EXHIBIT 10.3
 
AMENDED AND RESTATED INTERCREDITOR AND SUBORDINATION AGREEMENT
 
THIS AMENDED AND RESTATED INTERCREDITOR AND SUBORDINATION AGREEMENT is entered
into as of _____________, 2007, among ST. CLOUD CAPITAL PARTNERS, L.P. (“Senior
Creditor”), and the subordinated creditors executing this Agreement (each
hereinafter referred to as a “Subordinated Creditor” and collectively, as the
“Subordinated Creditors”), and SBI Advisors, LLC, a California limited liability
company, in its capacity as administrative agent for the Original Subordinated
Creditors (“Administrative Agent”), in light of the following:
 
R E C I T A L S
 
A.  This Agreement amends and restates the Intercreditor and Subordination
Agreement entered into as of February __, 2007, effective as of November 6,
2006, among (i) Senior Creditor, (ii) Hong Kong League Central Credit Union, a
Hong Kong credit union (“HKLCCU”), (iii) Kershaw/Mackie & Company, a sole
proprietorship (“KM&C”) (HKLCCU and KM&C are hereafter referred to as the
“Original Subordinated Creditors.” For purposes hereof, the term “New
Subordinated Creditors” means and refers to those Subordinated Creditors other
than the Original Subordinated Creditors.
 
B.  Senior Creditor and SMALL WORLD KIDS, INC., a Nevada corporation (“Debtor”),
have entered into that certain Note Purchase Agreement dated as of September 7,
2004 (as amended and modified by (i) that certain Amendment to Note Purchase
Agreement dated as of July 20, 2005, (ii) that certain Second Amendment Note
Purchase Agreement dated as of November 9, 2005, and (iii) that certain Third
Amendment to Note Purchase Agreement dated as of May 31, 2006) (the “Note
Purchase Agreement”).
 
C.  Pursuant to the Note Purchase Agreement, Senior Creditor made a loan to
Debtor in the amounts set forth in the Note Purchase Agreement.
 
D.  To secure repayment of the amounts loaned to Debtor and performance of the
other covenants, agreements and undertakings of Debtor under the Note Purchase
Agreement, Debtor executed a Commercial Security Agreement pursuant to which
Debtor granted to Senior Creditor a lien upon and security interest in certain
“Collateral” as therein defined.
 
E.  The Original Subordinated Creditors have made loans to Debtor in the
principal amount of $330,000 and the New Subordinated Creditors intend to make
loans to Debtor in the minimum principal amount of $833,333 and the maximum
principal amount of $1,333,333 (collectively, the “Subordinated Creditor
Obligations”), and, as security for the prompt payment and performance of the
Subordinated Creditor Obligations, Debtor has granted Subordinated Creditor a
lien upon and security interest in certain property of Debtor, which property
constitutes the Collateral.
 
F.  Debtor, Subordinated Creditors and Administrative Agent have requested that
Senior Creditor consent to Debtor’s incurrence of the Subordinated Creditor
Obligations and the grant to Subordinated Creditor of a security interest in
property of Debtor which comprises the Collateral.
 
G.  On or about September 6, 2006, Debtor and KM&C entered into an agreement
(the “KM&C Agreement”) pursuant to which KM&C agreed to provide certain services
to Debtor in consideration for which Debtor agreed to pay certain fees and
commissions to the KM&C as set forth in the KM&C Agreement.
 
H.  Senior Creditor, Subordinated Creditors, and the Administrative Agent wish
to agree as to the respective rights of Senior Creditor and Subordinated
Creditors to repayment by, and rights to, liens upon and security interests in
the assets of Debtor, and as to certain other rights, priorities, and interests
as between Senior Creditor and Subordinated Creditor.
 

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A G R E E M E N T
 
In consideration of the foregoing, the mutual covenants contained herein, and
for other good and valuable considerations, the receipt of which Senior Creditor
and Subordinated Creditors hereby acknowledge, Senior Creditor, Subordinated
Creditors and the Administrative Agent hereby agree as follows:
 
1.    Definitions. The following terms, as used in this Agreement, shall have
the following meanings:
 
“Agreement” means this Amended and Restated Intercreditor and Subordination
Agreement together with any and all amendments, extensions, modifications,
riders, addenda, exhibits, and schedules hereto.
 
“Bankruptcy Case” means any proceeding commenced by or against Debtor, under any
provision of the Bankruptcy Code or under any other federal or state bankruptcy
or insolvency law, including assignments for the benefit of creditors, the
appointment of a receiver, formal or informal moratoria, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, liquidation, dissolution, or the winding up of Debtor, or other
similar relief, and all converted or succeeding cases in respect thereof.
 
“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. Section
101, et seq.) as amended, and any successor statute.
 
“Collateral” means all of Debtor’s presently existing and hereafter acquired
personal property as described in the Commercial Security Agreement between
Senior Creditor and Debtor.
 
“Enforcement Action” means any action by Subordinated Creditors or the
Administrative Agent to enforce payment or performance by Debtor of any of its
Subordinated Creditor Obligations or Subordinated Creditor Agreements,
including, but not limited to, any of the following: (a) acceleration of the
maturity of Subordinated Creditor Obligations; (b) commencement of, prosecution
of, or participation in any lawsuit, action or proceeding, whether private,
judicial, equitable, administrative, or otherwise (including the commencement or
joining with any other creditors in the commencement of any Bankruptcy Case)
against Debtor; (c) exercise of any right of setoff for the collection of any
amounts due in respect of the Subordinated Creditor Obligations; (d) exercise of
any Security Creditor Remedy; or (e) in the event of a Bankruptcy Case: (i)
prosecuting a motion for relief from the automatic stay to exercise an
Enforcement Action; (ii) objecting to Senior Creditor’s motion for relief from
the automatic stay to foreclose on and sell any of the Collateral; (iii) seeking
to provide debtor-in-possession loans or advances to Debtor wherein Senior
Creditor’s liens would be subordinated in priority; (iv) seeking or acquiesce in
any request to convert the Bankruptcy Case under chapter 11 of Title 11 of the
Bankruptcy Code to a case under chapter 7 of Title 11 of the Bankruptcy Code;
(v) seeking the appointment of a trustee or examiner with expanded powers for
Debtor or any of its subsidiaries or affiliates, if any; (vi) opposing the
confirmation of Debtor’s plan of reorganization if such action might adversely
affect Debtor’s business or Debtor’s ability to repay the Senior Creditor
Obligations. Notwithstanding the foregoing, none of the following shall
constitute an “Enforcement Action” for purposes of this Agreement: (x) the
delivery of any notice of default or other notice to Debtor pursuant to or in
connection with the Subordinated Creditor Agreements, (y) the acceleration of
the Subordinated Creditor Obligations if Senior Creditor has already notified
Subordinated Creditors and Debtor in writing that it has accelerated the Senior
Creditor Obligations and has not rescinded such notice in writing, (z) the
filing by Subordinated Creditors of a proof of claim in a Bankruptcy Case, which
proof of claim indicates Subordinated Creditors’ subordination hereunder.
 
“Secured Creditor” means either of Senior Creditor or Subordinated Creditors, or
any successor or assignee of any of them, in its capacity as a secured creditor
under the Senior Creditor Agreements or the Subordinated Creditor Agreements,
respectively.
 
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“Secured Creditor Remedies” means any action by a Secured Creditor in
furtherance of the sale, foreclosure, realization upon, or the repossession or
liquidation of any of the Collateral, including without limitation, (i) the
exercise of any remedies or rights of a “Secured Creditor” under Division 9 of
the UCC, such as, without limitation, the notification of account debtors; (ii)
the exercise of any remedies available to a judgment creditor; or (iii) any
other remedy available in respect of the Collateral available to such Secured
Creditor under the Senior Creditor Agreements or the Subordinated Creditor
Agreements, as the case may be.
 
“Senior Creditor Agreements” means, collectively, the Note Purchase Agreement,
the Commercial Security Agreement and any other document, instrument, or
agreement entered into by or in favor of Senior Creditor and Debtor in
connection with the Senior Creditor Obligations and the Collateral, together
with any amendments, replacements, substitutions, or restatements thereof.
 
“Senior Creditor Obligations” means any and all presently existing or hereafter
arising indebtedness, claims, debts, liabilities, and obligations of Debtor
owing to Senior Creditor under the Senior Creditor Agreements (including but not
limited to debtor-in-possession loans or advances, any obligation to make
adequate protection payments relative to proceedings involving the use of cash
collateral or motions for relief from the automatic stay in a Bankruptcy Case,
or otherwise, whether direct or indirect, contingent or of any other nature,
character, or description, including all interest accruing after commencement of
any case, proceeding, or other action relating to the bankruptcy, insolvency, or
reorganization of Debtor, including both amounts and interest that are allowable
claims in such proceeding and all amounts and interest that, but for the
provision of the Bankruptcy Code, would have accrued and become due).
 
“Subordinated Creditor Agreements” means, collectively, any other document,
instrument, or agreement now existing or in the future entered into by or in
favor of Subordinated Creditors and Debtor in connection with the Subordinated
Creditor Obligations or the Collateral, together with any amendments,
replacements, substitutes, or restatements thereof.
 
“Subordinated Creditor Obligations” means any and all presently existing or
hereafter arising indebtedness, claims, debts, liabilities, and obligations of
Debtor owing to Subordinated Creditor under the Subordinated Creditor
Agreements, or otherwise, whether direct or indirect, whether contingent or of
any other nature, character, or description (including all interest accruing
after commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor to the extent such interest
is an allowable claim in any such proceedings).
 
“UCC” means the Uniform Commercial Code as adopted in the State of California,
or in such other jurisdiction as governs the perfection of the liens and
security interests in the Collateral for the purposes of the provisions hereof
relating to such perfection or effect of perfection.
 
2.    Subordination and Standstill.
 
(a)   Indebtedness. Subordinated Creditors hereby subordinate any and all
Subordinated Creditor Obligations to the Senior Creditor Obligations. Except as
provided in Section 2(b) and 2(c) hereof, until the Senior Creditor Obligations
has been indefeasibly paid in full, in cash, and the Senior Creditor Agreements
have been irrevocably terminated, Subordinated Creditors and the Administrative
Agent shall not accept or receive, by payment, setoff, or in any other manner,
from Debtor or any other obligor under the Subordinated Creditor Obligations,
the whole or any part of any sums, however such payments are characterized or
denominated, including but not limited to payment of or for adequate protection
in a Bankruptcy Case, which may now or hereafter be owing to Subordinated
Creditors on account of the Subordinated Creditor Obligations. In the event
that, notwithstanding the foregoing, Debtor shall make any payment to
Subordinated Creditors prohibited by the foregoing provisions of this Section
2(a), then and in such event such payment shall be segregated by Subordinated
Creditors and held in trust for the benefit of and immediately shall be paid
over to Senior Creditor (in the same form received, with all necessary
endorsements) for application against the Senior Creditor Obligations remaining
unpaid until the Senior Creditor Obligations is indefeasibly paid in full, in
cash, and the Senior Creditor Agreements have been irrevocably terminated.
Notwithstanding any provision of this Agreement to the contrary, so long as the
Senior Creditor Obligations have not been indefeasibly paid in full,
Subordinated Creditors may accrue, but not accept or retain, default interest on
or with respect to the Subordinated Creditor Obligations in the event of any
default thereunder.
 
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(b)    Payment of Interest and Legal Fees on Creditor Obligations.
Notwithstanding any other provision of this Agreement, so long as no event of
default has occurred in respect of the Senior Creditor Obligations, Debtor may
pay to Subordinated Creditors, and Subordinated Creditors may accept from Debtor
and retain, (i) monthly payments of contract rate (and not default rate)
interest on account of the Subordinated Creditor Obligations, and (ii)
reimbursement of legal fees and costs incurred or to be incurred with respect to
the negotiation and execution of, and as permitted under, the Subordinated
Creditor Agreements.
 
(c)    Exclusion for Payments under the KM&C Agreement. Notwithstanding any
other provision of this Agreement, Debtor may make, and KM&C may receive,
payments in accordance with the terms of the KM&C Agreement for services
rendered by KM&C to Debtor in accordance therewith The term of the KM&C
Agreement may, upon prior notice to Senior Creditor, be extended at any time or
from time to time; provided, however, that any such extension or extensions,
shall not, in the aggregate, operate to extend the term of the KM&C Agreement
for a date more than one (1) year, and, further, provided, that such payment,
and the frequency thereof, shall be limited to the amounts presently set forth
in the KM&C Agreement without amendment, revision or modification thereof.
During the term of the KM&C Agreement, and any extension thereof, KM&C shall
provide copies of all billings to Debtor.
 
(d)    Enforcement. Until the Senior Creditor Obligations has been indefeasibly
paid in full, in cash, and the Senior Creditor Agreements have been irrevocably
terminated, Subordinated Creditors and the Administrative Agent shall not (i)
commence, prosecute, or participate in any Enforcement Action, (ii) sell,
assign, exchange, redeem, transfer, pledge, or grant a security interest in the
Subordinated Creditor Obligations other than to pursuant to a transaction in
which the buyer, assignee, transferee, pledgee or secured party acknowledges in
writing and takes subject to this Agreement, (iii) incur any obligation to, or
receive any loans, advances, or gifts from, Debtor except as permitted in
Sections 2(b) and (c) hereof, or (iv) commence, prosecute, or participate in any
action or proceeding that in Senior Creditor’s sole judgment might adversely
affect Debtor’s business or Debtor’s ability to repay the Senior Creditor
Obligations.
 
(e)   Guaranties. In the event Subordinated Creditors or the Administrative
Agent acquire any guaranty with respect to the Subordinated Creditor
Obligations, whether secured or unsecured, from any affiliate of Debtor,
Subordinated Creditors and the Administrative Agent agree that all rights with
respect to such guaranty (including any collateral therefor) shall at all times
be junior, subordinate, and subject to the rights of Senior Creditor with
respect to any guaranties (including any collateral therefor) Senior Creditor
may receive from such affiliates with respect to the Senior Creditor
Obligations.
 
3.   Permitted Liens and Relative Priorities. As between the Secured Creditors,
notwithstanding:
 
(a)   the terms (including the description of collateral), dating, execution, or
delivery of any document, instrument, or agreement, the time, order, occurrence,
method, or manner of granting, or perfection of any security interest or lien,
the time of filing or recording of any financing statements, assignments, deeds
of trust, mortgages, or any other documents, instruments, or agreements under
the UCC or any other applicable law;
 
(b)   the existence of (or the order in which any Secured Creditor becomes a
party to or a beneficiary of) any collateral agency arrangement with any party
other than a Secured Creditor, or the appointment of such other party as a
collateral agent to perfect the Secured Creditors’ liens and security interests,
in all or any part of the Collateral;
 
(c)   the existence of any control agreement in favor of any Secured Creditor;
or
 
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(d)   whether the Subordinated Creditor Obligations or the liens or security
interests securing the Senior Creditor Obligations, are held to be unperfected,
deficient, invalid, void, voidable, voided, unenforceable, subordinated,
reduced, or discharged, or are set aside by a court of competent jurisdiction,
including, without limitation, pursuant to any Bankruptcy Case;
 
(e)   any provision of the UCC or any other applicable statute, rule, laws, or
court decision to the contrary, the Secured Creditors agree that, as to the
Collateral of Debtor:
 
(i)   Senior Creditor shall have a security interest in and lien on the
Collateral to secure the Senior Creditor Obligations which is prior to any
security interest in and lien on the Collateral of the Subordinated Creditors;
and
 
(ii)   Subordinated Creditors shall have a security interest in and lien on the
Collateral to secure the Subordinated Creditor Obligations which is junior and
subordinate to the lien and security interest therein of Senior Creditor.
 
For purposes of the foregoing allocation of priorities, any claim or a right to
a set-off shall be treated in all respects as a security interest, and no
claimed right of set-off shall be asserted to defeat or diminish the rights or
priorities provided for herein.
 
4.   No Alteration of Priority. The lien and security interest priorities
provided in Section 3 shall not be altered or otherwise affected by any
amendment, modification, supplement, extension, renewal, restatement, or
refinancing of any of the Secured Creditor Obligations, nor by any action or
inaction which either Secured Creditor may take or fail to take in respect of
the Collateral, or otherwise. Each Secured Creditor consents to Debtor’s
granting to each other Secured Creditor the liens and security interests
reflected in Section 3. Subordinated Creditor agrees that it will not directly
or indirectly take any action to contest or challenge the validity, legality,
perfection, priority, avoidability, or enforceability of the liens or security
interests of Senior Creditor upon the Collateral or seek to have the same
avoided, disallowed, set aside, or otherwise invalidated in any judicial
proceeding or otherwise.
 
5.   Perfection. Subordinated Creditors shall be solely responsible for
perfecting and maintaining the perfection of their lien or security interest in
any of the Collateral.
 
6.   Management of Collateral. Notwithstanding anything to the contrary
contained in any of the Senior Creditor Agreements or the Subordinated Creditor
Agreements, until the Senior Creditor Obligations has been indefeasibly paid in
full, in cash, and the Senior Creditor Agreements have been irrevocably
terminated: (i) Senior Creditor shall have the exclusive right to manage the
Collateral, including the exclusive right to perform and enforce the terms of
the Senior Creditor Agreements with respect to the Collateral and to exercise
and enforce all privileges and rights thereunder according to Senior Creditor’s
reasonable discretion, including, without limitation, the exclusive right to
enforce or settle insurance claims with respect to the Collateral, to pay,
compromise, or settle competing claims, liens, or security interests affecting
the Collateral, to take or retake control or possession of the Collateral, and
to hold, prepare for sale, sell, lease, or liquidate the Collateral; (ii)
neither Subordinated Creditor nor any party acting on its behalf, shall exercise
any Secured Creditor Remedies with respect to the Collateral; and (iii) any and
all Collateral or proceeds thereof which shall come into the possession,
control, or custody of Subordinated Creditors will be deemed to have been
received for the account of Senior Creditor and shall be immediately delivered
or paid, as applicable, over to Senior Creditor. In connection with the
provisions of clause 6(i) above, Subordinated Creditors waive any and all rights
to affect the method or challenge the appropriateness of any action by any
Senior Creditor with respect to the Collateral, and waive any claims or defenses
it may have against Senior Creditor, including any such claims or defenses based
on any actions or omissions of any such person, in connection with the
perfection, maintenance, enforcement, foreclosure, sale, liquidation, or release
of any lien or security interest therein by Senior Creditor, or any modification
or waiver of any Senior Creditor Agreements, except as provided or limited under
this Agreement.
 
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7.   Sale of Collateral. Until the Senior Creditor Obligations has been
indefeasibly paid in full, in cash, and the Senior Creditor Agreements have been
irrevocably terminated: (i) only Senior Creditor shall have the right to
restrict or permit, or approve or disapprove, the sale or disposition of the
Collateral; and (ii) Subordinated Creditor will, immediately upon the request of
Senior Creditor, release, reconvey, or otherwise terminate its liens and
security interests upon the Collateral, to the extent such Collateral is sold or
disposed of by Debtor with the consent of Senior Creditor in accordance with the
Senior Creditor Agreements, or is sold by or on behalf of Senior Creditor in
connection with the exercise of its Secured Creditor Remedies, and Subordinated
Creditors will promptly deliver (at Debtor’s expense) such release,
reconveyance, and termination documents as Senior Creditor or any Debtor may
reasonably require in connection therewith.
 
8.   Insurance. In the event of the occurrence of a fire or other casualty
resulting in damage to all or any portion of any Collateral (collectively, a
“Casualty”):
 
(a)   Subordinated Creditors and the Administrative Agent hereby waive any right
to participate or join in any adjustment, compromise, or settlement of any claim
resulting from a Casualty with respect to any Collateral;
 
(b)   all proceeds received or to be received on account of a Casualty shall be
applied in the manner or manners provided for in the Senior Creditor Agreements;
and
 
(c)   Subordinated Creditor and the Administrative Agent agree to execute and
deliver to Senior Creditor any documents, instruments, agreements or further
assurances reasonably required to effectuate any of the foregoing.
 
9.   Bankruptcy Issues.
 
(a)   This Agreement (including all rights and priorities set forth herein)
shall continue in full force and effect upon the commencement of a Bankruptcy
Case as contemplated under Section 510(a) of the Bankruptcy Code (all references
herein to Debtor being deemed to apply to debtor as a debtor-in-possession and
to a trustee for Debtor’s estate in a Bankruptcy Case), and irrespective of the
terms of any plan of reorganization adopted therein, and shall apply with full
force and effect with respect to all Collateral acquired by Debtor, and to all
Senior Creditor Obligations and Subordinated Creditor Obligations incurred by
Debtor, subsequent to such commencement.
 
(b)   If Debtor shall become subject to a Bankruptcy Case, and if Senior
Creditor shall desire to permit the use of cash collateral or to provide or
consent to any post-petition financing to Debtor, Subordinated Creditors and the
Administrative Agent agree as follows: (i) adequate notice to each Subordinated
Creditor and the Administrative Agent shall be deemed to have been provided for
such use of cash collateral or post-petition financing if such Subordinated
Creditor and the Administrative Agent receive notice thereof at least one
business day prior to the earlier of (y) any hearing on a request to approve
such use of cash collateral or post-petition financing or (z) the date of entry
of an order approving the same; and (ii) no objection will be raised by such
Subordinated Creditor or the Administrative Agent to any such use of cash
collateral or such post-petition financing on any grounds, including, without
limitation, the failure to provide adequate protection for the Subordinated
Creditor’s junior liens and security interests in the Collateral, provided that
Senior Creditor makes no objection if such Subordinated Creditor seeks to be
granted the same rights, benefits, and protections as Senior Creditor, including
the same liens and security interests on the post-petition Collateral, that may
be granted to or for the benefit of Senior Creditor, junior only to the liens or
security interests of Senior Creditor therein.
 
(c)   If Debtor shall become subject to a Bankruptcy Case, Subordinated
Creditors and the Administrative Agent shall not (i) contest or object to any
motion on behalf of any Senior Creditor for relief from the automatic stay in a
Bankruptcy Case to exercise any rights with respect to the Collateral, including
without limitation, foreclosure on and selling any of the Collateral; (ii) seek
to provide debtor-in-possession loans or advances to any Debtor wherein Senior
Creditor’s liens would be subordinated in priority; (iii) oppose the
confirmation of any Debtor’s plan of reorganization if such action might
adversely affect such Borrower’s business or ability to repay the Senior Debt;
(iv) take an action against or vote a claim or right in connection with a plan
of reorganization in a Bankruptcy Case of Borrower which Secured Creditor
otherwise supports; or (v) take any other act in connection with any Bankruptcy
Case that can directly or indirectly negatively affect the Collateral, the
rights and remedies of Senior Creditor in such proceeds or with respect to the
Collateral, or the exercise of such rights and remedies.
 
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(d)   In the event of (i) any Bankruptcy Case, or (ii) any proceedings for
voluntary liquidation, assignment for the benefit or creditors, dissolution, or
other winding up of Debtor, then, in each case, (1) all Senior Creditor
Obligations shall first be paid in full in cash before any payment is made by or
on behalf of Debtor on the Subordinated Creditor Obligations; (2) any payment or
distribution of any kind or character (whether in cash, securities, assets, by
set-off, or otherwise), including but not limited to those intended to be for
adequate protection (irrespective of whether an Event of Default has occurred)
or as provided for in a plan of reorganization or otherwise, to which
Subordinated Creditor would be entitled but for the provisions of this
Agreement, shall be paid or delivered by the person making such payment or
distribution, whether a trustee in bankruptcy, a receive, a liquidating trustee,
or otherwise, directly to Senior Creditor to the extent necessary to make
payment in full in cash of all Senior Creditor Obligations remaining unpaid. In
the event that, notwithstanding the provisions of this Agreement, Subordinated
Creditor shall have received any payment or distribution of any kind or
character (whether in cash, securities, assets, by setoff, or otherwise) that it
is not entitled to receive by the foregoing provisions, before all Senior
Creditor Obligations is paid in full, then and in such event such payment or
distribution shall be segregated and held in trust for the benefit of and
immediately shall be paid over to Senior Creditor for application against the
payment of all Senior Creditor Obligations remaining unpaid until all such
Senior Creditor Obligations shall have been indefeasibly paid in full, in cash,
and all obligations of Senior Creditor to extend credit under the Senior
Creditor Agreements have been irrevocably terminated.
 
10.   Notice of Default and Certain Events. Each Subordinated Creditor and the
Administrative Agent shall promptly notify Senior Creditor in writing of the
occurrence of any of the following as applicable to such Subordinated Creditor:
(i) any default or event of default under the Subordinated Creditor Agreements;
or (ii) the demand for payment of, acceleration of, or termination of any
Subordinated Creditor Obligations.
 
11.   Further Assurances.
 
(a)   Additional Documents. Subordinated Creditors and the Administrative Agent
agree to execute and deliver, upon the request of Senior Creditor, such
documents and instruments (appropriate for filing, if requested) as may be
necessary or appropriate to fully implement or to fully evidence the
understandings and agreements contained in this Agreement. Without limiting the
foregoing, in the event that all or part of any of the Senior Creditor
Obligations is hereafter refinanced, Subordinated Creditor and the
Administrative Agent agree to enter into one or more new agreements with the
refinancing lender or lenders on terms identical to those of this Agreement.
 
(b)   Attorney in Fact. Senior Creditor is hereby irrevocably constituted and
appointed the attorney-in-fact of Subordinated Creditor on the Subordinated
Creditor Obligations and to take all other action either in Senior Creditor’s
name or in the name of Subordinated Creditors, which in Senior Creditor’s
opinion is necessary or desirable to enable Senior Creditor to obtain all
payments on the Subordinated Creditor Obligations(other than payments permitted
to be paid to and accepted and retained by the Subordinated Creditors as
provided in Sections 2(b) and 2(c) hereof) that are to be turned over to Senior
Creditor pursuant to this Agreement, including, in the event of a Bankruptcy
Case: (i) filing a proof of claim, or any other document required under the
Bankruptcy Code, in such Bankruptcy Case; and (ii) voting any or all of
Subordinated Creditors’ claims in such Bankruptcy Case; provided however, that
in either case, such power shall only be exercised if Subordinated Creditor does
not file a proper proof of claim or other document or vote its claim in the
Bankruptcy Case, prior to 15 days before the expiration of time to file such
claim or other document or to vote such claim, and in no event shall Senior
Creditor be obligated to file such claim or document or vote such claim.
 
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12.   Representations; Warranties. Subordinated Creditor and the Administrative
Agent represent and warrant to Senior Creditor that: (a) Subordinated Creditor
and the Administrative Agent are currently informed of the financial condition
of Debtor and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Senior Creditor Obligations;
and that Subordinated Creditor and the Administrative Agent will continue to
keep informed of Debtor’s financial condition and of all other circumstances
which bear upon the risk of nonpayment of nonperformance of the Senior Creditor
Obligations; (b) they have full right, power, and authority to enter into this
Agreement and shall fully bind all such other parties; and (c) as of the date of
this Agreement, the outstanding balance of the Subordinated Creditor Obligations
is $_____________.
 
13.   Modification of Senior Creditor Obligations. Subordinated Creditors and
the Administrative Agent agree that Senior Creditor shall have absolute power
and discretion, without notice to Subordinated Creditors or to the
Administrative Agent, to deal in any manner with the Senior Creditor
Obligations, including, but not by way of limitation, the power and discretion
to do any of the following: (a) any demand for payment of any Senior Creditor
Obligations may be rescinded in whole or in part, and any Subordinated Creditor
Obligations may be continued, and the Senior Creditor Obligations or the
liability of Debtor upon or for any part thereof, or any Collateral or guaranty
therefor, or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, modified, accelerated, compromised, waived,
surrendered, or released; and (b) the Senior Creditor Agreements may be amended,
modified, supplemented, or terminated, in whole or in part, as Senior Creditor
may deem advisable from time to time, and any Collateral may be sold, exchanged,
waived, surrendered, or released. Subordinated Creditors and the Administrative
Agent will remain bound under this Agreement, and the subordination provided for
herein shall not be impaired, abridged, released, or otherwise affected
notwithstanding any such renewal, modification, acceleration, compromise,
amendment, supplement, termination, sale, exchange, waiver, surrender, or
release. All dealings between Senior Creditor and Debtor shall be deemed to have
been consummated in reliance upon this Agreement.
 
14.   Modification of Subordinated Creditor Obligations. No Subordinated
Creditor Agreement may be amended or modified without the prior written consent
of Senior Creditor.
 
15.   Subordinated Creditors’ and the Administrative Agent’s Waivers.
Subordinated Creditor and the Administrative Agent: (a) waive any and all notice
of the creation, modification, renewal, extension, or accrual of any of the
Senior Creditor Obligations and notice of or proof of reliance by Senior
Creditor upon this Agreement; (b) waive and agree not to assert against Senior
Creditor any rights which a guarantor or surety could exercise, but nothing in
this Agreement shall constitute Subordinated Creditors a guarantor or surety;
(c) waive and agree not to assert any right of subrogation, contribution,
reimbursement, or indemnity which it may have against Debtor arising directly or
indirectly out of this Agreement; and (d) waive any right to compel Senior
Creditor to marshal any of the Collateral or to seek payment from any particular
assets of Debtor or from any third party.
 
16.   Continuing Agreement; Other. This Agreement shall be a continuing
agreement, shall be irrevocable, and shall remain in full force and effect until
the Senior Creditor Obligations has been indefeasibly paid in full, in cash. To
the extent that the Debtor or any guarantor makes a payment on the Senior
Creditor Obligations that is subsequently invalidated, declared to be fraudulent
or preferential or set aside, or is required to be repaid to a trustee,
receiver, or any other party under the Bankruptcy Code or any bankruptcy,
insolvency, or reorganization act, state or federal law, common law or equitable
cause, including, without limitation, any Bankruptcy Case (such payment being
hereinafter referred to as a “Voided Payment”), then to the extent of such
Voided Payment, that portion of the Senior Creditor Obligations that had
previously been satisfied by such Voided Payment shall be revived and continue
in full force and effect as if such Voided Payment had not been made, and, an
Event of Default shall be deemed to have existed and to be continuing under the
Senior Creditor Agreements from the date of the Senior Creditor’s initial
receipt of such Voided Payment until the full amount of such Voided Payment is
restored to the Senior Creditor. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with respect to the
Subordinated Creditor Obligations. To the extent that the Subordinated Creditor
or the Administrative Agent has received any payments with respect to the
Subordinated Creditor Obligations subsequent to the date of the Senior
Creditor’s initial receipt of such Voided Payment and such payments to the
Subordinated Creditor have not been invalidated, declared to be fraudulent or
preferential, or set aside or are required to be repaid to a trustee, receiver,
or any other party under any bankruptcy act, state or federal law, common law,
or equitable cause, the Subordinated Creditor and the Administrative Agent shall
be obligated and hereby agree that any such payment so made or received shall be
deemed to have been received in trust for the benefit of the Senior Creditor,
and the Subordinated Creditor hereby agrees to pay to Senior Creditor, upon
demand, the full amount so received by the Subordinated Creditor or the
Administrative Agent to the extent necessary to fully restore to the Senior
Creditor the amount of such Voided Payment.
 
8

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17.   Parties Intended to be Benefited. All of the understandings, covenants,
and agreements contained herein are solely for the benefit of Senior Creditor,
Subordinated Creditors and the Administrative Agent, and there are no other
parties, including Debtor or any of the creditors, successors, or assigns of
Debtor, which are intended to be benefited, in any way, by this Agreement.
 
18.   No Limitation Intended. Nothing contained in this Agreement is intended to
or shall affect or limit, in any way, the rights that the Secured Creditors have
with respect to any third parties. The Secured Creditors hereby specifically
reserve all of their respective rights against Debtor and all other third
parties.
 
19.   Notice. Whenever it is provided herein that any notice, demand, request,
consent, approval, declaration, or other communication shall or may be given to
or served upon any of the parties hereto, or whenever any of the parties desires
to give or serve upon the other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration, or other
communication shall be in writing and shall be delivered either in person, with
respect acknowledged, or by regular, registered, or certified United States
mail, postage prepaid, or by facsimile, addressed as follows or to the address
set forth on the signature page hereto:
 
(a)   If to Senior Creditor, at:
 
ST. CLOUD CAPITAL PARTNERS, L.P.
10866 Wilshire Boulevard
Suite 1450
Los Angeles, CA 90024
Fax: (310)-475-0550
Attn: Robert Lautz
 
(b)   If to Subordinated Creditor, at:
 
Hong Kong League Central Credit Union
c/o SBI Advisors, LLC
610 Newport Center Drive, Suite 1205
Newport Beach, CA 92660
Fax: (949) 679-7280
Attn: David Wang
 
9

--------------------------------------------------------------------------------

 
Kershaw/Mackie & Company
2405 South Broadway
Santa Ana, CA 92707
Fax: (714) 709-1842
Attn: David S. Kershaw

(c)   If to Administrative Agent, at:
 
SBI Advisors, LLC
610 Newport Center Drive, Suite 1205
Newport Beach, CA 92660
Fax: (949) 679-7280
Attn: Shelly Singhal
 
(d)   If to other Subordinated Creditors
(at address indicated on signature page)
 
Or at such other address as may be substituted by notice given as hereby
provided. Giving of any notice required hereunder may be waived in writing by
the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration or other communication hereunder shall be deemed
to have been duly given or served on the date on which personally delivered,
with receipt acknowledged, or actually received via telefacsimile transmission,
or three days after the same shall have been deposited in the United States
mail.
 
20.   Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
of the remaining provisions of this Agreement.
 
21.   Jury Trial Waiver; Venue. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
PARTY HERETO HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, OR ANY OTHER
AGREEMENT OR TRANSACTION BETWEEN THE PARTIES HERETO. NOTWITHSTANDING THE PLACE
OF EXECUTION HEREOF, EACH PARTY HERETO AGREES THAT THE VALIDITY, INTERPRETATION
AND ENFORCEMENT OF THIS AGREEMENT AND ALL RIGHTS HEREUNDER SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF CALIFORNIA.
 
The parties to this Agreement prefer that any dispute between or among them be
resolved in litigation subject to the above jury trial waiver. Litigation to
resolve any dispute, claim, cause of action or controversy under this Agreement
or any other document (each, a “Claim”) shall be conducted in the state or
federal court in Los Angeles County (the “Court”). Notwithstanding the
foregoing, nothing in this paragraph shall limit the right of any party at any
time to exercise self-help remedies, foreclose against collateral or obtain
provisional remedies (including without limitation, requests for temporary
restraining orders, preliminary injunctions, writs of possession, writs of
attachment, appointment of a receiver, or any orders that a court may issue to
preserve the status quo, to prevent irreparable injury or to allow a party to
enforce its liens and security interests).
 
22.   Complete Agreement. This Agreement constitutes the complete agreement and
understanding of each of the Secured Creditors and supersedes all prior or
contemporaneous oral and written negotiations, agreements and understandings,
express or implied, with respect to the subject matter hereof.
 
10

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23.   Successors and Assigns. This Agreement shall be binding upon, and inure to
the benefit of, the successors and assigns of Senior Creditor and Subordinated
Creditors. Each Subordinated Creditor agrees that it shall not assign or
transfer any of its Subordinated Creditor Obligations or any of its rights under
the Subordinated Credit Agreement (including any liens and security interests in
the Collateral) without (i) prior notice being given to Senior Creditor and (ii)
such assignment or transfer being made expressly subject to the terms of this
Agreement.
 
24.   Waivers, Amendments, Choice of Law, etc. Any waiver or amendment hereunder
must be evidenced by a signed writing of a party to be bound thereby, and shall
only be effective in the specific instance. This Agreement shall be governed by
and construed in accordance with the laws of the State of California. The
parties agree that actions may be tried and litigated in the state and federal
courts located in the County of Los Angeles, in the State of California. The
headings in this Agreement are for convenience of reference only, and shall not
alter or otherwise affect the meaning hereof.
 
25.   Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, the singular includes
the plural, the part includes the whole, “including” is not limiting, and “or”
has the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Article, section, subsection, exhibit, and schedule references are to
this Agreement unless otherwise specified.
 
26.   Counterparts. This Agreement may be executed in any number of
counterparts, and by Senior Creditor and Subordinated Creditor in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same Agreement.
 
11

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first hereinabove set forth.
 
 
SENIOR CREDITOR:
ST. CLOUD CAPITAL PARTNERS, L.P.            
By:
              Title:     

 
 
SUBORDINATED CREDITOR:
Hong Kong League Central Credit Union, a Hong Kong credit union             By:
            Title:    

 
 
 
Kershaw/Mackie & Company             By:             Title:    

 
 
 
SBI Advisors, LLC, a California limited liability company             By:      
      Title:    

 
12

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ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,
 
personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________

(Seal)
 

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF ORANGE
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)
 

--------------------------------------------------------------------------------

 
ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF ORANGE
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)
 

--------------------------------------------------------------------------------

 
ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF ORANGE
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________

 
(Seal)
 

--------------------------------------------------------------------------------

 

OTHER SUBORDINATED CREDITORS:
SBI VENTURES, LLC
     
By:                                                                                                  
Name: Shelly Singhal
Title: Manager
     
Address:
610 Newport Center Drive, Suite 1205
Newport Beach, CA 92660
Attention: Shelly Singhal
Fax Number: (949) 679-7280

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF ORANGE
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________

(Seal)
 
[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

OTHER SUBORDINATED CREDITORS:
C. E. UNTERBERG, TOWBIN CAPITAL
PARTNERS I, L.P.
     
By:                                                                                                  
Name: 
Title: 
     
Address:
350 Madison Avenue
New York, NY 10017
Attention:          ____________________
Fax Number:       ____________________

ACKNOWLEDGEMENT
 
STATE OF NEW YORK
 
COUNTY OF NEW YORK CITY
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

 
OTHER SUBORDINATED CREDITORS:
TRINAD CAPITAL MASTER
FUND LTD.
     
By:                                                                                                  
Name: 
Title: 
     
Address:
2121 Avenue of the Stars, Suite 1650
Los Angeles, CA 90067
Attention:       ____________________
Fax Number:    ____________________

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

 
OTHER SUBORDINATED CREDITORS:
DAVID MARSHALL, INC.
     
By:                                                                                                  
Name: 
Title: 
     
Address:
9229 Sunset Boulevard, Suite 505
Los Angeles, CA 90069
Attention:       ____________________
Fax Number:    ____________________

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________

(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 
 
 

--------------------------------------------------------------------------------

 

OTHER SUBORDINATED CREDITORS:
THE LEVY FAMILY TRUST
     
By:                                                                                                  
Name: 
Title: 
     
Address:
815 Moraga Drive
Los Angeles, CA 90049
Attention:        ____________________
Fax Number:     ____________________

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

OTHER SUBORDINATED CREDITORS:
FINE FAMILY TRUST
 
     
By:                                                                                                  
Name: Debra Fine
Title: Trustee
     
Address:
371 Dalkeith Avenue
Los Angeles, CA 90049
Attention:        ____________________
Fax Number:     ____________________

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 

Signature _________________________________

(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

OTHER SUBORDINATED CREDITORS:
DENNIS L. PELINO FAMILY TRUST
     
By:                                                                                                  
Name: Dennis L. Pelino
Title: Trustee
     
Address:
c/o New China Media
10560 Wilshire Boulevard, Suite 1802
Los Angeles, CA 90024
Attention:       ____________________
Fax Number:    ____________________

ACKNOWLEDGEMENT
 
STATE OF CALIFORNIA
 
COUNTY OF LOS ANGELES
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.

Signature _________________________________

(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

OTHER SUBORDINATED CREDITORS:
 
 
GEORGE KARFUNKEL
 
Address:
1671 52nd Street
Brooklyn, NY 11204
Fax Number:        ____________________

ACKNOWLEDGEMENT
 
STATE OF NEW YORK
 
COUNTY OF KINGS
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.
 
Signature _________________________________
 
(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

 
OTHER SUBORDINATED CREDITORS:
 
 
YEHUDA NEUBERGER
 
Address:
224 Avenue J
Brooklyn, NY 11230
Fax Number:        ____________________

ACKNOWLEDGEMENT
 
STATE OF NEW YORK
 
COUNTY OF KINGS
 
On _________________________, before me, ____________________________________,
(insert name and title of the officer)
 
personally appeared ___________________________________________________________
 
____________________________________________________________________________
 
____________________________________________________________________________,

 
personally known to me (or provided to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same is his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
 
WITNESS my hand and official seal.

Signature _________________________________

(Seal)

[COUNTERPART SIGNATURE PAGE TO AMENDED AND RESTATED INTERCREDITOR
AND SUBORDINATION AGREEMENT]
 

--------------------------------------------------------------------------------

ACKNOWLEDGEMENT
 
The undersigned, SMALL WORLD KIDS, INC., a Nevada corporation (the “Debtor”)
hereby acknowledges receipt of a copy of the foregoing Amended and Restated
Intercreditor and Subordination Agreement and consents thereto, and agrees to
recognize all rights granted thereby to the parties thereto, and will not do any
act or perform any obligation which is not in accordance with the agreements set
forth in such Amended and Restated Intercreditor and Subordination Agreement.
Debtor further acknowledges that Debtor is not an intended beneficiary under the
Amended and Restated Intercreditor and Subordination Agreement.
 
Dated as of April 23, 2007.

        SMALL WORLD KIDS, INC., a Nevada corporation  
   
   
    By:        

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Title:
   

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