Document:

Exhibit 10.2 Loan Agreement

    

      Exhibit
        10.2

       

       

      

      

      Canadian
        Branch

      20
        Bay Street, 12th
        Floor

      Toronto,
        Ontario

      M5J
        2N8 Canada

      

      

      January
        12, 2007

       

      Private
        and Confidential

       

      LSI
        Saco Technologies Inc.

      7809
        route Transcanadienne

      Saint
        - Laurent, Quebec

      H4S
        1L3

       

      Attention: President

       

      Dear
        Sirs:

       

      Fifth
        Third Bank (the "Bank")
        is
        pleased to offer, subject to the terms and conditions set out in this Agreement,
        the credit facility described below (the "Credit
        Facility").

       

      1.  Standard
        Definitions, Terms and Conditions:
        Schedule
        1
        to this
        Agreement sets out the standard definitions, terms and conditions ("Standard
        Terms and Conditions")
        which
        apply to this Credit Facility. The Standard Terms and Conditions are
        incorporated into and form part of this Agreement unless this Agreement
        specifically states that one or more of the Standard Terms and Conditions
        do not
        apply or are modified.

       

      2.  Borrower: 
         LSI
        Saco Technologies Inc. (the "Borrower").

       

      3.  Credit
        Facility: 

       

      
        	 	
                (a)

              	
                Amount
                  and Type: The
                  Bank makes a revolving demand facility in a principal amount of
                  up to
                  US$7,000,000 or the Canadian Dollar Equivalent amount thereof in
                  Canadian
                  Dollars (the "Maximum
                  Amount")
                  available to the Borrower by way of (i) US Base Rate Loans (in
                  US Dollars
                  only), (ii) Libor Loans (in US Dollars only), (iii) Canadian Prime
                  Loans
                  (in Canadian Dollars only), and (iv) FRT Loans (in Canadian Dollars
                  only).
                  No more then five (5) separate Libor Loans or FRT Loans may be
                  outstanding
                  at any one time.

              

      

       

      
        	 	
                (b)

              	
                Purpose:
                  The purpose of this Credit Facility is to finance the ongoing working
                  capital requirements of the
                  Borrower.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -2-

        

      

      
        	 	
                (c)

              	
                Availability:
                  This
                  Credit Facility is made available at the sole discretion of the
                  Bank and
                  the Bank may cancel or restrict availability of any unutilized
                  portion of
                  this Credit Facility at any time and from time to time without
                  notice or
                  demand.

              

      

       

      
        	 	
                (d)

              	
                Interest:
                  Advances under this Credit Facility shall bear interest at the
                  rates and
                  in respect of the particular types of Advances as set out in the
                  pricing
                  grid below. For greater certainty, the pricing set out below is
                  to be
                  adjusted quarterly based upon the rolling four quarter calculation
                  of the
                  consolidated Total Fund Indebtedness to EBITDA ratio of LSI Industries
                  Inc. (the “Guarantor”)
                  as defined and calculated from time to time in accordance with
                  the credit
                  agreement dated March 30, 2001 by and among LSI Industries Inc.,
                  as
                  borrower, the lenders described therein and PNC Bank, National
                  Association
                  as the Administrative Agent and the Syndication Agent (as the same
                  may be
                  amended, varied, supplemented, restated, renewed or replaced from
                  time to
                  time, (the “US
                  Credit Agreement”))

              

      

       

      
        
          	 	
                   

                  Total
                    Funded Indebtedness to EBITDA

                	
                   

                  Canadian
                    Prime Rate plus

                	
                   

                  US
                    Base Rate 

                  less

                	
                  LIBOR
                    &/or FTB Fixed Rate 

                  plus

                   

                
	 	
                  <
                    1.00

                	
                  0
                    bps

                	
                  50
                    bps

                	
                  100
                    bps

                
	
                   

                	
                  >
                    1.00x<1.50x

                	
                  25
                    bps

                	
                  25
                    bps

                	
                  150
                    bps

                
	
                   

                	
                  >
                    1.50x

                	
                  50
                    bps

                	
                  0
                    bps

                	
                  175
                    bps

                

        

      

      

       

      
        	 	
                (e)

              	
                Repayment:
                  Notwithstanding compliance with the covenants, representations,
                  warranties
                  and all other terms and conditions of this Agreement and all other
                  Documents, and regardless of the maturities of any outstanding
                  instruments
                  or contracts, if any, Advances under this Credit Facility are repayable
                  on
                  demand and the Bank may terminate this Credit Facility at any time
                  and
                  from time to time, without notice or
                  demand.

              

      

       

      
        	 	
                (f)

              	
                Repayment
                  of Outstanding Amounts. Upon
                  demand or termination, the Borrower shall pay to the Bank all Advances
                  and
                  all other obligations outstanding under the Credit Facility and
                  the
                  Documents.

              

      

       

      
        	 	
                (g)

              	
                Bank
                  Accounts.
                  The Borrower shall establish (i) a current account with the Bank
                  for the
                  conduct of the Borrower’s day to day banking business in Canadian Dollars
                  (the “Canadian
                  Account”)
                  and (ii) a current account with the Bank for the conduct of the
                  Borrower’s
                  day to day banking business in US Dollars (the “US
                  Account”).
                  If the balance in either of the Canadian Account or the US Account,
                  as
                  applicable:

              

      

       

      
        	 	
                (i)

              	
                is
                  a credit, the Bank may apply, at any time in its discretion, the
                  amount of
                  such credit or part thereof, rounded as applicable to the nearest
                  Cdn$1,000

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -3-

        

      

      
        	 	 	
                or
                  US$1,000, as a repayment of Advances outstanding in the relevant
                  currency
                  under the Credit Facility, or

              

      

       

      
        	 	
                (ii)

              	
                is
                  a debit, the Bank may, subject to availability, make available
                  an Advance
                  by way of Canadian Prime Loan or US Base Rate Loan, as applicable,
                  under
                  the Credit Facility in an amount rounded as applicable to the nearest
                  Cdn$1,000 or US$1,000, as is required to place the Canadian Account
                  or the
                  US Account at not less than a zero balance. For the greater certainty
                  for
                  purposes of this Section 3(g), only Canadian Dollars may be credited
                  or
                  debited to the Canadian Account and only US Dollars may be credited
                  or
                  debited to the US Account.

              

      

       

      4.  Advance: 
        Each use
        of the Credit Facility is an "Advance" and all such usages outstanding at
        any
        time are "Advances".
        The
        Standard Terms and Conditions contain notice provisions and other relevant
        conditions applicable to all Advances that must be complied with by the
        Borrower.

       

      5.  Ancillary
        Documents:
        The
        liability, indebtedness and obligations of the Borrower under the Credit
        Facility and this Agreement shall be evidenced, governed and secured, as
        applicable and without limitation, by the following documents: 

       

      (a) an
        unlimited guarantee of the indebtedness of the Borrower to the Bank, executed
        by
        LSI Industries Inc.; and

       

      (b) a
        promissory note executed by the Borrower.

       

      6.  Conditions
        Precedent:
        In
        addition to the conditions specified in the Standard Terms and Conditions
        attached hereto as Schedule 1 and without limiting the discretion of the
        Bank
        pursuant to Section 3 hereof, the obligation of the Bank to make available
        any
        Advance (including the initial Advance) is subject to and conditional upon
        each
        of the conditions set out in Schedule 6 being satisfied on the applicable
        Drawdown Date.

       

      7.  Representations
        and Warranties:
        In
        addition to the representations and warranties specified in the Standard
        Terms
        and Conditions attached hereto as Schedule 1, the Borrower and the Guarantor,
        as
        applicable, makes the representations and warranties set out in
        Schedule
        7. All
        representations and warranties shall be deemed to be continued repeated so
        long
        as any Advance remains outstanding and unpaid under or in connection with
        this
        Agreement or the Documents or so long as any commitment under this Agreement
        remains in effect.

       

      8.  Reporting
        Covenants:
        Each of
        the Borrower and the Guarantor covenants and agrees with the Bank, so long
        as
        any Advance remains outstanding under or in connection with this Agreement
        or
        the Documents or so long as any commitment under this Agreement remains in
        effect, to provide, as applicable, the Bank with: 

       

      (a) quarterly
        Compliance Certificate, substantially in the form of Schedule 8(a), within
        45 days of each fiscal quarter end, certifying compliance with this Agreement
        and the US Credit Agreement;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -4-

        

      

      (b) quarterly
        unaudited financial statements for the Borrower within 45 days of the end
        of the
        each fiscal quarter for the Borrower;

       

      (c) annual
        complied financial statements for the Borrower, within 90 days of each fiscal
        year end of the Borrower;

       

      (d) quarterly
        unaudited financial statements for the Guarantor within 45 days of the end
        of
        each fiscal quarter for the Guarantor;

       

      (e) annual
        audited financial statements for the Guarantor within 90 days of the fiscal
        year
        end of Guarantor; and

       

      (f) such
        other financial and operating statements and reports as and when the Bank
        may
        reasonably require from time to time.

       

      9.  General
        Covenants:
        In
        addition to the standard covenants set out in the Standard Terms and Conditions,
        the Borrower and each Guarantor, as applicable, covenants and agrees with
        the
        Bank, so long as any Advance remains outstanding under or in connection with
        this Agreement or the Documents or so long as any commitment under this
        Agreement remains in effect, that the Borrower and each Guarantor, as
        applicable, will comply
        with the covenants set out in Schedule
        9.

       

      
        
          
            10.
                 Financial
              Covenants:
              The
              Borrower covenants and agrees with the Bank, so long as any Advance
              remains
              outstanding under or in connection with this Agreement or the Documents
              or so
              long as any commitment under this Agreement remains in effect
              to
              maintain the financial covenants specified in Schedule 10.

             

          

        

      

      11.  Events
        of Default:
        Without
        limiting the right of the Bank to demand payment of the Credit Facility at
        any
        time and from time to time notwithstanding the compliance or non-compliance
        by
        the Borrower with any or all of the terms and conditions of the Documents,
        upon
        the occurrence of any of the Events of Default set out in the Standard Terms
        and
        Conditions or any of the events listed in Schedule 11, the Bank may accelerate
        the payment of principal and interest under any committed term credit facility
        hereunder, if any, and cancel any undrawn portion of any committed credit
        facility hereunder, if any. For greater certainty, upon the occurrence of
        an
        Event of Default, the ability of the Borrower to obtain further Advances
        under
        any credit facility which is a term facility under this Agreement shall
        immediately terminate and the Bank may, by written notice to the Borrower,
        declare the Advances outstanding under any such credit facility to be
        immediately due and payable. Upon receipt of such written notice, the Borrower
        shall immediately pay to the Bank all Advances outstanding under any credit
        facility which is a term facility under this Agreement and all other obligations
        of the Borrower to the Bank in connection with any such credit facility under
        this Agreement including, without limitation, an amount equal to the aggregate
        of face amount of all Discount Notes, LCs and LGs which are unmatured or
        unexpired, which amount shall be held by the Bank as security for the Borrower's
        obligations to the Bank in respect of such instruments or contracts. The
        Bank
        may enforce its rights to realize upon its security and retain an amount
        sufficient to secure the Bank for the Borrower's obligations to the Bank
        in
        respect of such contracts or instruments. Whether
        or not any Default or Event of Default shall occur and be continuing, this
        shall
        in no way limit any right of the Bank under this Agreement to terminate or
        demand payment of, or cancel or restrict the availability of any unutilized
        portion of, any demand or other discretionary credit

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -5-

        

      

      facility
        made available under this Agreement. The Borrower and the Guarantor acknowledge
        and agree that the Credit Facility provided to the Borrower hereunder is
        a
        demand credit facility and that the Bank may demand repayment at any time
        notwithstanding the Borrower’s compliance or not with the provisions of this
        Agreement and the Documents.

       

      12.  Acceptance:
        This
        offer is open for acceptance until the 15th day of January, 2007, after which
        date it will be null and void, unless extended in writing by the
        Bank.

       

      Please
        confirm your acceptance of this Agreement by signing the attached copy of
        this
        Agreement in the space provided below and returning it to the
        undersigned.

       

      
        	 	
                Yours
                  truly,

              
	
                 

                20
                  Bay Street

                12th
                  Floor

                Toronto,
                  Ontario

                M5J
                  2N8

                 

                Attention: Vice
                  President

                Fax:  647-436-1156

              	
                FIFTH
                  THIRD BANK

              
	
                 

              	 
	
                 By:_/s/Stephen Pepper_____________

                
                       
                    Name:  Stephen Pepper

                       
                    Title:  Vice President

                

              	
                :

              
	 	
                By:_/s/Jeremiah
                  Hynes______________

              	 
	 	     Name:
                Jeremiah Hynes

                    
                  Title:  Vice President & Principal Officer

              	
                :

              

      

      

       

      

       

      

       

      

       

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -6-

        

      

      The
        undersigned acknowledges, accepts and agrees to the foregoing terms and
        conditions set out in this Agreement, as Borrower, as of the 12th day of
        January, 2007.

       

      
        	
                 

                7809
                  route Transcanadienne (TransCanada Highway)

                Saint
                  Laurent, Quebec

                H4S
                  1L3

                 

                Attention:  President

                Fax:  

              	
                LSI
                  SACO TECHNOLOGIES INC.

              
	
                 

              	 
	 	
                 

              
	 

                By:_/s/Ronald
                  S. Stowell__________

              	
                 

              
	
                     Name:  Ronald S. Stowell

                     Title:     Secretary and
                  Treasurer

              	 
	
                 

              	 
	 	
                 

              
	 

                By:_/s/Scott
                  D. Ready_____________

              	
                 

              
	 	
                     Name:  Scott D. Ready

                     Title:     Vice
                  President

                 

              	 
	 	
                I/We
                  have authority to bind the
                  corporation.

              

      

      

       

      The
        undersigned acknowledges, accepts and confirms its agreement with the foregoing
        terms and conditions set out in this Agreement, as Guarantor, as of the 12th
        day
        of January, 2007. 

       

      
        	 	 	
                LSI
                  INDUSTRIES INC.

              
	 	 	
                 

                By:

              	
                 

                  /s/Ronald S. Stowell

              
	 	 	 	
                Name: 
                  Ronald S. Stowell

                Title:   
                  Vice President, Chief Executive Officer

                          
                   and Treasurer

              
	 	 	
                 

                By:

              	
                 

                 /s/James P. Sferra

              
	 	 	 	
                Name: 
                  James P. Sferra

                Title:    
                  Secretary

                 

                I/We
                  have authority to bind the
                  corporation

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -7-

        

      

      Schedules
        and Exhibits forming part of this Agreement:

       

      
        	
                Schedule
                  1

              	
                -

              	
                Standard
                  Definitions, Terms and Conditions

              
	
                Schedule
                  1 - Exhibit 1

              	
                -

              	
                Notice
                  of Advance

              
	
                Schedule
                  1 - Exhibit 2

              	
                -

              	
                Notice
                  of Conversion and Rollover

              
	
                Schedule
                  6

              	
                -

              	
                Specific
                  Conditions Precedent

              
	
                Schedule
                  7

              	
                -

              	
                Specific
                  Representations and Warranties

              
	
                Schedule
                  8(a)

              	
                -

              	
                Compliance
                  Certificate

              
	
                Schedule
                  9

              	
                -

              	
                Specific
                  Covenants

              
	
                Schedule
                  10

              	
                -

              	
                Specific
                  Financial Covenants

              
	
                Schedule
                  11

              	
                -

              	
                Specific
                  Events of Default

              

      

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

      SCHEDULE
        1

       

      STANDARD
        DEFINITIONS, TERMS AND CONDITIONS

       

      1.   Definitions:
        For the
        purpose of this Agreement, the terms defined below shall have the indicated
        meanings unless the context expressly or by necessary implication requires
        otherwise:

       

      "Agreement"
        means
        this letter loan agreement, including all attached Schedules and Exhibits
        thereto and hereto, as the same may be amended, varied, supplemented, restated,
        renewed or replaced at any time and from time to time;

       

      "Applicable
        Law"
        means,
        at any time, in respect of any Person, property, transaction or event, all
        laws,
        statutes, regulations, treaties, judgments and decrees applicable to that
        Person, property, transaction or event (whether or not having the force of
        law
        with respect to regulatory matters applicable to the Bank) and all applicable
        requirements, requests, official directives, consents, approvals,
        authorizations, guidelines, decisions, rules, orders and policies of any
        Governmental Authority having or purporting to have authority over such Person,
        property, transaction or event;

       

      "Basis
        Point" and
        "bp"
        each
        means one one-hundredth of one percent (.01%);

       

      "Branch
        of Account"
        means
        the branch of the Bank at which the Borrower's accounts are maintained. As
        at
        the date of this Agreement, the "Branch
        of Account"
        is the
        Bank's branch at 20 Bay Street, 12th Floor, Toronto, Ontario M5J
        2N8;

       

      "Business
        Day"
        means a
        day on which chartered banks are open for over-the-counter business in Toronto,
        Ontario and Cincinnati, Ohio and excludes (a) Saturday, Sunday and any
        other day which is a statutory holiday in Toronto, Ontario or Cincinnati,
        Ohio,
        and (b) in respect of Libor Loans, any other day on which transactions
        cannot be carried out by and between banks in the London Interbank
        Market;

       

      "Canadian
        Dollars"
        and the
        symbols "$"
        and
        "C$"
        each
        means lawful money of Canada;

       

      "Canadian
        Dollar Equivalent"
        means
        at any time on any date in relation to any amount in a currency other than
        Canadian Dollars, the amount of Canadian Dollars required for the Borrower
        to
        purchase that amount of such other currency at the rate of exchange quoted
        by
        the Bank at or about 12:00 p.m. (noon) Toronto, Ontario time on such date,
        including all premiums and costs of exchange;

       

      "Canadian
        Overdraft"
        means
        subject to the terms hereof, any draw by the Borrower by way of overdraft
        on any
        of its Canadian Dollar current accounts maintained with or through the Bank;
        

       

      "Canadian
        Prime Loans"
        means
        Canadian Prime Rate based loans, which for greater certainty includes loans
        made
        by way of Canadian Overdraft;

       

      "Canadian
        Prime Rate"
        means,
        in connection with Canadian Prime Loans, on any day, the greater of: (a)
        the
        variable annual rate of interest established and adjusted by Royal Bank of
        Canada from time to time as being Royal Bank of Canada's reference rate then
        in
        effect for determining interest rates on Canadian Dollar denominated commercial
        loans made by Royal

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -2-

        

      

      Bank
        of
        Canada in Canada; and (b) the CDOR Rate in effect from time to time, plus
        100
        bps per annum. Any change in the Canadian Prime Rate shall be effective on
        the
        date the change becomes effective generally without the necessity for any
        notice
        to the Borrower; 

       

      "CDOR
        Rate" means,
        on
        any day, the annual rate of interest which is the arithmetic average of the
        "BA
        1 month" rates applicable to Canadian Dollar banker's acceptances identified
        as
        such on the Reuters Screen CDOR Page at approximately 10:00 a.m. on such
        day (as
        adjusted by the Bank after 10:00 a.m. to reflect any error in any posted
        rate or
        in the posted average annual rate) or if such date is not a Business Day
        then on
        the immediately preceding Business Day. If the rate does not appear on the
        Reuters Screen CDOR Page as contemplated above, then the CDOR Rate shall
        be the
        rate per annum quoted from time to time by the Bank as being its reference
        rate
        then in effect for determining fees on Canadian Dollar denominated bills
        of
        exchange accepted by the Bank;

       

      "Contaminant"
        includes, without limitation, any pollutant, dangerous substance, liquid
        waste,
        industrial waste, hazardous material, hazardous substance or contaminant
        including any of the foregoing as defined in any Environmental Law;

       

      "Contract
        Period"
        means
        the period selected by the Borrower in accordance with the Standard Terms
        and
        Conditions commencing on the Drawdown Date, Issuance Date, Rollover Date
        or
        Conversion Date, as applicable, and expiring on a Business Day, in respect
        of an
        Advance during which the interest rate with respect to any Advance is
        established in accordance with and subject to Section 4
        of this
        Schedule with respect to Libor Loans or Section 5 of this Schedule with respect
        to FRT Loans;

       

      "Conversion"
        means
        the conversion of an outstanding Advance, or a portion of an outstanding
        Advance, into an alternate type of Advance in accordance with this Agreement;
        

       

      "Conversion
        Date"
        means
        the Business Day that the Borrower elects as the date on which a Conversion
        is
        to occur; 

       

      "Drawdown
        Date"
        means
        any Business Day on which an Advance is made or is deemed to be
        made;

       

      "Default"
        means
        an event, circumstance or omission which is an Event of Default or which,
        with
        any or all of the giving of notice, lapse of time, or a failure to remedy
        the
        event, circumstance or omission within a period of time, would be an Event
        of
        Default; 

       

      "Documents"
        means
        this Agreement and all certificates, instruments, agreements and other documents
        delivered, or to be delivered to the Bank under or in connection with this
        Agreement and, when used in relation to any Person, "Documents"
        means
        the Documents executed and delivered by such Person;

       

      "Environmental
        Activity"
        means
        any activity, event or circumstance in respect of a Contaminant, including,
        without limitation, its storage, use, holding, collection, purchase,
        accumulation, assessment, generation, manufacture, construction, processing,
        treatment, stabilization, disposition, handling or transportation, or its
        Release into the natural environment, including movement through or in the
        air,
        soil, surface water or groundwater;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -3-

        

      

      "Environmental
        Laws"
        means
        all Applicable Laws relating to the environment or occupational health and
        safety, or any Environmental Activity;

       

      "Excluded
        Taxes" means,
        in
        relation to the Bank, any Taxes imposed on the net income or capital of the
        Bank
        by any Governmental Authority as a result of the Bank (a) carrying on a trade
        or
        business or having a permanent establishment in any jurisdiction or political
        subdivision thereof, (b) being organized under the laws of such jurisdiction
        or
        any political subdivision thereof, or (c) being or being deemed to be resident
        in such jurisdiction or political subdivision thereof;

       

      "FRT
        Loans"
        means
        FTB Fixed Rate term loans; 

       

      "FTB
        Fixed Rate"
        means,
        with respect to each Contract Period applicable to an FRT Loan, the annual
        fixed
        rate of interest offered by the Bank and accepted by the Borrower for the
        requested funds for a period of 30 days or such other period of time as the
        Borrower and the Bank agree to in the circumstances (but maturing not later
        than
        the final date for payment of the subject FRT Loan(s), in any event);

       

      "GAAP"
        means
        generally accepted accounting principles in effect from time to time in the
        United States of America, applicable to the relevant Person, applied in a
        consistent manner from period to period;

       

      "Governmental
        Approvals"
        means,
        with respect to any Person, all licenses, permits, consents, authorizations
        and
        approvals from any and all Governmental Authorities required for the conduct
        of
        that Person's business as presently conducted;

       

      "Governmental
        Authority"
        means
        any domestic or foreign governmental, legislative, or regulatory authority,
        agency, commission, board or court, tribunal or other law, regulation or
        rule
        making entity having or purporting to have jurisdiction on behalf of any
        nation,
        province, state, territory, region, municipality or city;

       

      "Guarantor(s)"
        means
        the Person or Persons who have or are to execute a guarantee or guarantees
        of
        the Obligations of the Borrower under or in connection with this Agreement
        and
        the Documents;

       

      "Libor"
        means,
        with respect to each Contract Period applicable to a Libor Loan, the annual
        rate
        of interest (rounded upwards, if necessary, to the nearest whole multiple
        of one
        sixteenth of one percent (1/16th%), at which the Bank, in accordance with
        its
        normal practice, would be prepared to offer deposits of US Dollars to leading
        banks in the London Interbank Market for delivery on the first day of each
        such
        Contract Period, for a period equal to each such Contract Period, such deposits
        being in comparable amounts to be outstanding during such Contract Period,
        at or
        about 11:00 a.m. (London, England time) two Business Days prior to the relevant
        Drawdown Date or Rollover Date; 

       

      "Libor
        Interest Date"
        means,
        with respect to any Libor Loan, the last day of each Contract Period applicable
        to the Libor Loan and, if the applicable Contract Period is longer than
        3 months, the date falling every 3 months after the beginning of the
        Contract Period and the last day of the Contract Period; 

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -4-

        

      

      "Libor
        Loans"
        means
        Libor based loans in US Dollars; 

       

      "Lien"
        means
        any mortgage, charge, lien, hypothec or encumbrance, whether fixed or floating
        on, or any security interest in, any property, whether real, personal or
        mixed,
        tangible or intangible, any pledge or hypothecation of any property, any
        deposit
        arrangement, priority, conditional sale agreement, other title retention
        agreement or equipment trust, capital lease or other security arrangement
        of any
        kind;

       

      "Obligations"
        means
        all loans, advances, debts, liabilities and obligations for the performance
        of
        covenants, tasks or duties or for the payment of monetary amounts (whether
        or
        not performance is then required or contingent, or whether or not those amounts
        are liquidated or determinable) owing by the Borrower and/or any Guarantor
        to
        the Bank under any or all of the Documents and all covenants and duties
        regarding those amounts, of any kind or nature, present or future, whether
        or
        not evidenced by any agreement or other instrument, owing under any or all
        of
        the Documents including all obligations owed by the Borrower to the Bank
        under
        the Credit Facilities;

       

      "Overdraft"
        means
        Canadian Overdraft or US Overdraft, as applicable; 

       

      "Person"
        includes an individual, a partnership, a joint venture, a trust, an
        unincorporated organization, a company, a corporation, an association, a
        government or any department or agency thereof, and any other incorporated
        or
        unincorporated entity of whatsoever nature or kind;

       

      "Priority
        Claims"
        means
        all amounts owing or required to be paid, where the failure to pay any such
        amount could give rise to a claim pursuant to any Applicable Law or otherwise,
        which ranks or is capable of ranking in priority to the Bank's Lien or otherwise
        in priority to any claim by the Bank for repayment of any amounts owing under
        or
        in connection with this Agreement or the Documents;

       

      "Release"
        includes discharge, spray, inject, inoculate, abandon, deposit, spill, leak,
        seep, pour, emit, empty, throw, dump, place and exhaust, and when used as
        a noun
        has a similar meaning;

       

      "Rollover"
        means
        the rollover of an Advance by way of Libor Loan or FRT Loan for an additional
        Contract Period under Section 4
        or
        Section 0
        of this
        Schedule, as applicable; 

       

      "Rollover
        Date"
        means
        the Business Day on which a Rollover occurs; 

       

      "Subsidiary"
        of a
        Person means (a) any corporation of which the Person and/or any one of its
        affiliates holds, directly or indirectly, other than by way of security only,
        securities to which are attached more than 50% of the votes that may be cast
        to
        elect directors of such corporation, (b) any corporation of which the
        Person and/or any one of its affiliates has, through operation of law or
        otherwise, the ability to elect or cause the election of a majority of the
        directors of such corporation, (c) any partnership, limited liability company,
        unlimited liability company or joint venture in which such Person and/or
        one or
        more of its affiliates has, directly or indirectly, more than 50% of the
        votes
        that may be cast to elect the governing body of such entity or otherwise
        control
        its activity, and (d) any partnership, limited liability company, unlimited
        liability company or joint venture in which such Person and/or one or more
        of
        its affiliates has, through

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -5-

        

      

      operation
        of law or otherwise, the ability to elect or cause the election of a majority
        of
        the members of the governing body of such entity or otherwise control its
        activity;

       

      "Tax" and "Taxes"
        include, at any time, all taxes, surtaxes, duties, levies, imposts, rates,
        fees,
        assessments, withholdings, dues and other charges of any nature imposed by
        any
        Governmental Authority (including income, capital (including large
        corporations), withholding, consumption, sales, use, transfer, goods and
        services or other value-added, excise, customs, anti-dumping, countervail,
        net
        worth, stamp, registration, franchise, payroll, employment, health, education,
        business, school, property, local improvement, development, education
        development and occupation taxes, surtaxes, duties, levies, imposts, rates,
        fees, assessments, withholdings, dues and charges) together with all fines,
        interest, penalties on or in respect of, or in lieu of or for non-collection
        of,
        those taxes, surtaxes, duties, levies, imposts, rates, fees, assessments,
        withholdings, dues and other charges;

       

      "US
        Base Rate"
        means
        the variable annual rate of interest established and adjusted by the Bank
        from
        time to time as being its reference rate then in effect for determining interest
        rates on US Dollar denominated commercial loans made by it in Canada. Any
        change
        in the US Base Rate shall be effective on the date the change becomes effective
        generally without the necessity for any notice to the Borrower; 

       

      "US
        Base Rate Loans"
        means
        US Base Rate based loans in US Dollars, which for greater certainty includes
        loans made by way of US Overdraft;

       

      "US
        Dollar Equivalent"
        means
        at any time on any date in relation to any amount in a currency other than
        US
        Dollars, the amount of US Dollars required for the Borrower to purchase that
        amount of such other currency at the rate of exchange quoted by the Bank
        at or
        about 12:00 p.m. (noon) Toronto, Ontario time on such date, including all
        premiums and costs of exchange;

       

      "US
        Dollars"
        and the
        symbol "US$"
        each
        means lawful money of the United States of America; and

       

      “US
        Overdraft”
means
        subject to the terms hereof, any draw by the Borrower by way of overdraft
        on any
        of its US Dollar current accounts maintained with or through the
        Bank.

       

      2. Representations
        and Warranties:
        If a
        corporation, the Borrower and each Guarantor, as applicable, represents and
        warrants, on each Drawdown Date, Rollover Date and Conversion Date,
        that:

       

      
        	
                (a)

              	
                Corporate
                  Status.
                  It
                  (i) is a duly organized and validly existing corporation in good
                  standing
                  under the laws of the jurisdiction of its incorporation, (ii) has
                  the
                  power and authority to own its property and assets and to transact
                  the
                  business in which it is engaged and presently proposes to engage,
                  and
                  (iii) is duly qualified as a foreign corporation or an extra-provincial
                  corporation and is in good standing in each jurisdiction where
                  the
                  ownership, leasing or operation of its property or the conduct
                  of its
                  business requires such qualification except where the failure to
                  be
                  qualified would not materially affect its
                  business.

              

      

       

      
        	
                (b)

              	
                Power
                  and Authority.
                  It
                  has the corporate power to execute, deliver and perform the terms
                  and
                  provisions of each of the Documents to which it is a party and
                  has taken
                  all

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -6-

        

      

       

      

        
          	 	
                  necessary
                    action to authorize the execution, delivery and performance by
                    it of each
                    of such Documents. It has duly executed and delivered each of
                    the
                    Documents to which it is a party, and each such Document constitutes
                    its
                    legal, valid and binding obligation enforceable against it in
                    accordance
                    with its terms, subject to (i) applicable bankruptcy, reorganization,
                    moratorium or similar laws affecting creditors' generally, (ii)
                    the fact
                    that specific performance and injunctive relief may only be given
                    at the
                    discretion of the courts, and (iii) the equitable or statutory
                    powers of
                    the courts to stay proceedings before them and to stay the execution
                    of
                    judgments.

                

        

      

       

      
        	
                (c)

              	
                No
                  Violation.
                  Neither the execution, delivery or performance by it of the Documents
                  to
                  which it is a party, nor compliance by it with the terms and provisions
                  thereof, (i) will contravene any Applicable Law, (ii) will conflict
                  with
                  or result in any breach of any of the terms, covenants, conditions
                  or
                  provisions of, or constitute a default under, or result in the
                  creation or
                  imposition of (or the obligation to create or impose) any Lien
                  upon any of
                  its property or assets pursuant to the terms of any indenture,
                  mortgage,
                  deed of trust, credit agreement, loan agreement or any other agreement,
                  contract or instrument to which it is a party or by which it or
                  any of its
                  property or assets is bound or to which it may be subject, or (iii)
                  will
                  violate any provision of its constating
                  documents.

              

      

       

      
        	
                (d)

              	
                Governmental
                  Approvals.
                  Except as otherwise advised by the Borrower to the Bank in writing,
                  no
                  order, consent, certificate, approval, permit, license, authorization
                  or
                  validation of, or filing, recording or registration with or exemption
                  by
                  (except as have been obtained or made prior to the date hereof
                  or exist
                  and are in full force and effect) any Person (including any Governmental
                  Authority), is required to authorize, or is required in connection
                  with
                  (i) the execution, delivery and performance by it of any Document
                  to which
                  it is a party, or (ii) the legality, validity, binding effect or
                  enforceability with respect to it of any such
                  Document.

              

      

       

      
        	
                (e)

              	
                True
                  and Complete Disclosure.
                  All factual information heretofore or contemporaneously furnished
                  by or on
                  behalf of it in writing to the Bank (including all information
                  contained
                  in the Documents) for purposes of or in connection with this Agreement
                  or
                  any transaction contemplated herein, is true and accurate in all
                  material
                  respects on the date as of which such information is dated or certified
                  and is not incomplete by omitting to state any fact necessary to
                  make such
                  information (taken as a whole) not misleading at such time in light
                  of the
                  circumstances under which such information was
                  provided.

              

      

       

      
        	
                (f)

              	
                Compliance
                  with Applicable Laws, etc.
                  It
                  (i) has obtained and is in compliance with all material Governmental
                  Approvals which are necessary for the conduct of its business as
                  presently
                  conducted and the use of its property and assets (both real and
                  personal),
                  each of which is in full force and effect, is a good, valid and
                  subsisting
                  approval which has not been surrendered, forfeited or become void
                  or
                  voidable and is unamended, and (ii) is in compliance with all Applicable
                  Laws in all material respects, including Environmental Laws in
                  all
                  material respects.

              

      

       

      
        	
                (g)

              	
                Representations
                  and Warranties in Other Documents.
                  All representations and warranties made by it in the Documents
                  other than
                  this Agreement are true and correct
                  in

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -7-

        

      

       all
        material respects as of the time as of which such representations and warranties
        were made.

       

      3.   Notice
        of Borrowing:
        All
        Advances, other than Advances by way of Overdraft, require the delivery of
        prior
        notice. To request an Advance, the Borrower shall give to the Bank written
        notice substantially in the form attached as Exhibit 1 to this Schedule,
        indicating the amount of the requested Advance, at or before the time set
        out
        below opposite the type of Advance that the Borrower wishes to
        request:

       

      
        	
                Type
                  of Advance

              	 	
                Time
                  of Notice

              
	
                Canadian
                  Prime Loans and US Base Rate Loans less than $10 million

              	 	
                Before
                  11:00 a.m. one Business Day prior to the requested date of the
                  Advance.

              
	
                Libor
                  Loans

              	 	
                Before
                  11:00 a.m. three Business Days prior to the requested date of the
                  Advance.

              
	
                FRT
                  Loans

              	 	
                Before
                  11:00 a.m. five Business Days prior to the requested date of the
                  Advance

              

      

       

      Each
        notice given in respect of an Advance by way of Canadian Prime Loan, US Base
        Rate Loan, Libor Loan and FRT Loan shall indicate the amount of the required
        Advance and the date funds are required. 

       

      4.   Libor
        Loan Conditions:
        The
        following terms and conditions apply to Libor Loans: 

       

      
        	
                (a)

              	
                Minimum
                  Advance.
                  Each Advance by way of Libor Loan shall be in a minimum aggregate
                  amount
                  of US$500,000 and larger whole multiples of US
                  $100,000.

              

      

       

      
        	
                (b)

              	
                Term.
                  Each Libor Loan shall have a Contract Period of one month (each
                  month
                  being a period of 30 days for purposes of this Section) or such
                  longer
                  period of time in whole months as the Borrower may request and
                  the Bank in
                  its sole discretion may agree, subject to availability. No Contract
                  Period
                  shall extend beyond the maturity date of the relevant Credit
                  Facility.

              

      

       

      
        	
                (c)

              	
                Rollover
                  of Libor Loans.
                  At
                  least three Business Days before the expiry of the Contract Period
                  of each
                  Libor Loan, the Borrower shall notify the Bank by irrevocable telephone
                  notice, followed by written confirmation on the same day in form
                  and
                  substance substantially in accordance with Exhibit 2, if it intends
                  to
                  enter into a new Contract Period with respect to the maturing Libor
                  Loan,
                  or repay the maturing Libor Loan. If the Borrower fails to provide
                  the
                  foregoing notice or make the required payment, then payment of
                  its
                  obligations to the Bank with respect to that maturing Libor Loan
                  shall be
                  funded with an Advance under a US Base Rate Loan in the amount
                  outstanding
                  under that Libor Loan.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -8-

        

      

      
        	
                (d)

              	
                Indemnity.
                  The Borrower shall indemnify and hold the Bank harmless against
                  any loss,
                  cost or expense (including without limitation, any loss incurred
                  by the
                  Bank in liquidating or redeploying deposits acquired to fund or
                  maintain
                  any Libor Loan) incurred by the Bank as a result of repayments,
                  prepayments, Conversions, Rollovers or cancellations of a Libor
                  Loan other
                  than on the last day of the Contract Period applicable to such
                  Libor Loan,
                  or failure to draw down a Libor Loan on the first day of the Contract
                  Period selected by the Borrower.

              

      

       

      
        	
                (e)

              	
                Substitute
                  Basis of Advance.
                  If, at any time during the term of this Agreement, the Bank acting
                  in good
                  faith determines (which determination is final, conclusive and
                  binding
                  upon the Borrower) that:

              

      

       

      
        	 	
                (i)

              	
                adequate
                  and fair means do not exist for ascertaining the rate of interest
                  on a
                  Libor Loan,

              

      

       

      
        	 	
                (ii)

              	
                the
                  making or the continuance of a Libor Loan has become impracticable
                  by
                  reason of circumstances which materially and adversely affect the
                  London
                  Interbank Market,

              

      

       

      
        	 	
                (iii)

              	
                deposits
                  in US Dollars are not available to the Bank in the London Interbank
                  Market
                  in sufficient amounts in the ordinary course of business for the
                  applicable Contract Period to make or maintain a Libor Loan during
                  such
                  Contract Period, or

              

      

       

      
        	 	
                (iv)

              	
                the
                  cost to the Bank of making or maintaining a Libor Loan does not
                  accurately
                  reflect the effective cost to the Bank thereof or the costs to
                  the Bank
                  are increased or the income receivable by the Bank is reduced in
                  respect
                  of a Libor Loan,

              

      

       

      then
        the
        Bank shall promptly notify the Borrower of such determination and the Borrower
        hereby instructs the Bank to repay the affected Libor Loan with the proceeds
        of
        a US Base Rate Loan in the amount of the Libor Loan to be drawn down on the
        last
        day of the then current Contract Period. The Bank shall not be required to
        make
        any further Libor Loans available under this Agreement so long as any of
        the
        circumstances referred to in this clause continue.

       

      5.   FRT
        Loan Conditions:
        The
        following terms and conditions apply to FRT Loans: 

       

      
        	
                (a)

              	
                Amount.
                  Each FRT Loan shall be in a minimum aggregate amount Cdn$500,000
                  and
                  larger whole multiples of Cdn$100,000.

              

      

       

      
        	
                (b)

              	
                Term.
                  Each FRT Loan shall be for a term of 30 days or such other period
                  of time
                  as may be agreed to by the Bank at its sole discretion and the
                  Borrower in
                  the circumstances, provided that the maturity date of any FRT Loan
                  issued
                  under any relevant term Credit Facility shall not extend beyond
                  the
                  maturity date of the relevant term Credit
                  Facility.

              

      

       

      
        	
                (c)

              	
                Repayment.
                  FRT Loans may not be repaid, prepaid, converted or rolled over
                  prior to
                  their maturity.

              

      

       

      
        	
                (d)

              	
                Rollover
                  of FRT Loans.
                  At
                  least seven (7) Business Days before the expiry of the Contract
                  Period of
                  each FRT Loan, the Borrower shall notify the Bank by
                  irrevocable

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -9-

        

      

      

        
          	 	
                  telephone
                    notice, followed by written confirmation on the same day in form
                    and
                    substance substantially in accordance with Exhibit 2, if it intends
                    to
                    enter into a new Contract Period with respect to the maturing
                    FRT Loan, or
                    repay the maturing FRT Loan. If the Borrower fails to provide
                    the
                    foregoing notice or make the required payment, then payment of
                    its
                    obligations to the Bank with respect to that maturing FRT Loan
                    shall be
                    funded with an Advance under a Canadian Prime Loan in the amount
                    outstanding under that FRT
                    Loan.

                

        

      

       

      
        	
                (e)

              	
                Indemnity.
                  The Borrower shall indemnify and hold the Bank harmless against
                  any loss,
                  cost or expense (including without limitation, any loss incurred
                  by the
                  Bank in liquidating or redeploying deposits acquired to fund or
                  maintain
                  any FRT Loan) incurred by the Bank as a result of repayments, prepayments,
                  Conversions, Rollovers or cancellations of a FRT Loan other than
                  on the
                  last day of the Contract Period applicable to such FRT Loan, or
                  failure to
                  draw down a FRT Loan on the first day of the Contract Period selected
                  by
                  the Borrower.

              

      

       

      6.   Conversion
        Option and Conditions:
        Subject
        to this Agreement, the Borrower may, during the term of this Agreement,
        effective on any Business Day, convert, in whole or in part, an outstanding
        Advance into another type of Advance permitted under the relevant Credit
        Facility upon giving written notice to the Bank in substantially the form
        attached hereto as Exhibit 2, the notice period being that which would be
        applicable to the type of Advance into which the outstanding Advance is to
        be
        converted under Section 3 of the Standard Terms and Conditions. Conversions
        under this Agreement may only be made provided that: 

       

      
        	
                (a)

              	
                Currency.
                  Notwithstanding any other term in this Agreement, no Advance denominated
                  in C$ may be converted into an Advance denominated in US$ and no
                  Advance
                  denominated in US$ may be converted into an Advance denominated
                  in
                  C$.

              

      

       

      
        	
                (b)

              	
                Amounts.
                  Each conversion into an Advance shall be for minimum aggregate
                  amounts and
                  whole multiples in excess thereof as are specified in respect of
                  that type
                  of Advance pursuant to this
                  Agreement.

              

      

       

      
        	
                (c)

              	
                Libor
                  Loans.
                  An
                  Advance by way of Libor Loan may be converted only on the last
                  day of the
                  relevant Contract Period; if less than all of the Libor Loan is
                  converted,
                  after the conversion not less than US$100,000 shall remain as a
                  Libor
                  Loan.

              

      

       

      
        	
                (d)

              	
                Other
                  Conditions.
                  A
                  conversion into an Advance by way of Libor Loan shall only be made
                  to the
                  extent that the conditions outlined in Section 4 of the Standard
                  Terms and
                  Conditions shall not exist on the relevant Conversion
                  Date.

              

      

       

      
        	
                (e)

              	
                No
                  Demands.
                  No
                  demand shall have been made and no Default or Event of Default
                  shall have
                  occurred and be continuing on the relevant Conversion Date or after
                  giving
                  effect to the conversion of the Advance to be made on the Conversion
                  Date.

              

      

       

      
        	
                (f)

              	
                No
                  Repayment.
                  No
                  Conversion or Rollover shall constitute a repayment of any Advance
                  or a
                  new Advance.

              

      

       

      
        	
                (g)

              	
                Default.
                  Subject to the ability of the Bank to accelerate payment obligations
                  in
                  respect of a term Credit Facility upon the occurrence of an Event
                  of
                  Default, if a Default or Event of

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -10
            -

        

      

       

      

        
          	 	Default has occurred
                  and is
                  continuing on the last day of a Contract Period, as regards a Libor
                  Loan,
                  in respect of an Advance by way of a Libor Loan, the Borrower shall
                  be
                  deemed to have converted the Advance into a US Base Rate Loan as
                  of the
                  last day of the applicable Contract
                  Period.

        

      

       

      7.   Calculation
        and Payment of Interest And Fees:

       

      
        	
                (a)

              	
                Canadian
                  Prime Loans.
                  The Borrower shall pay to the Bank interest on each Canadian Prime
                  Loan,
                  monthly in arrears at the rates set out in this Agreement, on the
                  last
                  Business Day of each month. Such interest will be calculated monthly
                  and
                  will accrue daily on the basis of the actual number of days elapsed
                  and a
                  year of 365 or 366 days, as
                  applicable.

              

      

       

      
        	
                (b)

              	
                US
                  Base Rate Loans.
                  The Borrower shall pay to the Bank interest on each US Base Rate
                  Loan,
                  monthly in arrears at the rates set out in this Agreement, on the
                  last
                  Business Day of each month. Such interest will be calculated monthly
                  and
                  will accrue daily on the basis of the actual number of days elapsed
                  and a
                  year of 365 or 366 days, as applicable.

              

      

       

      
        	
                (c)

              	
                Libor
                  Loans. The
                  Borrower shall pay to the Bank interest on Libor Loans outstanding
                  to the
                  Bank at the rates set out in this Agreement.
                  Interest on each Libor Loan shall be payable on each Libor Interest
                  Date
                  applicable to the Libor Loan, for the period commencing from and
                  including
                  the first day of the Contract Period or the immediately preceding
                  Libor
                  Interest Date, as the case may be, applicable to the Libor Loan,
                  to but
                  excluding the first mentioned Libor Interest Date, and shall be
                  calculated
                  daily on the principal amount of each Libor Loan remaining unpaid
                  on the
                  basis of the actual number of days elapsed in a year of 360 days.
                  

              

      

       

      
        	
                (d)

              	
                FRT
                  Loans.
                  The Borrower shall pay to the Bank interest on each FRT Loan monthly
                  in
                  arrears at the applicable interest rate set out in the Agreement
                  on the
                  last Business Day of each month or such other date as may be agreed
                  upon
                  between the Bank and the Borrower. Such interest will be calculated
                  monthly and will accrue daily on the basis of the actual number
                  of days
                  elapsed and a year of 365 or 366 days, as applicable.
                  

              

      

       

      
        	
                (e)

              	
                Limits
                  on Interest.
                  The Borrower shall not be obligated to pay any interest, fees or
                  costs
                  under or in connection with this Agreement or the Documents in
                  excess of
                  what is permitted by Applicable Law. For purposes of the
                  Interest Act
                  (Canada), the annual rates of interest or fees to which the rates
                  calculated in accordance with this Agreement are equivalent, are
                  the rates
                  so calculated multiplied by the actual number of days in the calendar
                  year
                  in which such calculation is made and divided by 365 or 366, as
                  applicable.

              

      

       

      8.   Fees,
        Payment and Rights:

       

      
        	
                (a)

              	
                Additional
                  Fees.
                  In
                  addition to the fees previously described in other provisions of
                  this
                  Agreement, the Borrower shall, at the discretion of the Bank, pay
                  to the
                  Bank a fee of $25.00 for each cheque of the Borrower which is honoured
                  by
                  the Bank, in its discretion, in excess of the authorized amount
                  of any
                  Credit Facility.

              

      

       

      
        	
                (b)

              	
                Consideration.
                  The fees collected by the Bank shall be its property as consideration
                  for
                  the time, effort and expense incurred by it in the review and
                  administration of documents and financial statements, and the Borrower
                  acknowledges and agrees that the

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -11-

        

      

       

      

        
          	 	determination of these
                  costs is
                  not feasible and that the fees set out in the Agreement represent
                  a
                  reasonable estimate of such costs.

        

      

       

      
        	
                (c)

              	
                Discretionary
                  Advance.
                  Notwithstanding anything to the contrary contained in the Agreement,
                  the
                  Bank may, in its discretion, make an Advance under any applicable
                  Credit
                  Facility to pay any unpaid interest or fees which have become due
                  under
                  the terms of the Agreement.

              

      

       

      
        	
                (d)

              	
                Evidence
                  of Obligations.
                  The Borrower and each Guarantor acknowledges that the actual recording
                  of
                  the amount of any Advance or repayment thereof under the Credit
                  Facilities, and interest, fees and other amounts due in connection
                  with
                  the Credit Facilities, in an account of the Borrower maintained
                  by the
                  Bank shall constitute prima facie evidence of the Borrower's indebtedness,
                  liability and Obligations from time to time under and in connection
                  with
                  the Agreement and the Documents; provided that the obligation of
                  the
                  Borrower to pay or repay any indebtedness and liability in accordance
                  with
                  the terms and conditions of the Agreement shall not be affected
                  by the
                  failure of the Bank to make such recording. The Borrower also acknowledges
                  being indebted to the Bank for principal amounts shown as outstanding
                  from
                  time to time in the Bank's account records, and all accrued and
                  unpaid
                  interest in respect of such amounts, in accordance with the terms
                  and
                  conditions of this Agreement.

              

      

       

      
        	
                (e)

              	
                Absolute
                  Obligations.
                  The obligation of the Borrower and each Guarantor, as applicable,
                  to make
                  all payments under and in connection with the Agreement and the
                  Documents
                  shall be absolute and unconditional and shall not be limited or
                  affected
                  by any circumstance, including, without limitation: (i) any set-off,
                  compensation, counterclaim, recoupment, defence or other right
                  which the
                  Borrower or any Guarantor, as applicable, may have against the
                  Bank or any
                  other Persons for any reason whatsoever; or (ii) any insolvency,
                  bankruptcy, reorganization or similar proceedings by or against
                  the
                  Borrower or any Guarantor, as
                  applicable.

              

      

       

      
        	
                (f)

              	
                Set-Off.
                  In
                  addition to and not in limitation of any rights now or hereafter
                  available
                  to the Bank whether pursuant to Applicable Law or arising in the
                  Documents, the Bank is authorized, at any time and from time to
                  time, upon
                  delivery of written notice to the Borrower to set-off and appropriate
                  and
                  to apply any and all deposits (general and special) and any other
                  indebtedness at any time held by or owing by the Bank to or for
                  the credit
                  of the Borrower against and on account of the obligations and liabilities
                  of the Borrower to the Bank under or in connection with this Agreement
                  or
                  the Documents. The Bank agrees to provide written notice of the
                  exercise
                  of any of the rights under this section immediately after the exercise
                  of
                  such rights.

              

      

       

      
        	
                (g)

              	
                Cumulative
                  Rights.
                  The remedies, rights and powers of the Bank under this Agreement,
                  the
                  Documents and at law and in equity are cumulative and not alternative
                  and
                  are not in substitution for any other remedies, rights or powers
                  of the
                  Bank and no delay or omission in exercise of such remedy, right,
                  or power
                  shall exhaust such remedies, rights or powers or be construed as
                  a waiver
                  of any of them.

              

      

       

      
        	
                (h)

              	
                Overdue
                  Amounts.
                  Any amount that is not paid when due hereunder shall, unless interest
                  is
                  otherwise payable in respect thereof in accordance with the terms
                  of this
                  Agreement or the relevant instrument or contract governing same,
                  bear
                  interest until paid

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -12
            -

        

      

       

      
        
          	 	at the rate of Canadian
                  Prime
                  Rate plus 2.0% per annum or, in the case of an amount denominated
                  in US
                  Dollars, at the rate of US Base Rate plus 2.0% per
                  annum.

        

      

       

      
        	
                (i)

              	
                Place
                  of Payment.
                  Amounts payable by the Borrower under or in connection with the
                  Agreement
                  and the Documents shall be paid at the Branch of Account in the
                  applicable
                  currency. Amounts due on a day other than a Business Day shall
                  be deemed
                  to be due on the Business Day next following such day. Any payment
                  delivered or made to the Bank by 1:00 local time at the Branch
                  of Account
                  shall be credited as of that date, but if made afterwards shall
                  be
                  credited as of the next Business Day. Interest and fees payable
                  under or
                  in connection with this Agreement and the Documents are payable
                  both
                  before and after any or all of Default, maturity date, demand and
                  judgement.

              

      

       

      
        	
                (j)

              	
                Taxes.
                  All
                  payments to be made by or on behalf of the Borrower or any Guarantor
                  under
                  or with respect to this Agreement or the Documents are to be made
                  free and
                  clear of and without deduction or withholding for, or on account
                  of, any
                  present or future Taxes, unless such deduction or withholding is
                  required
                  by Applicable Law. If the Borrower or any Guarantor is required
                  to deduct
                  or withhold any Taxes from any amount payable to the Bank (i) the
                  amount
                  payable shall be increased as may be necessary so that after making
                  all
                  required deductions or withholdings (including deductions and withholdings
                  applicable to, and taking into account all Taxes on, or arising
                  by reason
                  of the payment of, additional amounts under this clause), the Bank
                  receives and retains an amount equal to the amount that it would
                  have
                  received had no such deductions or withholdings been required,
                  (ii) the
                  Borrower and any Guarantor shall make such deductions or withholdings,
                  and
                  (iii) the Borrower and any Guarantor shall remit the full amount
                  deducted
                  or withheld to the relevant taxing authority in accordance with
                  Applicable
                  Laws. Notwithstanding the foregoing, neither the Borrower nor any
                  Guarantor shall be required to pay additional amounts in respect
                  of
                  Excluded Taxes.

              

      

       

      
        	
                (k)

              	
                Exchange
                  Rate Fluctuations.
                  If, for any reason, the amount of Advances outstanding under any
                  Credit
                  Facility, when converted to the US Dollar Equivalent, exceeds the
                  amount
                  available in US Dollars under such Credit Facility, the Borrower
                  shall
                  immediately repay such excess or shall secure such excess to the
                  satisfaction of the Bank.

              

      

       

      9.   Conditions
        Precedent:
        Without
        limiting the discretion of the Bank pursuant to Section 3 of the Agreement,
        the
        obligation of the Bank to make available any Advance, Rollover or Conversion
        is
        subject to and conditional upon each of the conditions below being satisfied
        on
        or before the applicable Drawdown Date, Issuance Date, Rollover Date or
        Conversion Date:

       

      
        	
                (a)

              	
                Execution.
                  The Documents completed and, where necessary, registered in form
                  and
                  manner satisfactory to the Bank, together with such certificates,
                  authorizations, resolutions and legal opinions as the Bank may
                  reasonably
                  require.

              

      

       

      
        	
                (b)

              	
                Reports.
                  Satisfactory banker's and/or other agency reports on the financial
                  position of the Borrower, any Guarantor and such customers of the
                  Borrower
                  as the Bank may specify from time to
                  time.

              

      

       

      
        	
                (c)

              	
                Default.
                  No
                  Default or Event of Default shall exist hereunder and no default
                  or event
                  of default shall exist under the US Credit
                  Agreement.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -13
            -

        

      

      
        	
                (d)

              	
                Accuracy.
                  The
                  representations and warranties contained in this Agreement and
                  the
                  Documents shall be true and correct on each Drawdown Date, Issuance
                  Date,
                  Rollover Date or Conversion Date as if made on that
                  date.

              

      

       

      
        	
                (e)

              	
                Notice.
                  The Borrower shall have provided any notice required in respect
                  of an
                  Advance, Rollover or Conversion.

              

      

       

      
        	
                (f)

              	
                Documentation.
                  The Borrower executing and delivering to the Bank customary documentation
                  required by the Bank from time to time for purposes of extending
                  Advances
                  by way of FRT Loan.

              

      

       

      
        	
                (g)

              	
                Compliance.
                  Confirmation that the Borrower is in compliance with each of the
                  terms and
                  conditions of the Agreement.

              

      

       

      10.   Covenants:
        The
        Borrower covenants and agrees with the Bank, while this Agreement is in effect
        or any Obligations are outstanding that it will, and it will cause its
        Subsidiaries, as applicable, to:

       

      
        	
                (a)

              	
                Payment.
                  Pay all sums of money when due under or in connection with this
                  Agreement
                  or the Documents.

              

      

       

      
        	
                (b)

              	
                Status.
                  Maintain its corporate existence and
                  status.

              

      

       

      
        	
                (c)

              	
                Notice.
                  Without limitation to the demand nature of any Credit Facility,
                  give the
                  Bank prompt notice of any Default or Event of
                  Default.

              

      

       

      
        	
                (d)

              	
                Insurance.
                  Insure and keep insured all properties customarily insured by Persons
                  carrying on a similar business in similar locations, or owning
                  or
                  operating similar properties, against all
                  risks.

              

      

       

      
        	
                (e)

              	
                Taxes.
                  File all material income tax returns which are or will be required
                  to be
                  filed, to pay or make provision for payment of all Taxes (including
                  interest and penalties) which are or will become due and payable
                  and to
                  provide adequate reserves for the payment of any Tax the payment
                  of which
                  is being contested.

              

      

       

      
        	
                (f)

              	
                Property.
                  Cause its properties and assets to be maintained and operated in
                  good
                  working condition in accordance with industry practice, and permit
                  the
                  Bank or its agents to enter on and inspect each of its assets and
                  properties, including operating and manufacturing facilities as
                  the Bank
                  may require upon reasonable advance notice to the
                  Borrower.

              

      

       

      
        	
                (g)

              	
                Applicable
                  Laws.
                  Comply, in all material respects, with all Applicable Laws and
                  all
                  Government Approvals required in respect of its business, properties,
                  or
                  any activities or operations carried out thereon including health,
                  safety
                  and employment standards, labour codes and Environmental
                  Laws.

              

      

       

      
        	
                (h)

              	
                Rank.
                  Not do anything to adversely affect the ranking of its Obligations
                  to the
                  Bank.

              

      

       

      
        	
                (i)

              	
                No
                  Liens.
                  Not grant, create, assume or suffer to exist any Lien affecting
                  any of its
                  properties, assets or other rights without the prior written consent
                  of
                  the Bank which

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -14
            -

        

      

       

      

        
          	 	consent shall not be
                  unreasonably
                  withheld, provided, however, that, notwithstanding the foregoing,
                  in any
                  fiscal year the Borrower may incur Liens securing an aggregate
                  indebtedness not exceeding Cdn.$50,000 in connection with purchase
                  money
                  security interests and/or capital leases.

        

      

       

      
        	
                (j)

              	
                No
                  Dispositions.
                  Not to sell, transfer, convey, lease or otherwise dispose of any
                  part of
                  its property or assets, outside of its normal course of business
                  without
                  the prior written consent of the Bank if the proceeds of any such
                  transaction are not completely used to repay the
                  Bank.

              

      

       

      
        	
                (k)

              	
                Corporate
                  Changes.
                  Not liquidate, dissolve or merge, amalgamate or consolidate with
                  any other
                  Person, without the prior written consent of the
                  Bank.

              

      

       

      
        	
                (l)

              	
                Indebtedness.
                  Not issue, create, incur, assume, permit to exist any indebtedness
                  other
                  than indebtedness under this Agreement and the Documents, trade
                  payables,
                  or guarantees or capital leases incurred in the ordinary course
                  of
                  business and in any event not exceeding $200,000 in aggregate,
                  without the
                  prior written consent of the Bank.

              

      

       

      11.   Events
        of Default: Without
        limiting the right of the Bank to demand payment of the Credit Facility at
        any
        time and from time to time notwithstanding the compliance or non-compliance
        by
        the Borrower with any or all of the terms and conditions of the Documents,
        the
        occurrence of any one or more of the following events shall constitute an
“Event
        of Default” and the Bank may, without limitation, exercise any of its rights
        pursuant to the Documents and/or Applicable Law:

       

      
        	
                (a)

              	
                Payment.
                  The non-payment when due of principal, interest, fee, or any other
                  amounts
                  due under this Agreement or the Documents and such default shall
                  continue
                  unremedied for a period of 5 Business Days after written
                  notice.

              

      

       

      
        	
                (b)

              	
                Breach.
                  The breach by the Borrower, any Guarantor or any Subsidiary of
                  the
                  Borrower, as applicable, of any material provision of this Agreement,
                  the
                  Documents or any other agreement with the Bank and such default
                  (other
                  than a default under paragraph (a) above) shall continue unremedied
                  for a
                  period of 30 Business Days after written
                  notice.

              

      

       

      
        	
                (c)

              	
                Other
                  Indebtedness. The
                  default by the Borrower, the Guarantor or any Subsidiary of the
                  Borrower
                  under any obligation or obligations to repay borrowed money, or
                  in the
                  performance or observance of any agreement or condition in respect
                  of such
                  borrowed money (beyond any applicable grace period), or demand
                  by any
                  creditor or creditors for payment of indebtedness payable on demand
                  where,
                  following such default or demand, indebtedness having an aggregate
                  principal amount in excess of $500,000 is due and payable or the
                  maturity
                  of such obligations is accelerated.

              

      

       

      
        	
                (d)

              	
                Representation.
                  If
                  any representation or warranty made herein or in any Document,
                  agreement
                  or certificate delivered pursuant hereto shall be false or inaccurate
                  in
                  any material respect and such default (other than a default under
                  paragraph (a)) above shall continue unremedied for a period of
                  30 Business
                  Days after written notice.

              

      

       

      
        	
                (e)

              	
                Involuntary
                  Proceeding.
                  If
                  (a) a petition shall be filed or an involuntary proceeding, case
                  or
                  proposal shall be commenced against the Borrower or the Guarantor
                  under
                  any

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -15
            -

        

      

       

      
        
          	 	bankruptcy, insolvency,
                  debt
                  restructuring, reorganization, incorporation, readjustment of debt,
                  dissolution, liquidation, winding up or similar law now or hereafter
                  in
                  effect, seeking the liquidation, reorganization, dissolution, winding-up
                  composition or readjustment of debts of the Borrower or the Guarantor,
                  the
                  appointment of a trustee, receiver, receiver and manager, custodian,
                  liquidator, administrator or the like for the Borrower or the Guarantor
                  or
                  all or any material part of the Borrower's assets or the Guarantor's
                  assets, or any similar relief, and (b) such proceeding or petition
                  shall
                  continue undismissed for 60 days.

        

      

       

      
        	
                (f)

              	
                Voluntary
                  Proceeding.
                  The commencement by the Borrower or any Guarantor of, or the making
                  of any
                  order for substantive relief against the Borrower or any Guarantor
                  in, any
                  bankruptcy, insolvency, debt restructuring, reorganization, incorporation,
                  readjustment of debt, dissolution, liquidation or other similar
                  proceedings (including without limitation proceedings under the
                  Bankruptcy
                  and Insolvency Act,
                  the Winding-Up
                  and Restructuring Act,
                  the Companies'
                  Creditors Arrangement Act,
                  the corporation statute under which the Borrower or any Guarantor
                  is
                  organized or other similar legislation) or proceedings for the
                  appointment
                  of an interim receiver, receiver, receiver manager, liquidator,
                  provisional liquidator, trustee in bankruptcy, sequestrator or
                  other like
                  official with respect to the Borrower or any Guarantor or all or
                  any
                  material part of the Borrower's assets or the Guarantor's
                  assets.

              

      

       

      
        	
                (g)

              	
                Seizure.
                  The seizure of all or any material part of the Borrower's assets
                  or the
                  Guarantor's assets by any creditor or creditor's representative,
                  including
                  without limitation, a privately appointed receiver or
                  sheriff.

              

      

       

      
        	
                (h)

              	
                Judgements.
                  Judgments are made against the Borrower, any Guarantor, any Subsidiary
                  of
                  the Borrower or any one of them in excess of $50,000 by any court
                  of
                  competent jurisdiction and either (i) a writ, execution or attachment
                  or
                  similar process is levied against the property of any of them in
                  respect
                  of such judgment, or (ii) the judgment is not actively and diligently
                  appealed and execution thereof stayed pending appeal within 30
                  days of the
                  rendering of the judgment, or (iii) the judgment is not paid or
                  otherwise
                  satisfied within 30 days of the rendering of the
                  judgment.

              

      

       

      12.   General:
        The
        following terms and conditions apply:

       

      
        	
                (a)

              	
                Successors
                  and Assigns.
                  This Agreement shall be binding upon and enure to the benefit of
                  the
                  parties and their respective successors and permitted assigns.
                  The Bank
                  may not assign all or part of its rights and obligations under
                  this
                  Agreement and the Documents to any Person without the prior written
                  consent of the Borrower. Notwithstanding the foregoing and for
                  greater
                  certainty, where a demand for payment, Default or an Event of Default
                  has
                  occurred, the consent of the Borrower shall not be required with
                  respect
                  to the assignment to any Person of all or any part of the rights
                  and
                  obligations of the Bank under this Agreement and the Documents.
                  The rights
                  and obligations of the Borrower and any Guarantor under this Agreement
                  and
                  the Documents may not be assigned without the prior written consent
                  of the
                  Bank. The Bank may disclose (with the consent of the Borrower in
                  circumstances where a demand for payment, Default or Event of Default
                  has
                  not occurred) to potential or actual assignees confidential information
                  regarding the Borrower and the Guarantor (including, any such information
                  provided by

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -16
            -

        

      

      

        
          	 	the Borrower and/or
                  the Guarantor
                  to the Bank) and shall not be liable for any such
                  disclosure.

        

      

       

      
        	
                (b)

              	
                Expenses.
                  The Borrower and each Guarantor agrees to pay on demand all fees
                  (including reasonable legal fees), costs and expenses incurred
                  by the Bank
                  in connection with the preparation, negotiation and documentation
                  of this
                  Agreement and the Documents and the operation or enforcement of
                  this
                  Agreement and the Documents.

              

      

       

      
        	
                (c)

              	
                Review.
                  The Bank may conduct periodic reviews of the affairs of the Borrower,
                  as
                  and when determined by the Bank, for the purpose of evaluating
                  the
                  financial condition of the Borrower. The Borrower shall make available
                  to
                  the Bank such financial statements and other information and documentation
                  as the Bank may reasonably require and shall do all things reasonably
                  necessary to facilitate such review by the
                  Bank.

              

      

       

      
        	
                (d)

              	
                Priority
                  Claims.
                  The Borrower hereby grants its consent (such grant to remain in
                  force as
                  long as this Agreement is in effect or any Advances are outstanding)
                  to
                  any Person having information relating to any Priority Claim arising
                  by
                  any Applicable Law or otherwise and including, without limitation,
                  claims
                  by or on behalf of any Governmental Authority to release such information
                  to the Bank at any time upon its written request for the purpose
                  of
                  assisting the Bank to evaluate the financial condition of the
                  Borrower.

              

      

       

      
        	
                (e)

              	
                Amendments
                  and Waivers.
                  No
                  amendment or waiver of any provision of this Agreements and the
                  Documents
                  will be effective unless it is in writing signed by the Borrower,
                  the
                  Guarantor and the Bank. No failure or delay, on the part of the
                  Bank, in
                  exercising any right or power hereunder or under any security document
                  shall operate as a waiver thereof.

              

      

       

      
        	
                (f)

              	
                Judgement
                  Currency.
                  If
                  for the purpose of obtaining judgement in any court in any jurisdiction
                  with respect to this Agreement or the Documents, it is necessary
                  to
                  convert into the currency of such jurisdiction (the "Judgement
                  Currency")
                  any amount due hereunder in any currency other than the Judgement
                  Currency, then conversion shall be made at the rate of exchange
                  prevailing
                  on the Business Day before the day on which judgement is given.
                  For this
                  purpose "rate of exchange" means the rate at which the Bank would,
                  on the
                  relevant date, be prepared to sell a similar amount of such currency
                  in
                  the Toronto foreign exchange market, against the Judgement Currency,
                  in
                  accordance with normal banking procedures. In the event that there
                  is a
                  change in the rate of exchange prevailing between the Business
                  Day before
                  the day on which judgement is given and the date of payment of
                  the amount
                  due, the Borrower will, on the date of payment, pay such additional
                  amounts as may be necessary to ensure that the amount paid on such
                  date is
                  the amount in the Judgement Currency which, when converted at the
                  rate of
                  exchange prevailing on the date of payment, is the amount then
                  due under
                  this Agreement in such other currency together with interest at
                  the
                  Canadian Prime Rate and expenses (including legal fees on a solicitor
                  and
                  client basis). Any additional amount due from the Borrower under
                  this
                  section will be due as a separate debt and shall not be affected
                  by
                  judgement being obtained for any other sums due under or in respect
                  of
                  this Agreement.

              

      

       

      
        	
                (g)

              	
                Whole
                  Agreement.
                  This Agreement, the Documents and any other written agreement delivered
                  pursuant to or referred to in this Agreement constitute the whole
                  and
                  entire

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -17
            -

        

      

       

      
        
          	 	agreement between the
                  parties in
                  respect of the Credit Facilities. There are no verbal agreements,
                  undertakings or representations in connection with the Credit
                  Facilities.

        

      

       

      
        	
                (h)

              	
                Joint
                  and Several.
                  Where more than one Person is liable as Borrower or Guarantor for
                  any
                  obligation under this Agreement or the Documents, then the liability
                  of
                  each such Person for such obligation is joint and several with
                  each other
                  such Person.

              

      

       

      
        	
                (i)

              	
                Visit.
                  Representatives of the Bank shall be entitled to attend at the
                  Borrower's
                  business premises and to view all financial and other records of
                  the
                  Borrower at any time, on reasonable
                  notice.

              

      

       

      
        	
                (j)

              	
                References.
                  Time shall be of the essence in all provisions of this Agreement.
                  Unless
                  otherwise expressly provided, all accounting terms used in this
                  Agreement
                  shall be interpreted, all financial information shall be prepared
                  and all
                  financial calculations shall be made in accordance with GAAP, consistently
                  applied. The division of this Agreement into sections and the insertion
                  of
                  headings are for convenience of reference only and are not to affect
                  the
                  construction or interpretation of this Agreement. Unless otherwise
                  specified, words importing the singular include the plural and
                  vice versa
                  and words importing gender include all genders. Unless otherwise
                  specified, references in this Agreement to Sections, Schedules
                  and
                  Exhibits are to sections of, schedules to and exhibits to, this
                  Agreement.

              

      

       

      
        	
                (k)

              	
                No
                  Merger.
                  This Agreement shall, on execution by the Borrower and each Guarantor,
                  replace all previous letter loan agreements from the Bank to the
                  Borrower
                  with respect to the Credit Facilities. Any existing loan to the
                  Borrower
                  shall be modified, not refinanced, without novation of the Borrower's
                  existing facilities or obligations, by virtue of the Agreement
                  unless
                  otherwise provided in the Agreement. The terms and conditions of
                  the
                  Agreement shall not be merged by and shall survive the execution
                  of the
                  Documents. In the event of a conflict between the terms of this
                  Agreement
                  and the terms of the Documents, the terms of this Agreement shall
                  prevail
                  to the extent of such conflict.

              

      

       

      
        	
                (l)

              	
                Disclosure
                  of Information.
                  The Bank shall, in accordance with and subject to Applicable Law,
                  maintain
                  the confidentiality of all of the Borrower’s and Guarantor’s confidential
                  information. When it is necessary for providing products and services
                  to
                  the Borrower or any Guarantor, the Borrower and each Guarantor,
                  as
                  applicable, consents to the Bank obtaining from any credit reporting
                  agency or from any Person any information (including personal information)
                  that the Bank may require at any time. The Borrower and each Guarantor,
                  as
                  applicable, also consent to the disclosure at any time by the Bank
                  any
                  information concerning the Borrower and any Guarantor to any credit
                  grantor, to any credit reporting agency, or to the Bank's subsidiaries
                  and
                  affiliates. If applicable, the Borrower also authorizes the Bank
                  to
                  release the information contemplated by any builder's lien or similar
                  legislation to all persons claiming a right to such information
                  under such
                  legislation. The Borrower and each Guarantor may refuse or withdraw
                  these
                  consents; however this may result in the Bank cancelling or withholding
                  products or services for which these consents are necessary. Unless
                  each
                  Guarantor advises the Bank otherwise, the Bank may use the each
                  Guarantor's social insurance number, if applicable, to help ensure
                  accurate credit enquiries.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -18
            -

        

      

      
        	
                (m)

              	
                Increased
                  Costs.
                  The Borrower shall reimburse the Bank for any additional cost or
                  reduction
                  in income arising as a result of (i) the imposition of, or increase
                  in,
                  taxes on payments due to the Bank hereunder (other than taxes on
                  the
                  overall net income of the Bank), (ii) the imposition of, or increase
                  in,
                  any reserve or other similar requirement, (iii) the imposition
                  of, or
                  change in, any other condition affecting the Credit Facilities
                  imposed by
                  any Applicable Law or the interpretation
                  thereof.

              

      

       

      
        	
                (n)

              	
                Severability.
                  If
                  any provision of this Agreement is or becomes prohibited or unenforceable
                  in any jurisdiction, such prohibition or unenforceability shall
                  not
                  invalidate or render unenforceable the provision concerned in any
                  other
                  jurisdiction nor shall it invalidate, affect or impair any of the
                  remaining provisions.

              

      

       

      
        	
                (o)

              	
                Counterparts.
                  This Agreement and the Documents may be executed and delivered
                  in any
                  number of counterparts, each of which when executed and delivered
                  is an
                  original but all of which taken together constitute, as applicable,
                  one
                  and the same instrument.

              

      

       

      
        	
                (p)

              	
                Governing
                  Law.
                  This Agreement shall be construed in accordance with and governed
                  by the
                  laws of the Province of Ontario and the federal laws of Canada
                  applicable
                  therein and the parties attorn to the non-exclusive jurisdiction
                  of the
                  courts of the Province of Ontario.

              

      

       

      
        	
                (q)

              	
                Notice.
                  Unless otherwise specified, any notice or other communication required
                  or
                  permitted to be given to a party under this Agreement shall be
                  in writing
                  and may be delivered personally or sent by overnight delivery service
                  or
                  by facsimile, to the address or facsimile number of the party set
                  out
                  beside its name at the foot of this Agreement to the attention
                  of the
                  Person there indicated or to such other address, facsimile number
                  or other
                  Person's attention as the party may have specified by notice in
                  writing
                  given under this Section. Any notice or other communication shall
                  be
                  deemed to have been given: (i) if delivered personally, when
                  received; (ii) if sent by overnight delivery service, on the first
                  Business Day following the date of mailing; (iii) if sent by
                  facsimile, on the Business Day when the appropriate confirmation
                  of
                  receipt has been received if the confirmation of receipt has been
                  received
                  before 3:00 p.m. on that Business Day or, if the confirmation of
                  receipt has been received after 3:00 p.m. on that Business Day, on
                  the next succeeding Business Day; and (iv) if sent by facsimile on a
                  day which is not a Business Day, on the next succeeding Business
                  Day on
                  which confirmation of receipt has been received. If a notice has
                  been sent
                  by prepaid registered mail and before the fifth Business Day after
                  the
                  mailing there is a discontinuance or interruption of regular postal
                  service so that the notice cannot reasonably be expected to be
                  delivered
                  within 5 Business Days after the mailing, the notice will be deemed
                  to
                  have been given when it is actually
                  received.

              

      

       

      
        	
                (r)

              	
                Language.
                  The parties hereby confirm their express wish that this Agreement
                  and all
                  documents, agreements or notices directly or indirectly related
                  hereto be
                  drawn up in the English language. Les parties reconnaissent leur
                  volonté
                  expresse que le présent contrat ainsi que tous les documents, conventions
                  ou avis s’y rattachant directement ou indirectement soient rédigés en
                  langue anglaise.

              

      

       

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

      EXHIBIT
        1

       

      NOTICE
        OF ADVANCE

       

      Date: _____________________

       

      To: Fifth
        Third Bank

       

      Ladies
        and Gentlemen:

       

      The
        undersigned LSI
        Saco Technologies Inc.
        (the
        "Borrower")
        refers
        to the letter loan agreement dated as of January _____, 2007 (as the same
        may be
        amended, restated or replaced from time to time, (the "Agreement")),
        among, inter
        alia,
        the
        Borrower and Fifth Third Bank, as Bank. Capitalized terms used but not defined
        herein have the meaning assigned to such terms in the Agreement. The Borrower
        hereby notifies you, pursuant to the Agreement, of its request for the following
        Advance:

       

      
        	
                1.

              	
                Credit Facility:

              	
                _______________________

              
	
                2.

              	
                Amount and Currency:

              	
                _______________________

              
	
                3.

              	
                Drawdown Date/Issuance Date:

              	
                _______________________

              
	
                4.

              	
                Type of Loan
(Canadian Prime
                  Loan,
US Base Rate Loan, LIBOR
Loan, FRT Loan)

              	
                _______________________

              
	
                5.

              	
                Contract Period
for LIBOR Loan
                  or
FRT Loan

              	
                _______________________

              

      

      The
        undersigned hereby certifies that the following statements are true on the
        date
        hereof, and will be true on the Drawdown Date, immediately after the Advance
        and
        the application of the proceeds therefrom:

       

      
        	 	
                (a)

              	
                immediately
                  after such Advance, the sum in US Dollars of the aggregate outstanding
                  principal amount of all Advances outstanding from the Bank under
                  that
                  Credit Facility shall not exceed the maximum aggregate principal
                  amount
                  available under that Credit
                  Facility;

              

      

       

      
        	
                 

              	
                (b)

              	
                no Default or Event of Default
                  shall
                  have occurred and be continuing;  and

              

      

       

      
        	 	
                (c)

              	
                the
                  representations and warranties of the Borrower and the Guarantor
                  contained
                  in the Credit Agreement are and will be accurate in all material
                  respects.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          -2
            -

        

      

      

       

      
        	 	
                
                

                 

                Per:

              	
                LSI
                  SACO TECHNOLOGIES INC.

              
	
                 

                 

              	 
	 Name:
                 Title:

              	
              
	 	 

                Per:

              	
                 

              	 
	 	 	 Name:
                 Title:

              	
              

      

      

       

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

      EXHIBIT
        2

       

      NOTICE
        OF CONVERSION AND ROLLOVER

       

      Date: _____________________

       

      To: Fifth
        Third Bank

       

      Ladies
        and Gentlemen:

       

      The
        undersigned LSI
        Saco Technologies Inc.
        (the
        "Borrower")
        refers
        to the letter loan agreement dated as of January _____, 2007 (as the same
        may be
        amended, restated or replaced from time to time, the "Agreement"),
        among, inter
        alia,
        the
        Borrower and Fifth Third Bank, as Bank. Capitalized terms used but not defined
        herein have the meaning assigned to such terms in the Agreement. The Borrower
        hereby notifies you, pursuant to the applicable provision of the Agreement,
        of
        the following:

       

      
        	
                1.

              	
                Group
                  of Advances (or portion thereof) to which notice applies

              	 
	
                2.

              	
                Date
                  of Conversion or Rollover

              	 
	
                3.

              	
                New
                  type of Advance [if
                  Advances are to be converted]
                  or
                  repayment

              	 
	
                4.

              	
                Next
                  succeeding Contract Period [if
                  Advances are converted or rolled over to Libor Loans or FRT
                  Loans]

              	 

      

       

      The
        undersigned hereby certifies that the following statements are true on the
        date
        hereof, and will be true on the Rollover Date or Conversion Date, as applicable,
        immediately after the Rollover or Conversion, as applicable, and the application
        of the proceeds therefrom:

       

      
        	 	
                (a)

              	
                immediately
                  after such Rollover or Conversion, (i) the sum in US Dollars of
                  the
                  aggregate outstanding principal amount of all Advances outstanding
                  from
                  the Bank under that Credit Facility shall not exceed the maximum
                  aggregate
                  principal amount available under that Credit Facility and (ii)
                  no Advance
                  under any Credit Facility shall have a Contract Period that extends
                  beyond, if applicable, the maturity date of that Credit
                  Facility;

              

      

       

      
        
          	 	
                  (b)

                	
                   
                    no Default or Event of Default shall have occurred and be continuing;
                    and
                    

                

        

         

      

      
        	 	
                (c)

              	
                the
                  representations and warranties of the Borrower and the Guarantor
                  contained
                  in the Credit Agreement are and will be accurate in all material
                  respects.

              

      

       

      
        	 	 

                 

                 

                Per:

              	
                LSI
                  SACO TECHNOLOGIES INC.

              
	
                 

                 

                 

              	 
	 Name:
                Title:

              	
              
	 	 

                Per:

              	
                 

              	 
	 	 	 Name:
                Title:

              	
              

      

      

       

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

      SCHEDULE
        6

       

      to
        the Agreement dated as of January _____, 2007, among, inter
        alia,
        LSI Saco 

      Technologies
        Inc., as Borrower, and Fifth Third Bank, as the Bank.

       

      SPECIFIC
        CONDITIONS PRECEDENT

       

      The
        obligation of the Bank to make available any Advance is subject to and
        conditional upon each of the conditions below being satisfied on or before
        the
        applicable Drawdown Date:

       

      
        	
                1.

              	
                receipt
                  from the Guarantor of a true and complete copy of the US Credit
                  Agreement,
                  together with all amendments thereto, including an amendment which
                  confirms the lenders consent to the Guarantor providing an unlimited
                  guarantee in favor of the Bank;

              

      

       

      
        	
                2.

              	
                the
                  Guarantor is in compliance with the terms and conditions of the
                  US Credit
                  Agreement and no Event of Default (as defined therein) has occurred
                  and is
                  continuing thereunder;

              

      

       

      
        	
                3.

              	
                a
                  certificate of the Borrower dated the closing date certifying [Note
                  to Draft: FTB US counsel to confirm if something similar is to
                  be obtained
                  from US Guarantor];

              

      

       

      a)
        that
        its constating documents and the by-laws, which shall be attached thereto
        or
        referenced therein, as applicable, are complete and correct copies and are
        in
        full force and effect;

       

      
        	 	
                b)
                  all resolutions and all other authorizations necessary to authorize
                  the
                  execution and delivery of and the performance by it of its obligations
                  under this Agreement and the other Documents to which it is a party
                  and
                  all the transactions contemplated thereby have been taken and/or
                  completed; and

              

      

       

      
        	 	
                c)
                  all representations and warranties contained in this Agreement
                  are true
                  and correct as if made on the date of the
                  certificate.

              

      

       

      
        	
                4.

              	
                a
                  legal opinion from Canadian counsel to the Borrower and the Guarantor
                  in
                  form and substance satisfactory to the Bank and its counsel;
                  and

              

      

       

      
        	
                5.

              	
                a
                  legal opinion from United States counsel to the Guarantor in form
                  and
                  substance satisfactory to the Bank and its
                  counsel.

              

      

       

       

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      SCHEDULE
        7

       

      to
        the Agreement dated as of January _____, 2007, among, inter
        alia,
        LSI Saco 

      Technologies
        Inc., as Borrower, and Fifth Third Bank, as the Bank.

       

      SPECIFIC
        REPRESENTATIONS AND WARRANTIES

       

      
        	
                1.

              	
                The
                  Guarantor is in compliance with all terms and conditions of the
                  US Credit
                  Agreement and no Event of Default (as defined therein) has occurred
                  and is
                  continuing thereunder.

              

      

       

      
        	
                2.

              	
                The
                  Borrower is a wholly-owned subsidiary of the
                  Guarantor.

              

      

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      SCHEDULE
        8(a)

       

      to
        the Agreement dated as of January ____, 2007, among, inter
        alia,
        LSI Saco Technologies

      Inc.
        as Borrower, and Fifth Third Bank, as the Bank.

       

      COMPLIANCE
        CERTIFICATE

       

      I,
        ___________________________________, the [insert
        title]
        of LSI
        Industries Inc. (the "Guarantor")
        hereby
        certify as of [insert
        last day of fiscal quarter/fiscal year, as applicable]
        on
        behalf of each of the Borrower and the Guarantor as follows:

       

      
        	
                1.

              	
                I
                  am familiar with and have examined the provisions of the letter
                  loan
                  agreement (the "Agreement")
                  dated January ____, 2007, among, inter
                  alia,
                  LSI Saco Technologies Inc., as Borrower, LSI Industries Inc., as
                  Guarantor, and Fifth Third Bank and have made reasonable investigations
                  of
                  corporate records and inquiries of other officers and senior personnel
                  of
                  the Borrower and the Guarantor. Terms defined in the Agreement
                  have the
                  same meanings when used in this
                  certificate.

              

      

       

      
        	
                2.

              	
                The
                  representations and warranties contained in the Agreement are true
                  and
                  correct in all material respects.

              

      

       

      
        	
                3.

              	
                No
                  event or circumstance has occurred which constitutes or which,
                  with the
                  giving of notice, lapse of time, or both, would constitute a Default
                  or an
                  Event of Default under the Agreement and there is no reason to
                  believe
                  that during the next fiscal quarter of the Borrower and the Guarantor,
                  any
                  such event or circumstance will
                  occur.

              

      

       

      
        	
                4.

              	
                The
                  Guarantor is in compliance with all terms and conditions of the
                  US Credit
                  Agreement and no Event of Default (as defined therein) has occurred
                  and is
                  continuing thereunder and there is no reason to believe that during
                  the
                  next fiscal quarter of the Guarantor any Event of Default (as defined
                  therein) will occur under the US Credit
                  Agreement.

              

      

       

      Dated
        as
        of this _____ day of _____________, 20___.

       

      Per:  

      Name:

      Title:
        

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      SCHEDULE
        9

       

      to
        the Agreement dated as of January ____, 2007, among, inter
        alia,
        LSI Saco Technologies

      Inc.
        as Borrower, and Fifth Third Bank, as the Bank.

       

      SPECIFIC
        COVENANTS

       

      While
        any
        amount owing under this Agreement or any of the other Documents remains unpaid,
        or the Bank has any obligations under this Agreement or any of the other
        Documents, the Guarantor covenants and agrees with the Bank that the Guarantor
        will at all times remain in compliance with the terms and conditions of the
        US
        Credit Agreement unless such non-compliance is waived by the lenders or the
        agent pursuant to the terms of the US Credit Agreement. The Guarantor will
        immediately notify the Bank in writing in the event that (i) the Guarantor
        or
        any affiliated or related Person is required to provide security or other
        collateral to the Lenders under and in connection with the US Credit Agreement,
        or (ii) a default or an event of default occurs under or in connection with
        the
        US Credit Agreement unless such non-compliance is waived by the lenders or
        the
        agent pursuant to the terms of the US Credit Agreement.

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

      SCHEDULE
        10

       

      to
        the Agreement dated as of January ____, 2007, among, inter
        alia,
        LSI Saco Technologies 

      Inc.
        as Borrower, and Fifth Third Bank, as the Bank.

       

      FINANCIAL
        COVENANTS

       

      Not
        Applicable

       

      

       

      
        
          
          

          
          

        

        
          
          

          
            

          

        

        
          
          

          
             

          

        

      

      SCHEDULE
        11

       

      to
        the Agreement dated as of January ____, 2007, among, inter
        alia,
        LSI Saco Technologies 

      Inc.
        as Borrower, and Fifth Third Bank, as the Bank.

       

      SPECIFIC
        EVENTS OF DEFAULT

       

      The
        occurrence of a default or an event of default under the US Credit Agreement.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

     

     

    
       

      
        
        

        
          

        

      

      
        -2-

      

    

     

    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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        -3-

      

    

     

    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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        -4-

      

    

    

     

    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.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        -5-

      

    

     

    (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.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT
      BLANK]

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        -6-

      

    

     

    

               
      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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00115-of-00352.parquet"}]]