantor of any general assignment for the
      benefit of creditors; or the failure of Guarantor generally to pay Guarantor's
      debts as such debts become due; or the taking of action by Guarantor in
      furtherance of any of the foregoing.

     

    (g)          
      The revocation or attempted revocation of this Guaranty by Guarantor before
      the
      termination of this Guaranty in accordance with its terms, or the assignment
      or
      attempted assignment of this Guaranty by Guarantor.

     

    5.            
      REMEDIES.

     

    (a)          
      Whenever any Event of Default as defined herein shall have happened,
      Beneficiary, in its sole discretion, may take any remedial action permitted
      by
      law or in equity or by the Loan Documents or any other document or instrument
      evidencing, securing or otherwise relating to the Obligations, including
      demanding payment in full of all sums guaranteed hereby, plus any accrued
      interest or other expenses.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
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    (b)          
If
      Beneficiary should employ attorneys or incur other expenses for the enforcement
      of this Guaranty, Guarantor, on demand therefor, shall reimburse the reasonable
      fees of such attorneys and such other expenses to the extent permitted by
      law.

     

    (c)          
No
      remedy set forth herein is exclusive of any other available remedy or remedies,
      but each is cumulative and in addition to every other remedy given under this
      Guaranty or now or hereafter existing at law or in equity or by statute. No
      delay or omission on the part of Beneficiary to exercise any right or remedy
      shall be construed to be a waiver thereof, but any such right or remedy may
      be
      exercised from time to time and as often as may be deemed expedient thereby,
      and
      a waiver on any one occasion shall be limited to that particular
      occasion.

     

    6.            
      FINANCIAL CONDITION OF BORROWER. Guarantor is presently informed
      of the financial condition of  Borrower and of all other circumstances that
      a diligent inquiry would reveal and which would bear upon the risk of nonpayment
      of any of the Obligations. Guarantor hereby covenants that Guarantor shall
      continue to keep informed of such matters, and hereby waives Guarantor's right,
      if any, to require Beneficiary to disclose any present or future information
      concerning such matters including, but not limited to, the release of or
      revocation by any other guarantor.

     

    7.            
      NOTICES. Any notices under or pursuant to this Guaranty shall be
      deemed duly sent when delivered in hand or when mailed by registered or
      certified mail, return receipt requested, addressed as set forth on the first
      page hereof.  Either party may change such address by sending notice of the
      change to the other party.

     

    8.            
      MISCELLANEOUS.

     

    (a)          
      This Guaranty may be executed by the parties hereto in separate counterparts,
      each of which when so executed and delivered shall be an original, but all
      such
      counterparts shall together constitute but one and the same
      instrument.

     

    (b)          
      This Guaranty is the complete agreement of the parties hereto and supersedes
      all
      previous understandings and agreements relating to the subject matter hereof.
      Neither this Guaranty nor any of the terms hereof may be terminated, amended,
      supplemented, waived or modified orally, but only by an instrument in writing
      signed by the party against whom enforcement of the termination, amendment,
      supplement, waiver or modification is sought.

     

    (c)          
As
      the context herein requires, the singular shall include the plural and one
      gender shall include one or both other genders.

     

    (d)          
      This Guaranty shall inure to the benefit of Beneficiary's successors and assigns
      and shall be binding upon the heirs, executors, administrators and successors
      of
      Guarantor. This Guaranty is not assignable by Guarantor.

     

    (e)          
If
      any provision of this Guaranty or the application thereof to any person or
      circumstance is held invalid, the remainder of this Guaranty and the application
      thereof to other persons or circumstances shall not be affected
      thereby.

     

                           
      (f)            This
      Guaranty shall be governed by and construed in accordance with the law of the
      State of Ohio.  Guarantor agrees that the state and federal courts for the
      County in which the Beneficiary is located or any other court in which
      Beneficiary initiates proceedings have exclusive jurisdiction over all matters
      arising out of this Guaranty.

     

    (g)          
      GUARANTOR AND BENEFICIARY HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS
      ARISING IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS RELATED
      THERETO.

     

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      IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed as of
      the
      date first above written.

     

    WITNESS/ATTEST:                                                             
      GUARANTOR:

     

                                                                                                   
      LSI INDUSTRIES INC.

     

     

    By:   /s/James
      P. Sferra  
                                                   
By:  /s/Ronald S.
      Stowell                               


    Name:    James
      P.
      Sferra                                                   
Name: Ronald S. Stowell

    Title:       Secretary        
                                                            
Title: Vice President, Chief Financial Officer

        
                                         
andTreasurer

     

     

    Accepted
      this 12th
      day of January, 2007

     

                                                                                                   
      BENEFICIARY:

     

                                                                                                   
      FIFTH THIRD BANK

     

                                                                                                   
      By:          
    /s/Jeremiah A.
      Hynes            


                                                                                                   
      Name:    Jeremiah A. Hynes

                                                                                                   
      Title:       Vice President and Principal
      Officer