LOAN AGREEMENT FOR SECURED BRIDGE LOAN

LOAN AGREEMENT FOR

SECURED BRIDGE LOAN

March 9, 2005

AMONG

LORETTA BAKING MIX PRODUCTS LTD.

(as "Borrower")

- and -

LORETTA FOOD GROUP INC.

("Parent")

- and -

CAITHNESS FINANCIAL SERVICES LIMITED

(as "Lender")

- and -

AL BURGIO

(as "Burgio")

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TABLE OF CONTENTS

ARTICLE 1 - INTERPRETATION...............................................2

1.1 Definitions.................................................2

1.2 Headings...................................................10

1.3 Number.....................................................10

1.4 Accounting Principles......................................10

1.5 Accounting Practices.......................................10

1.6 Determinations by Obligors.................................10

1.7 Permitted Encumbrances.....................................11

1.8 Currency...................................................11

1.9 Conflicts..................................................11

1.10 Non-Business Days..........................................11

1.11 Statutory References.......................................11

1.12 Schedules..................................................12

ARTICLE 2 - THE LOAN....................................................12

2.1 Loan.......................................................12

2.2 Purpose of the Loan........................................12

2.3 Right of First Refusal.....................................12

ARTICLE 3 - CONDITIONS PRECEDENT........................................13

3.1 Conditions Precedent to the First Loan.....................13

3.2 Waiver.....................................................16

ARTICLE 4 - PAYMENTS OF INTEREST AND BONUS..............................16

4.1 Interest...................................................16

4.2 General Interest Rules.....................................16

4.3 Bonus......................................................17

ARTICLE 5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES....................17

5.1 Repayment of Principal.....................................17

5.2 Mandatory Prepayment of Principal..........................17

5.3 Voluntary Repayment of Principal...........................18

5.4 Manner of Payment of Principal, Interest and Fees..........18

ARTICLE 6 - REPRESENTATIONS AND WARRANTIES..............................18

6.1 Representations and Warranties.............................18

6.1.1 Existence and Qualification........................18

6.1.2 Power and Authority................................18

6.1.3 Execution, Delivery, Performance and

Enforceability of Documents........................19

6.1.4 Loan Documents Comply with Applicable Law,

Organizational Documents and Contractual

Obligations .......................................19

6.1.5 Consent Respecting Loan Documents..................19

6.1.6 Enforceable Obligations............................19

6.1.7 Taxes..............................................20

6.1.8 Judgments, Etc.....................................20

6.1.9 Absence of Litigation..............................20

6.1.10 Debt and Non Arm's Length Transactions.............20

6.1.11 Ownership..........................................20

6.1.12 Insurance..........................................21

6.1.13 Compliance with Law................................21

6.1.14 No Event of Default or Pending Event of Default....22

6.1.15 Relevant Jurisdictions.............................22

6.1.16 Material Contracts and Material Licences...........22

6.1.17 Fiscal Year........................................23

(i)

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6.1.18 Financial Information..............................23

6.1.19 No Material Adverse Effect.........................23

6.1.20 Insolvency.........................................23

6.1.21 Full Disclosure....................................23

6.2 Survival and Repetition of Representations and Warranties..24

ARTICLE 7 - COVENANTS...................................................24

7.1 Positive Covenants.........................................24

7.1.1 Timely Payment.....................................24

7.1.2 Conduct of Business, Maintenance of Existence,

Compliance with Law................................24

7.1.3 Access to Information..............................24

7.1.4 Obligations and Taxes..............................25

7.1.5 Use of the Loan....................................25

7.1.6 Insurance..........................................25

7.1.7 Notice of Event of Default or Pending Event

of Default.........................................25

7.1.8 Notice of Material Adverse Effect..................25

7.1.9 Notice of Litigation...............................26

7.1.10 Other Notices......................................26

7.1.11 Security...........................................26

7.1.12 Maintenance of Property............................27

7.1.13 Landlord Consents and Non-Disturbance Agreements...27

7.1.14 Material Contracts.................................27

7.1.15 Expenses...........................................27

7.1.16 Revision or Update of Schedules....................27

7.2 Reporting Requirements.....................................28

7.2.1 Financial Information..............................28

7.2.2 Information to be Presented to Directors...........28

7.2.3 Other Information..................................28

7.3 Negative Covenants.........................................29

7.3.1 Restrictions on Business Activities................29

7.3.2 Operation of Business..............................29

7.3.3 Disposition of Property............................29

7.3.4 Capital Expenditures...............................29

7.3.5 No Debt............................................29

7.3.6 No Encumbrances....................................29

7.3.7 No Distributions...................................29

7.3.8 No Repayment of Other Debt.........................29

7.3.9 No Consolidation, Amalgamation, etc................30

7.3.10 No Change of Name..................................30

7.3.11 No Continuance.....................................30

7.3.12 No Share Issuance..................................30

7.3.13 Ownership of Subsidiaries..........................30

7.3.14 Amendments to Organizational Documents.............30

7.3.15 Amendments to other Material Contracts and

Material Licences..................................30

7.3.16 Location of Assets in Other Jurisdictions..........30

7.3.17 Burgio Restriction.................................31

ARTICLE 8 - SECURITY....................................................31

8.1 Form of Security...........................................31

8.2 Insurance Assignment.......................................32

8.3 After Acquired Property and Further Assurances.............32

8.4 Registration...............................................32

8.5 Release of Security........................................33

ARTICLE 9 - DEFAULT.....................................................33

9.1 Events of Default..........................................33

9.2 Acceleration and Termination of Rights.....................35

(ii)

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9.3 Remedies Cumulative........................................36

9.4 Saving.....................................................36

9.5 Perform Obligations........................................36

9.6 Set-Off or Compensation....................................36

9.7 Application of Payments....................................37

ARTICLE 10 - COSTS, EXPENSES AND INDEMNIFICATION........................37

10.1 Costs and Expenses.........................................37

10.2 Indemnification by the Borrower............................38

10.3 Specific Third Party Claim Indemnification.................38

ARTICLE 11 - TAXES, CHANGE OF CIRCUMSTANCES.............................39

11.1 Change in Law..............................................39

11.2 Illegality.................................................40

11.3 Taxes......................................................41

ARTICLE 12 - SUCCESSORS AND ASSIGNS AND ADDITIONAL LENDERS..............41

12.1 Successors and Assigns.....................................41

12.2 Assignments................................................42

ARTICLE 13 - GENERAL....................................................42

13.1 Exchange and Confidentiality of Information................42

13.2 Notices....................................................43

13.3 Governing Law..............................................44

13.4 Consent to Jurisdiction....................................44

13.5 Severability...............................................45

13.6 Entire Agreement...........................................45

13.7 Further Assurances.........................................45

13.8 Waiver of Jury Trial.......................................45

13.9 Non-Merger.................................................46

13.10 Time of the Essence........................................46

13.11 Counterparts...............................................46

13.12 Amendments and Waivers.....................................46

ADDENDA

Schedule 1.1.1 (a)

Schedule 1.1.1 (b)

Schedule 1.1.1 (c)

Schedule 1.1.49

Schedule 2.1

Schedule 2.2

Schedule 6.1.9

Schedule 6.1.11

Schedule 6.1.12

Schedule 6.1.15

Schedule 6.1.16

(iii)

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LOAN AGREEMENT

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

B E T W E E N:

LORETTA BAKING MIX PRODUCTS LTD., a corporation incorporated under the laws of

the state of Michigan (hereinafter referred to as the

(hereinafter referred to as the "Borrower")

- and -

LORETTA FOOD GROUP INC., a corporation incorporated under the

laws of the state of Delaware (hereinafter referred to as the "Parent")

- and -

CAITHNESS FINANCIAL SERVICES LTD., a corporation incorporated under

the laws of the Province of Ontario (hereinafter referred to as the "Lender")

- and -

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

RECITALS:

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

wholesale.

B. The Borrower will use the proceeds of this Loan to acquire from Monroe Bank &

Trust ("Monroe") substantially all of the business assets (excluding real

property) ("Acquired Assets") formerly-owned by Amendt Corporation (Monroe

having acquired title to said assets by virtue of a voluntary surrender by

Amendt Corporation of said assets to Monroe and a sale by Monroe pursuant to the

provisions Article 9 of the Uniform Commercial Code as adopted in Michigan),

pursuant to the terms of an asset purchase agreement dated as of December 24,

2004 (the "Asset Purchase Agreement").

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

D. The Parent and Burgio, the Parent's principal, are willing to unconditionally

guaranty the obligations of the Borrower under this Loan Agreement and the Loan

Documents.

NOW THEREFORE, in consideration of the covenants and agreements contained

in this Agreement, the Parties agree as follows:

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ARTICLE 1 - INTERPRETATION

1.1 Definitions

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

inconsistent therewith:

1.1.1 "Acquired Assets" means the property to be acquired by the Borrower

pursuant to the Asset Purchase Agreement, the closing of which is to

occur contemporaneously with the completion of the transactions

hereunder on the Closing Date including, without limitation, the

following property:

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

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

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

hereto.

1.1.2 "Additional Compensation" has the meaning ascribed to that term in

Section 11.1(a)(iii);

1.1.3 "Affiliate" has the meaning ascribed to that term in the Business

Corporations Act (Ontario) and for greater certainty includes a

directly or indirectly held Subsidiary of any of the Obligors;

1.1.4 "Agreement" means this agreement, including its attached schedules, and

all amendments made to it in accordance with its provisions as amended,

revised, replaced, supplemented or restated from time to time;

1.1.5 "Applicable Law" means, in respect of a Person, property, transaction,

event or other matter, as applicable, all present or future Law

relating or applicable to that Person, property, transaction, event or

other matter, including any interpretation of Law by any Governmental

Authority;

1.1.6 "Applicable Order" means any applicable domestic or foreign order,

judgment, award or decree of any Governmental Authority;

1.1.7 Intentionally Deleted;

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

"Non-Arm's Length";

1.1.9 "Asset Purchase Agreement" means the asset purchase agreement dated the

24th day of December, 2004 between the Borrower and MB Monroe

Properties Inc. as purchasers and Monroe as vendor;

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

this Agreement;

1.1.11 "Borrower's Counsel" means the firm of Himelfarb Prozanski LLP or such

other firm of legal counsel as the Borrower may from time to time

designate;

1.1.12 "Business" means the business as now carried on by the Obligors, namely

the business of manufacturing and selling baking mixes and other food

product mixes at wholesale and/or at retail and all business or

activities related or ancillary thereto, and including the business

acquired as a result of the completion of the purchase of the Acquired

Assets;

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

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

1.1.15 "Change of Control" means the failure of the Parent to own, directly or

indirectly, legally and beneficially, 100% of the outstanding voting

stock of the Borrower or any direct Subsidiary acquired or incorporated

by the Borrower after the Closing Date (as may be permitted under this

Agreement) free and clear of all Encumbrances (other than the

Encumbrances created by the Security) or shall otherwise fail to

Control the Borrower.

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

agreed to by the parties

1.1.17 "Control" (including with correlative meanings the terms "controlled

by" and "under common control with") in respect of a corporation has

the meaning given thereto in the Business Corporations Act (Ontario)

and in respect of any other Person means the power to direct or cause

the direction of the management and policies of any Person, whether

through the ownership of shares or voting interests or by contract or

otherwise;

1.1.18 "Disposition" means any sale, assignment, transfer, conveyance, lease,

license or other disposition of any nature or kind whatsoever of any

Property or of any right, title or interest in or to any Property, and

the verb "Dispose" shall have a correlative meaning;

1.1.19 "Distribution" means, with respect to any Person, any payment, directly

or indirectly, by that Person:

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

(b) on account of, or for the purpose of setting apart any property for

a sinking or other analogous fund for, the purchase, redemption,

retirement or other acquisition of any shares of its capital or any

warrants, options or rights to acquire any such shares;

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

(d) of any principal of or interest or premium on, or of any amount in

respect of, a sinking or analogous fund or defeasance fund for

Subordinated Debt or other indebtedness or liability of such Person

ranking, at law or by contract, in right of payment subordinate to any

liability of such Person under the Loan Documents or otherwise; or

(e) of any management, consulting or similar fee or any bonus payment

or comparable payment, or by way of gift or other gratuity, to any

Affiliate of such Person or to any director or officer of such Person

or Affiliate of such Person, or to any Person not dealing at Arm's

Length with such first Person or Affiliate, director or officer;

1.1.20 "Encumbrance" means, in respect of any Person, any mortgage, debenture,

pledge, hypothec, lien, charge, assignment by way of security,

hypothecation or security interest granted or permitted by that Person

or arising by operation of law, in respect of any of that Person's

Property, or any consignment of Property by that Person as consignee or

lessee or any other security agreement, trust or arrangement having the

effect of security for the payment of any debt, liability or

obligation, and "Encumbrances", "Encumbrancer", "Encumber" and

"Encumbered" shall have corresponding meanings;

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

amount of

(a) the stated capital of all of the outstanding shares or other

ownership interest of that Person;

(b) that Person's accumulated retained earnings;

(c) the amount, without duplication, of any contributed surplus all as

set forth in the financial statements for that Person as at the end of

its most recently completed fiscal quarter; and

(d) the amount of any loans from shareholders of that Person which have

been fully subordinated and postponed to the Obligations on terms and

conditions satisfactory to the Lender;

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

Section 9.1;

1.1.23 "Financial Assistance" means, without duplication and with respect to

any Person, all loans granted by that Person and guarantees incurred by

that Person for the purpose of, or having the effect of, providing

financial assistance to another Person or Persons, including, without

limitation, letters of guarantee, letters of credit, legally binding

comfort letters or indemnities issued in connection with them,

endorsements of bills of exchange (other than for collection or deposit

in the ordinary course of business), obligations to purchase assets

regardless of the delivery or non-delivery of those assets and

obligations to make advances or otherwise provide financial assistance

to any other entity, and for greater certainty shall include any

guarantee of any third party lease obligations;

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1.1.24 "Fiscal Year" means the fiscal year of the Borrower ending on December

31 in each calendar year;

1.1.25 "GAAP" means those accounting principles which are recognized as being

generally accepted and which are in effect from time to time, as

published in the Handbook of the Canadian Institute of Chartered

Accountants;

1.1.26 "Governmental Authority" means the government of any nation, province,

territory, municipality, state or other political subdivision of any

nation, any entity exercising executive, legislative, judicial,

regulatory or administrative functions of or pertaining to government,

or the application, enforcement, or interpretation of Law, including

any central bank, and any corporation or other entity owned or

controlled (through stock or capital ownership or otherwise) by any of

the foregoing;

1.1.27 "Guarantors" means collectively, the Parent and Burgio, and "Guarantor"

shall mean any one of them;

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

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

1.1.30 "Law" means all laws, (including the common law), by-laws, ordinances,

rules, statutes, regulations, treaties, orders, rules, judgments and

decrees, and all official directives, rules, guidelines, notices,

approvals, orders, policies and other requirements of any Governmental

Authority whether or not they have force of law;

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

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

this Agreement;

1.1.33 "Lender's Counsel" means the firm of Kavanagh Bateman & Baek LLP or any

other firm of legal counsel that the Lender may from time to time

designate;

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

1.1.35 "Loan Documents" means this Agreement, the Security and all other

documents, certificates and instruments executed or delivered or to be

executed or delivered by an Obligor to the Lender pursuant hereto or

thereto, as the same may be modified, amended, extended, restated or

supplemented from time to time and "Loan Document" shall mean any one

of the Loan Documents;

1.1.36 "Material Adverse Effect" means:

(a) a material adverse effect on the business , operations, properties,

assets, condition (financial or otherwise) or prospects of any Obligor;

(b) an adverse effect on the legality, validity or enforceability of

any of the Loan Documents which could reasonably be considered material

having regard to the Loan Documents considered as a whole, including

the validity, enforceability, perfection or priority of any Encumbrance

created or intended to be created under any of the Security which could

reasonably be considered material having regard to the Security

considered as a whole;

(c) an adverse effect on the right, entitlement or ability of any

Obligor to pay or perform any of its Obligations under any of the Loan

Documents which could reasonably be considered material having regard

to the Obligors as a whole; or

(d) an adverse effect on the right, entitlement or ability of the

Lender to enforce any of the Obligations of any Obligor which could

reasonably be considered material having regard to the Obligors, or any

one of them, or to exercise or enforce any of its rights, entitlements,

benefits or remedies under any of the Loan Documents;

1.1.37 "Material Contract" means any agreement, arrangement or understanding,

whether written or oral, which:

(a) materially affects the business, operations, assets or prospects,

financial or otherwise, of the Borrower, including without limitation,

the Business; or

(b) is from time to time designated by the Lender in its sole

discretion, acting reasonably, as a Material Contract, provided notice

of such designation is delivered to the Borrower by the Lender (and,

for greater certainty, the contracts listed in Schedule 6.1.16 are

deemed to be so designated);

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1.1.38 "Material Licence" means any licence, franchise, permit or approval

issued by any Governmental Authority to the Borrower, and which is at

any time on or after the date of this Agreement,

(a) necessary or material to the business and operations of the

Borrower, including without limitation, the Business or the breach,

default or revocation of which would result in a Material Adverse

Effect, or

(b) is from time to time designated by the Lender in its sole

discretion, acting reasonably, as a Material Licence, provided notice

of such designation is delivered to the Borrower by the Lender (and,

for greater certainty, the licences listed in Schedule 6.1.16 are

deemed to be so designated);

1.1.39 "Maturity Date" means March 1, 2006;

1.1.40 "Net Proceeds" means, with respect to any Disposition, the aggregate

fair market value of proceeds of that Disposition (whether such

proceeds are in the form of cash or other Property or part cash and

part other Property) net of reasonable, bona fide direct transaction

costs and expenses incurred in connection with that Disposition;

1.1.41 "Non-Arm's Length" and similar phrases have the meaning attributed

thereto for the purposes of the ITA; and "Arm's Length" shall have the

opposite meaning;

1.1.42 "Obligations" means, with respect to an Obligor, all of that Obligor's

present and future indebtedness, liabilities and obligations of any and

every kind, nature or description whatsoever (whether direct or

indirect, joint or several or joint and several, absolute or

contingent, matured or unmatured, in any currency and whether as

principal debtor, guarantor, surety or otherwise, including without

limitation any interest that accrues thereon or would accrue thereon

but for the commencement of any case, proceeding or other action,

whether voluntary or involuntary, relating to the bankruptcy,

insolvency or reorganization whether or not allowed or allowable as a

claim in any such case, proceeding or other action) to the Lender

under, in connection with, relating to or with respect to each of the

Loan Documents, and any unpaid balance thereof;

1.1.43 "Obligors" means, collectively, the Borrower and the Guarantors and

their respective successors and assigns and "Obligor" means any one of

them;

1.1.44 "Organizational Documents" means, with respect to any Person, that

Person's articles or other charter documents, by-laws, unanimous

shareholder agreement, partnership agreement, joint venture agreement,

operating agreement or trust agreement, as applicable, and any and all

other similar agreements, documents and instruments relative to that

Person;

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

this Agreement;

1.1.46 "Parties" means the Borrower, the Lender, the Parent, and any other

Person that may become a party to this Agreement;

1.1.47 "Pending Event of Default" means an event which, but for the

requirement for the giving of notice, lapse of time, or both, or but

for the satisfaction of any other condition subsequent to that event,

would constitute an "Event of Default";

1.1.48 "Permitted Distributions" means:

(a) routine employee salaries, bonuses, and benefits, all paid in the

normal course of business;

(b) redemption, out of the earned funds of the Borrower, of up to One

Thousand (1,000) shares of Class A Preferred Stock of Borrower

originally issued to and held by Monroe at a redemption price of One

Hundred ($100) Dollars per share on December 31, 2005.

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

(a) the Security;

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

and

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

1.1.50 "Person" is to be broadly interpreted and includes an individual, a

corporation, a limited liability company, an unlimited liability

company, a partnership, a trust, an incorporated organization, a joint

venture, the government of a country or any political subdivision of a

country, or an agency or department of any such government, any other

Governmental Authority and the executors, administrators or other legal

representatives of an individual in such capacity;

1.1.51 "Property" means, with respect to any Person, all or any portion of

that Person's undertaking, property and assets, both real and personal,

including, for greater certainty, any share in the capital of a

corporation or ownership interest in any other Person;

1.1.52 "Relevant Jurisdiction" means, from time to time, with respect to any

Person that is granting Security under this Agreement, any province or

territory of Canada, any state of the United States or any other

country or political subdivision thereof, in which that Person has its

chief executive office or chief place of business or has Property and,

for greater certainty, includes the provinces and states set out in

Schedule 6.1.15;

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1.1.53 Intentionally Omitted.

1.1.54 "Requirements of Law" means, in respect of any Person, the

Organizational Documents of such Person and any Applicable Law, in each

case applicable to or binding upon such Person or any of its business

or Property or to which such Person or any of its business or Property

is subject;

1.1.55 "Security" means all security held from time to time by or on behalf of

the Lender, securing or intended to secure directly or indirectly

repayment of the Obligations and includes all security described in

Article 8;

1.1.56 "Senior Officer" means, in respect of any Person, the chairperson, the

chief executive officer, the chief operating officer, the chief

financial officer, the president, or any vice-president of such Person

or any person holding a similar office;

1.1.57 "Subordinated Debt" means indebtedness owing by any Obligor to any

Person, which indebtedness (including the payment of principal and

interest) and any security granted in respect of that indebtedness is

fully and absolutely postponed and subordinated to the full, final and

indefeasible repayment of the Obligations pursuant to a written

agreement in form and substance satisfactory to the Lender in its sole

discretion, acting reasonably;

1.1.58 "Subsidiary" means, with respect to a corporation, a subsidiary as

defined in the Business Corporations Act (Ontario) or the Michigan

Business Corporations Act, MCLA 450.1101, et. seq. as in effect on the

date hereof, and any partnership, joint venture or other organization

which is Controlled by the corporation or any Subsidiary of the

corporation;

1.1.59 "Tax" or "Taxes" means all taxes, charges, fees, levies, imposts and

other assessments of any kind or nature whatsoever, including without

limitation all income, sales, use, goods and services, value added,

capital, capital gains, alternative, net worth, transfer, profits,

withholding, payroll, employer health, excise, franchise, real property

and personal property taxes, and any other taxes, customs duties, fees,

assessments, royalties, duties, deductions, compulsory loans or similar

charges in the nature of a tax, including Canada Pension Plan and

provincial pension plan contributions, employment insurance payments

and workers compensation premiums, together with any instalments, and

any interest, fines and penalties, imposed by any Governmental

Authority, whether disputed or not; and

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

States of America.

1.2 Headings

The division of this Agreement into Articles and Sections and the insertion

of headings are for convenience of reference only and shall not affect the

construction or interpretation of this Agreement. The term "this Agreement",

refers to this Agreement in its entirety and not to any particular Article,

Section or other portion of this Agreement and includes any agreement

supplemental to this Agreement. Unless otherwise indicated, references in this

Agreement to Articles and Sections are to Articles and Sections of this

Agreement.

1.3 Number

Words importing the singular number only shall include the plural and vice

versa, words importing the masculine gender shall include the feminine and

neuter genders and vice versa.

1.4 Accounting Principles

Where the character or amount of any asset or liability, or item of revenue

or expense, is required to be determined, or any consolidation or other

accounting computation is required to be made for the purpose of this Agreement

or any Loan Document, that determination or calculation shall, to the extent

applicable and except as otherwise specified in this Agreement or as otherwise

agreed in writing by the Parties, be made in accordance with GAAP.

1.5 Accounting Practices

All calculations for the purpose of determining compliance with the

financial ratios and financial covenants contained in this Agreement shall be

made on a basis consistent with GAAP in existence as at the date of this

Agreement. In the event of a change in GAAP, the Borrower and the Lender shall

negotiate in good faith to revise (if appropriate) those ratios and covenants to

reflect GAAP as then in effect, in which case all subsequent calculations made

for the purpose of determining compliance with those ratios and covenants shall

be made on a basis consistent with GAAP in existence as at the date of those

revisions.

1.6 Determinations by Obligors

All provisions contained herein or under any other Loan Document requiring

any Obligor to make a determination or assessment of any event or circumstance

or other matter to the best of its knowledge shall be deemed to require such

Obligor to make all due inquiries and investigations as may be necessary or

prudent in the circumstances before making any such determination or assessment.

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1.7 Permitted Encumbrances

The inclusion of reference to Permitted Encumbrances in any Loan Document

is not intended to subordinate, and shall not subordinate, any Encumbrance

created by any of the Security to any Permitted Encumbrance.

1.8 Currency

Unless otherwise specified in this Agreement, all references to dollar

amounts (without further description) shall mean United States Dollars and all

payments shall be made in United States Dollars.

1.9 Conflicts

In the event of a conflict or inconsistency between the application of any

of the provisions of this Agreement and the application of any of the provisions

of any of the other Loan Documents, the provisions giving the Lender greater

rights or remedies shall govern (to the maximum extent permitted by Applicable

Law), it being understood that the purpose of this Agreement and any other Loan

Document is to add to, and not detract from, the rights granted to the Lender

under the Loan Documents.

1.10 Non-Business Days

Unless otherwise expressly provided in this Agreement, whenever any payment

is stated to be due on a day other than a Business Day, the payment will be made

on the immediately preceding Business Day. In the case of interest or fees

payable pursuant to the terms of this Agreement, the extension or contraction of

time will be considered in determining the amount of interest and fees. Unless

otherwise expressly provided in this Agreement, whenever any action to be taken

is stated or scheduled to be required to be taken on, or (except with respect to

the calculation of interest or fees) any period of time is stated or scheduled

to commence or terminate on, a day other than a Business Day, the action will be

taken or the period of time will commence or terminate, as the case may be, on

the immediately preceding Business Day.

1.11 Statutory References

Any reference in this Agreement to any Law, or to any section of or any

definition in any Law, shall be deemed to be a reference to such Law or section

or definition as amended, supplemented, substituted, replaced or re-enacted from

time to time.

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1.12 Schedules

The following are the Schedules annexed hereto and incorporated by

reference and deemed to be part hereof:

Schedule 1.1.1(a) - Equipment

Schedule 1.1.1(b) - Inventory

Schedule 1.1.1(c) - Accounts Receivable

Schedule 1.1.49 - Permitted Encumbrances

Schedule 2.1 - Senior Secured Promissory Note

Schedule 2.2 - Asset Purchase Agreement

Schedule 6.1.9 - Absence of Litigation

Schedule 6.1.11 - Description of Real Property

Schedule 6.1.12 - Insurance Policies

Schedule 6.1.15 - Relevant Jurisdictions

Schedule 6.1.16 - Material Contracts and Material Licenses

ARTICLE 2 - THE LOAN

2.1 Loan

Subject to the terms and conditions, and during the term of this Agreement,

the Lender agrees to lend to the Borrower and the Borrower agrees to borrow from

the Lender the principal sum of EIGHT HUNDRED EIGHTY THOUSAND AND NO/100THS

UNITED STATES DOLLARS (US$ 880,000) (the "Loan"). The Lender shall advance the

Loan Amount to the Borrower on the Closing Date. The loan shall be evidenced by

a promissory note (the "Note") substantially in the form attached hereto as

Schedule 2.1.

2.2 Purpose of the Loan

Except for the payment of the bonus contemplated by Section 4.3 (a), the

Borrower shall use the Loan Amount solely to pay the purchase price of Purchased

Assets acquired from Monroe pursuant to the Asset Purchase Agreement (a copy of

which is attached hereto as Schedule "2.2"). The Borrower shall not use the Loan

Amount for any other purpose.

2.3 Right of First Refusal

The Lender shall have the right of first refusal to provide to the Borrower

any subsequent financing of any kind, including without limitation debt, lease

facility, convertible debt, rights or equity until the Loan is fully repaid. The

Borrower shall provide Lender with fifteen (15) days prior written notice of any

proposed subsequent funding during which time Lender may match the terms and

conditions thereof or this right of first refusal shall terminate.

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ARTICLE 3 - CONDITIONS PRECEDENT

3.1 Conditions Precedent to the First Loan

The obligations of the Lender under this Agreement (including without

limitation, the obligation to make the first Loan hereunder) are subject to, and

conditional upon, all of the following conditions precedent being satisfied as

at the Closing Date:

(a) receipt by the Lender of a copy of the following documents (together

with this Agreement and such other documents as may be required by the

Lender hereunder from time to time, collectively referred to as the

"Loan Documents"), each duly executed and delivered, and in form and

substance satisfactory to the Lender in the Lender's sole discretion:

(i) this Loan Agreement;

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

(iii) Assignment of Lease or Leasehold Deed of Trust, at the Lender's

discretion, covering the tenant's interest in the Leased Premises for

security purposes;

(iv) Attornment and Non-Disturbance Agreement made by the landlord of

the Leased Premises in favor of the Lender; and

(v) Subordination and Postponement Agreement among the Lender, the

Borrower and Monroe;

(b) receipt by the Lender of certified true copies of the Organizational

Documents of each Obligor, the resolutions authorizing the execution,

delivery and performance of each Obligor's respective obligations under

the Loan Documents and the transactions contemplated in this Agreement,

as well as certificates of the incumbency of the officers of the

Obligors, and any other documents to be provided under the terms and

conditions of this Agreement;

(c) receipt by the Lender of certificates of status or good standing, as

applicable, for all Relevant Jurisdictions of each Obligor;

(d) compliance by each Obligor in all material respects with all Material

Contracts and Material Licenses to the satisfaction of the Lender in

its sole discretion, acting reasonably, and a receipt by the Lender of

copies of all Material Contracts and Material Licences of each of the

Obligors;

(e) completion by the Lender of its due diligence with respect to the

Obligors, the Acquired Assets and the Business, including but not

limited to a review of all Material Contracts and Material Licenses,

the results of which shall be satisfactory to the Lender in its sole

discretion, acting reasonably;

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(f) receipt by the Lender of copies, if any, of all required shareholder,

regulatory, governmental, and other approvals, necessary or desirable

in connection with the execution and delivery of the Loan Documents and

the consummation of the transactions contemplated by the Loan

Documents;

(g) receipt by the Lender of copies of all documentation to be delivered

under the terms of the Asset Purchase Agreement including the bill of

sale by Monroe on the closing of the purchase of the Acquired Assets,

certified by a Senior Officer of the Borrower to be true and correct in

full force and effect;

(h) all representations and warranties of the Borrower or any Guarantor set

forth in any Loan Document shall be true and correct in all material

respects on the Closing Date;

(i) completion by the Borrower, to the satisfaction of the Lender in its

sole discretion, acting reasonably, of the purchase of the Acquired

Assets free and clear of all Encumbrances and all other rights or

claims of any other Person, except for Permitted Encumbrances, and the

transactions otherwise contemplated in, and substantially in accordance

with the terms and conditions (without any waiver or variation thereof)

of, the Asset Purchase Agreement, including, without limitation an

opinion of the Borrower's counsel with respect to the Acquired Assets

addressed to the Lender;

(j) delivery to the Lender of any releases, discharges, subordinations and

postponements (in registerable form where appropriate) of all

Encumbrances affecting the collateral encumbered by the Security which

are not Permitted Encumbrances;

(k) delivery to the Lender of subordination or non sheltering agreements in

form satisfactory to the Lender in its sole discretion, acting

reasonably, obtained from all secured Parties under Permitted

Encumbrances designated by the Lender;

(l) the non-existence of any continuing Event of Default or Pending Event

of Default on the Closing Date, including any Event of Default or

Pending Event of Default that would result from making the Loan;

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

(n) delivery to the Lender of duly executed copies of the Security, and the

due registration, filing and recording of the Security in all

applicable offices or places of registration in all Relevant

Jurisdictions;

(o) delivery to the Lender of a currently-dated letters of opinion of the

Borrower's Counsel that encompasses all Obligors, in form and substance

satisfactory to the Lender and the Lender's Counsel in their sole

discretion;

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(p) receipt by the Lender of copies of certificates of insurance of the

Obligors evidencing general comprehensive liability and property

insurance meeting the requirements set forth in the Loan Documents, all

in accordance with Section 7.1.6;

(q) receipt by the Lender from the Borrower of a statement of sources and

uses of funds covering all payments reasonably expected to be made by

the Borrower in connection with the purchase of the Acquired Assets and

otherwise on the Closing date of the first Loan, including an estimate

of all fees, expenses and other closing costs; and

(r) payment in full on or before the Closing Date to the Lender of the

aggregate amount of the Lender's actual and estimated legal fees and

other out-of-pocket fees and expenses (including any goods and services

tax, provincial sales tax or any commodity taxes thereon) in connection

with its due diligence review, preparation of the Indicative Term

Sheet, Loan Documents and all related documentation;

(s) delivery to the Lender of executed copies of all other Loan Documents

not specifically referenced in this Section 3.1, including written

acknowledgements and consents to assignment to the Lender signed by all

counterparties to the Material Contracts;

(t) the Approved Budget shall have been finalized and approved by the

Lender, and a copy delivered to the Lender at Closing;

(u) prior to the advance of the Loan, the Lender shall have reviewed each

lease and memorandum of lease over the Leased Premises, and shall have

determined in its sole discretion that each is in form and substance

satisfactory to the Lender in all respects. The Leases shall be in full

force and effect and no party shall be in breach of or in default

thereunder, nor shall an event have occurred which with the passage of

time or the giving of notice or both would constitute an event of

default thereunder;

(v) Monroe shall have executed and delivered a final Asset Purchase

Agreement, bill of sale and/or such other documents as in the Lender's

reasonable judgment are necessary and appropriate for the acquisition

by the Borrower of the Acquired Assets, and the sole contingency to

closing of the sale of the Acquired Assets shall be the advance of the

Loan;

(w) delivery to the Lender of evidence that the Loan Amount will be used

solely for the purpose provided for in Section 2 hereof;

(x) the Borrower has delivered a cheque in the amount of CDN $15,000

payable to the Borrower's Counsel; and

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(y) receipt by the Lender of such additional evidence, documents or

undertakings as the Lender shall reasonably request to establish the

consummation of the transactions contemplated by this Agreement, and to

satisfy the Lender in its sole discretion, acting reasonably, that all

proceedings in connection with this Agreement are being taken in

compliance with the conditions set out in this Agreement;

provided that all documents delivered pursuant to this Section 3.1 shall be

in full force and effect and in form and substance satisfactory to the

Lender in its sole discretion, acting reasonably.

3.2 Waiver

The conditions set forth in Sections 3.1 are inserted for the sole benefit

of the Lender and may be waived by the Lender, in whole or in part (with or

without terms or conditions) in respect of the Loan.

ARTICLE 4 - PAYMENTS OF INTEREST AND BONUS

4.1 Interest

The Borrower shall pay interest on the amount of outstanding principal

under this Loan Agreement from time to time at a rate of 12% per annum (net of

any withholding or other similar taxes). Interest shall be payable monthly in

arrears on the last Business Day of each month (net of any withholding or other

similar taxes). Notwithstanding the foregoing, if an Event of Default shall have

occurred and be continuing, interest shall accrue at a rate of 15% per annum on

the amount of outstanding principal and any other amount payable under this Loan

Agreement.

4.2 General Interest Rules.

(a) All interest payments to be made under this Agreement shall be paid

without allowance or deduction, both before and after maturity and

before and after judgment, if any, until payment. Interest shall accrue

on overdue interest, if any, compounded monthly.

(b) Unless otherwise stated, wherever in this Agreement reference is made

to a rate of interest or rate of fees "per annum" or a similar

expression is used, such interest or fees will be calculated on the

basis of a calendar year of 365 days or 366 days, as the case may be,

and using the nominal rate method of calculation, and will not be

calculated using the effective rate method of calculation or on any

other basis that gives effect to the principle of deemed re-investment

of interest.

(c) In calculating interest or fees payable under this Agreement for any

period, unless otherwise specifically stated, the first day of a period

shall be included and the last day of a period shall be excluded.

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4.3 Bonus

The Borrower shall pay to the Lender the following non-refundable bonus

payments (net of any withholding or other similar taxes):

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

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

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

and

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

The Borrower hereby irrevocably authorizes and directs the Lender to

withhold from the advance of the Loan Amount the sum of US $80,000.00 (net of

any withholding or other similar taxes) in satisfaction of its bonus payment

obligation under Section 2.4 (a).

ARTICLE 5 - PAYMENTS OF PRINCIPAL, INTEREST AND FEES

5.1 Repayment of Principal

Unless the Borrower is required to repay the Loan Amount at an earlier date

pursuant to this Loan Agreement, the Borrower shall repay to the Lender the

outstanding principal amount of the Loan together with all accrued interest,

fees and other amounts then unpaid by it in full on the Maturity Date.

5.2 Mandatory Prepayment of Principal

(a) The Borrower shall pay to the Lender:

(i) 75% of any proceeds from the sale, assignment, licence, transfer or

disposition of any asset (including insurance proceeds) whether

tangible or intangible (except for Excluded Proceeds); and

(ii) 100% of any proceeds from the issuance or sale of any equity or

debt of the Borrower or its subsidiary or any other financing activity

of the Borrower or its subsidiary.

(b) "Excluded Proceeds" means proceeds from dispositions in the ordinary

course of the Borrower's business of inventory or other assets that are

customarily sold by the Borrower on an-on-going basis as part of the

normal operation of its business. 5.3 Voluntary Repayment of Principal

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5.3 Voluntary Repayment of Principal

The Borrower may prepay the outstanding Loan Amount at any time without

bonus or penalty upon fifteen (15) days' prior written notice to the Lender.

5.4 Manner of Payme