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                                                                Exhibit: 10.54FT

[LOGO BANK OF AMERICA]                                  Business Loan Agreement

This Agreement dated as of December 1, 1998 is between Bank of America National
Trust and Savings Association (the "Bank") and Futech Interactive Products, Inc.
(the "Borrower").

1.        AMOUNT AND TERMS.

1.1 LINE OF CREDIT AMOUNT. During the availability period described below, the
Bank will provide a line of credit to the Borrower. The amount of the line of
credit (the "Commitment") is Seven Million and No/100 Dollars ($7,000,000.00).

This is a revolving line of credit with a within line facility for letters of
credit. During the availability period, the Borrower may repay principal amounts
and reborrow them.

The Borrower agrees not to permit the outstanding principal balance of the line
of credit plus the outstanding amounts of any letters of credit, including
amounts drawn on letters of credit and not yet reimbursed, to exceed the
Commitment.

1.2 AVAILABILITY. The line of credit is available between the date of this
Agreement and December 1, 2000 (the "Expiration Date") unless the Borrower is in
default.

1.3 INTEREST RATE.
The interest rate is the Reference Rate plus 1.00 percentage point(s).

The Reference Rate is the rate of interest publicly announced from time to time
by the Bank in San Francisco, California, as its Reference Rate. The Reference
Rate is set by the Bank based on various factors, including the Bank's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customers at, above or below the Reference Rate. Any change in the Reference
Rate shall take effect at the opening of business on the day specified in the
public announcement of a change in the Bank's Reference Rate.

1.4 REPAYMENT.

(a) The Borrower will pay interest on January 1, 1999 and on the first day of
each month thereafter until payment in full of any principal outstanding under
this line of credit. (b) The Borrower will repay in full all principal and any
unpaid interest or other charges outstanding under this line of credit no later
than the Expiration Date

1.5 LETTERS OF CREDIT. This line of credit may be used for financing standby
letters or commercial letters of credit with a maximum maturity of December 1,
2000.

The amount of letters of credit outstanding at any one time (including amounts
drawn on letters of credit and not yet reimbursed) may not exceed One Million
and No/100 Dollars ($1,000,000.00) for standby and commercial letters of credit.

The Borrower agrees: (a) any sum drawn under a letter of credit may, at the
option of the Bank, be added to the principal amount outstanding under this
Agreement. The amount will bear interest and be due as described elsewhere in
this Agreement. (b) if there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of credit. (c) the
issuance of any letter of credit and any amendment to a letter of credit is
subject to the Bank's written approval and must be in form and content
satisfactory to the Bank and in favor of a beneficiary acceptable to the Bank.
(d) to sign the Bank's form Application and Agreement for Commercial Letter of
Credit or Application and Agreement for Standby Letter of Credit. (e) to pay any
issuance and/or other fees that the Bank notifies the Borrower will be charged
for issuing and processing letters of credit for the Borrower. (f) to allow the
Bank to automatically charge its checking account for applicable fees,
discounts, and other charges.

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2.  FEES AND EXPENSES.

2.1 (a) LOAN FEE. The Borrower agrees to pay a Seventy Thousand and No/100
Dollar ($70,000.00) fee due upon execution of this Agreement.

(b) UNUSED COMMITMENT FEE. The Borrower agrees to pay a fee on any difference
between the Commitment and the amount of credit it actually uses, determined by
the weighted average loan balance maintained during the specified period. The
fee will be calculated at 1/8% per year.

This fee is due on February 28, 1999 and on the last day of each May, August,
November, and February until the expiration of the availability period.

2.2 REIMBURSEMENT COST. The Borrower agrees to reimburse the Bank for any
expenses it incurs in the preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's in-house
counsel.

3. DISBURSEMENTS, PAYMENTS AND COSTS

3.1 TELEPHONE AND TELEFAX AUTHORIZATION. (a) The Bank may honor telephone or
telefax instructions for advances or repayments or the issuance of letters of
credit given by any one of the individual signer(s) of this Agreement or a
person or persons authorized in writing by any one of the signer(s) of this
Agreement. (b) Advances will be deposited in and repayments will be withdrawn
from the Borrower's account number _____________________, or such other of the
Borrower's accounts with the Bank as designated in writing by the Borrower. (c)
The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection with
any act resulting from telephone instructions it reasonably believes are made by
any individual authorized by the Borrower to give such instructions. This
indemnity and excuse will survive this Agreement's termination.

3.2 INTEREST CALCULATION. All interest and fees, if any, will be computed on the
basis of a 360 day year and the actual number of days elapsed. This results in
more interest or a higher fee than if a 365-day year is used,

3.3 INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear
interest from the due date at the Reference Rate plus 5.00 percentage points.
This may result in compounding of interest.

3.4 DEFAULT RATE. Upon the occurrence and during the continuation of any default
under this Agreement, advances under this Agreement will at the option of the
Bank bear interest at a rate per annum which is 5.00 percentage points higher
than the rate of interest otherwise provided under this Agreement. This will not
constitute a waiver of any default.

4. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement.

4.1 AUTHORIZATIONS. Evidence that the execution, delivery and performance by the
Borrower (and any guarantors) of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.

4.2 GUARANTIES. Guaranties signed by F. Keith Withycombe and Patricia A.
Withycombe and Vincent W. Goett and Melissa Turner Goett on the Bank's standard
form in an amount as may be acceptable, from time to time, to the Bank.

5. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement, and
until the Bank is repaid in full, the Borrower makes the following
representations and warranties. Each request for an extension of credit
constitutes a renewed representation. (a) The Borrower is a corporation duly
formed and existing under the laws of the state where organized. (b) This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower's powers, have been duly authorized, and do not conflict with any of
its organizational papers. (c) This Agreement, and each other agreement or
document executed and delivered to the Bank in connection with this

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Agreement. is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable. (d) In each state in which the Borrower
does business, it is properly licensed, in good standing, and, where required,
in compliance with fictitious name statutes. (e) This Agreement does not
conflict with any law, agreement, or obligation by which the Borrower is bound.
(f) All financial and other information that has been or will be supplied to the
Bank is: (i) sufficiently complete to give the Bank accurate knowledge of the
Borrower's (and any guarantors) financial condition. (ii) in form and content
required by the Bank. (iii) in compliance with all government regulations that
apply. (g) There is no lawsuit, tax claim or other dispute pending or threatened
against the Borrower, which, if lost, would impair the Borrower's financial
condition or ability to repay the loan, except as have been disclosed in writing
to the Bank prior to the date of this Agreement (h) The Borrower possesses all
permits, memberships, franchises, contracts and licenses required and all
trademark rights, trade name rights, patent rights and fictitious name rights
necessary to enable it to conduct the business in which it is now engaged. (i)
There is no event which is, or with notice or lapse of time or both would be, a
default under this Agreement. (j) The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
(k) on the basis of a comprehensive review and assessment of Borrower's systems
and equipment and inquiry made of Borrower's material suppliers, vendors and
customers Borrower's management is of the view that the "Year 2000 problem"
(that is, the inability of computers, as well as embedded microchips in
non-computing devices, to perform properly date-sensitive functions with respect
to certain dates prior to and after December 31, 1999), including costs of
remediation, will not result in a material adverse change in the operations,
business properties, condition (financial or otherwise) of Borrower. Borrower
has developed feasible contingency plans to adequately ensure uninterrupted and
unimpaired business operation in the event of failure of its own or a third
party's systems or equipment due to the Year 2000 problem, including those of
vendors, customers, and suppliers, as well as a general failure of or
interruption in its communications and delivery infrastructure.

6. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:

6.1 USE OF PROCEEDS. To use the proceeds of the credit only for working capital
financing and the issuance of standby letters of credit.

6.2 FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:

(a)        Within 90 days of the Borrower's fiscal year end, the Borrower's
           annual financial statements. These financial statements must be
           audited by a Certified Public Accountant ("CPA") acceptable to the
           Bank.
(b)        Each guarantor's annual budgeted statement of sources and uses of
           cash flows within 90 days of each calendar year end. These financial
           statements may be guarantor prepared.
(c)        Each guarantor's annual financial statements in form satisfactory to
           the Bank within 90 days of each calendar year end. These financial
           statements may be guarantor prepared.
(d)        Copies of each guarantor's federal income tax return (with all forms
           K-1 attached) within 30 days of filing, together with a statement of
           any contributions made by the guarantor to any subchapter S
           corporation or trust, and copies of any extensions of the filing
           date.
(e)        Within 60 days of each quarter end, the Borrower shall provide to the
           Bank copies of statements from depository institutions or brokerage
           firms, or other evidence acceptable to the Bank of the Borrowers
           liquid assets.

6.3 LIQUIDITY. Guarantors shall each maintain liquid assets equal to at least
Fourteen Million and No/100 Dollars ($14,000,000.00) (includes the liquidity
requirement as contained in the Second Amendment to the Individual Loan
Agreement between Vincent W. Goett and Melissa A. Goett and Bank of America
National Trust and Savings Association, dated                              1998,
paragraph 7.6). "Liquid assets" means the following assets of the Guarantor's:
(a) cash and certificates of deposit; (b) U.S. treasury bills and other
obligations of the federal government; (c) readily marketable securities
(including commercial paper, but excluding restricted stock and stock subject to
the provisions of Rule 144 of the Securities and Exchange Commission); (c) for
F. Keith Withycombe and Patricia A.

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Withycombe, directly owned operating partnership units in equity residential
properties; and (d) for Vincent W. Goett and Melissa Turner Goett, Futech stock,
options and notes.

If more than 25% of the value of the Guarantors' liquid assets is represented by
margin stock, the Borrower will provide the Bank a Form U-1 Purpose Statement,
and the Bank and the Borrower will comply with the restrictions imposed by
Regulation U of the Federal Reserve, which may require a reduction in the amount
of credit provided to the Borrower.

6.4 OTHER DEBTS (BORROWER AND GUARANTORS). Not to have outstanding or incur any
direct or contingent debts or lease obligations (other than those to the Bank),
or become liable for the debts of others without the Bank's written consent.
This does not prohibit: (a) Acquiring goods, supplies, or merchandise on normal
trade credit. (b) Endorsing negotiable instruments received in the usual course
of business. (c) Obtaining surety bonds in the usual course of business. (d)
Debts and lines of credit in existence on the date of this Agreement disclosed
in writing to the Bank. (e) F. Keith Withycombe will not create, incur, assume
or become liable in any manner for any indebtedness (as surety or guarantor for
the debt for another, or otherwise) other than to Bank, in excess of Ten Million
and No/100 Dollars ($10,000,000.00) in aggregate, excluding permanent secured
financing of real estate property. (f) Vincent W. Goett will not create, incur,
assume or become liable in any manner for any indebtedness (as surety or
guarantor for the debt for another, or otherwise) other than to Bank, in excess
of: Three Million and No/100 Dollars ($3,000,000.00) in aggregate, excluding
permanent secured real estate property.

6.5 OTHER LIENS (BORROWER AND GUARANTORS). Not to create, assume, or allow any
security interest or lien (including judicial liens) on property the Borrower
now or later owns, except: (a) Deeds of trust and security agreements in favor
of the Bank. (b) Liens for taxes not yet due. (c) Liens outstanding on the date
of this Agreement disclosed in writing to the Bank. (d) Additional liens for F.
Keith Withycombe, which together with the debts permitted under preceding
paragraph 6.4 (e), secure obligations in a total principal amount not exceeding
Ten Million and No/100 Dollars ($10,000,000.00). (e) Additional liens for
Vincent W. Goett, which together with the debts permitted under the preceding
paragraph 6.4 (0, secure obligations in a total principal amount not exceeding
Three Million and No/100 Dollars ($3,000,000.00).

6.6 NOTICES TO BANK. To promptly notify the Bank in writing of: (a) any lawsuit
over Fifty Thousand and No/100 Dollars ($50,000.00) against the Borrower (or any
guarantor). (b) any substantial dispute between the Borrower (or any guarantor)
and any government authority. (c) any failure to comply with this Agreement. (d)
any material adverse change in the Borrower's (or any guarantor's) financial
condition or operations. (e) any change in the Borrower's name, legal structure,
place of business, or chief executive office if the Borrower has more than one
place of business.

6.7 CHANGE OF OWNERSHIP. Guarantors not to cause, permit, or suffer any change,
direct or indirect, in the Borrower's capital ownership.

6.8 BOOKS AND RECORDS. To maintain adequate books and records.

6.9 AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit, and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.

6.10 COMPLIANCE WITH LAWS. To comply with the laws, (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.

6.11 PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises the Borrower now has.

6.12 MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements
to keep the Borrower's properties in good working condition.

6.13 COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.

6.14 INSURANCE. To maintain insurance as is usual for the business it is in.

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6.15 ADDITIONAL NEGATIVE COVENANTS (BORROWER AND GUARANTORS). Not to, without
the Bank's written consent: (a) engage in any business activities substantially
different from the Borrower's present business: (b) liquidate or dissolve the
Borrower's business; (c) enter into any consolidation, merger, pool, joint
venture, syndicate, or other combination: (d) acquire or purchase a business or
its assets; or (e) sell or otherwise dispose of any assets for less than fair
market value or enter into any sale and leaseback agreement covering any of its
fixed or capital assets, except guarantors' annual charitable/trust
contributions not to exceed Ten Million and No/100 Dollars ($10,000,000.00) for
F. Keith Withycombe and Three Million and No/100 Dollars ($3,000,000.00) for
Vincent W. Goett in total when combined with the preceding paragraphs 6.4 (e)
and (f) and 6.5 (d) and (e).

7. DEFAULT If any of the following events occur, the Bank may do one or more of
the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. If an event of default occurs under
the paragraph entitled "Bankruptcy" below with respect to the Borrower, the
entire debt outstanding under this Agreement will automatically be due
immediately.

7.1 FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
when due.

7.2 FALSE INFORMATION. The Borrower (or any guarantor) has given the Bank false
or misleading information or representations.

7.3 DEATH. The Borrower (or any guarantor) dies; if the Borrower is a
corporation, any principal officer or majority stockholder dies.

7.4 BANKRUPTCY. The Borrower (or any guarantor or general partner of the
Borrower) files a bankruptcy petition, a bankruptcy petition is filed against
the Borrower (or any guarantor or general partner of the Borrower), or the
Borrower (or any guarantor or general partner of the Borrower) makes a general
assignment for the benefit of creditors.

7.5 RECEIVERS. A receiver or similar official is appointed for the Borrower's
(or any guarantor's) business, or the business is terminated.

7.6 GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.

7.7 MATERIAL ADVERSE CHANGE. A material adverse change occurs in the Borrower's
(or any guarantor's) financial condition, properties or prospects, or ability to
repay the extensions of credit under this Agreement.

7.8 CROSS-DEFAULT. Any default occurs under any agreement in connection with any
credit the Borrower (or any guarantor) has obtained from anyone else or which
the Borrower (or any guarantor) has guaranteed.

7.9 DEFAULT UNDER RELATED DOCUMENTS. Any guaranty, subordination agreement,
security agreement, deed of trust, or other document required by this Agreement
is violated or no longer in effect.

7.10 OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet the
conditions of, or fails to perform any obligation under any other agreement the
Borrower (or guarantor) has with the Bank or any affiliate of the Bank.

7.11 OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions of,
or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article

8. ENFORCING THIS AGREEMENT; MISCELLANEOUS

8.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.

8.2 ARIZONA LAW. This Agreement is governed by Arizona law.

8.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the
Bank's successors and assignees. The Borrower agrees that it may not assign this
Agreement without the Bank's prior consent.


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8.4 ARBITRATION. (a) Unless expressly prohibited by law, any controversy or
claim between or among the parties, including but not limited to those arising
out of or relating to this Agreement or any agreements or instruments relating
hereto or delivered in connection herewith and any claim based on or arising
from an alleged tort, shall at the request of any party be determined by
arbitration. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
provision in this Agreement, and under the Commercial Rules of the American
Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes
of limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the
arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. (b) No
provision of this paragraph shall limit the right of any party to this Agreement
to exercise self-help remedies such as setoff, to foreclose against or sell any
real or personal property collateral or security, or to obtain provisional or
ancillary remedies from a court of competent jurisdiction before, after, or
during the pendency of any arbitration or other proceeding. The exercise of a
remedy does not waive the right of either party to resort to arbitration. At the
Bank's option, foreclosure under a deed of trust or mortgage may be accomplished
either by exercise of power of sale under the deed of trust or by judicial
foreclosure of the deed of trust or mortgage.

8.5 SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable, the
rest of the Agreement may be enforced. The Bank retains all rights, even if it
makes a loan after default. If the Bank waives a default, it may enforce a later
default. Any consent or waiver under this Agreement must be in writing.

8.6 ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.

8.7 ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any reasonable
costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. As
used in this paragraph, "attorneys' fees" includes the allocated costs of
in-house counsel.

8.8 ONE AGREEMENT. This Agreement and any related security or other agreements
required by this Agreement, collectively: (a) represent the sum of the
understandings and agreements between the Bank and the Borrower concerning this
credit, and (b) replace any prior oral or written agreements between the Bank
and the Borrower concerning this credit; and (c) are intended by the Bank and
the Borrower as the final, complete and exclusive statement of the terms agreed
to by them. In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.

8.9 USURY LAWS. This paragraph covers the transactions described in this
Agreement and any other agreements with the Bank or its affiliates executed in
connection with this Agreement, to the extent they are subject to the Arizona
usury laws (the "Transactions"). The Borrower understands and believes that the
Transactions comply with the Arizona usury laws. However, if any interest or
other charges paid or payable in connection with the Transactions are ever
determined to exceed the maximum amount permitted by law, the Borrower agrees
that:

(a)      the amount of interest or other charges payable by the Borrower
         pursuant to the Transactions shall be reduced to the maximum amount
         permitted by law; and

(b)      any excess amount previously collected from the Borrower in connection
         with the Transactions which exceeded the maximum amount permitted by
         law will be credited against the then outstanding principal balance. If
         the outstanding principal balance has been repaid in full, the excess
         amount paid will be refunded to the Borrower.

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All fees, charges, goods, things in action or any other sums or things of value,
other than interest at the interest rate described in this Agreement, paid or
payable by the Borrower (collectively the "Additional Sums"), that may be deemed
to be interest with respect to the Transactions, shall, for the purpose of any
laws of the State of Arizona that may limit the maximum amount of interest to be
charged with respect to the Transactions, be payable by Borrower as, and shall
be deemed to be, additional interest. For such purposes only, the agreed upon
and "contracted for rate of interest" of the Transactions shall be deemed to be
increased by the rate of interest resulting from the Additional Sums.

This Agreement is executed as of the date stated at the top of the first page.

BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION

/s/ Deborah L. Kelly
------------------------------------
By: Deborah L. Kelly, Vice President

Address where notices to the Bank
are to be sent:

101 North 1st Avenue
Phoenix, Arizona 85003

FUTECH INTERACTIVE PRODUCTS, INC.


/s/ Vincent W. Goett
----------------------------------
By: Vincent W. Goett, President

Address where notices to Borrower
are to be sent:

2999 North 44th Street, Suite #225
Phoenix, Arizona 85018


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[LOGO BANK OF AMERICA]                    CORPORATE RESOLUTIONS TO OBTAIN CREDIT

RESOLVED, that this corporation, Futech Interactive Products, Inc., may:

1        borrow money from Bank of America National Trust and Savings
         Association and any other subsidiary or affiliate of BankAmerica
         Corporation (collectively, "Bank");

2.       obtain for the account of this corporation commercial and standby
         letters of credit issued by Bank;

3.       obtain for the account of this corporation Bank's acceptance of drafts
         and other instruments; and

4.       discount with or sell to Bank notes, acceptances, drafts, receivables
         and other evidences of indebtedness, and assign or otherwise transfer
         to Bank any security interest or lien for such obligations;

from time to time, in such amount or amounts as in the judgment of the
Authorized Officers (as hereinafter defined) this corporation may require (the
credit facilities described in the first part of this resolution are
collectively referred to herein as the "Credit Facilities"); provided, however,
that the aggregate principal amount outstanding at any one time under the Credit
Facilities authorized by this resolution shall not exceed the sum of Seven
Million and No/100 Dollars ($7,000,000.00), which sum shall be in addition to
such other amount or amounts as otherwise may be authorized.

RESOLVED FURTHER, that the Authorized Officers are hereby authorized and
directed, as security for any obligation or obligations of this corporation to
Bank, whether arising pursuant to these Resolutions or otherwise, to grant in
favor of Bank a security interest in or lien on any real or personal property
belonging to or under the control of this corporation.

RESOLVED FURTHER, that

1.      If only one signature is obtained, any one of the following:

        a.   Vincent W. Goett, President
        b.
        c.
        d.

2.      If two signatures are obtained, any one of the following:

        a.
        b.
        c.
        d.

        together with any one of the following:

        e.
        f.
        g.
        h.

of this corporation, acting individually or in any combination as may be set
forth above (the "Authorized Officers"), are hereby authorized and directed, in
the name of this corporation, to execute and deliver to Bank, and Bank is
requested to accept:

a.       the notes, credit agreements, advance account agreements, acceptance
         agreements, letter of credit applications and agreements, purchase
         agreements or other instruments, agreements and documents which
         evidence the obligations of this corporation under the Credit
         Facilities obtained or to be obtained pursuant to these resolutions;

b.       any and all security agreements, deeds of trust, mortgages, financing
         statements, fixture filings or other instruments, agreements and
         documents with respect to any security interest or lien authorized to
         be given

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        pursuant to these resolutions; and

c.      any other instruments, agreements and documents as Bank may require and
        the Authorized Officers may approve.

RESOLVED FURTHER, that the Authorized Officers are hereby authorized and
directed, in the name of this Corporation, to endorse, assign to Bank, and
deliver to Bank, any and all notes, acceptances, drafts, receivables and other
evidences of indebtedness discounted with or sold to Bank, together with any
security interest or lien for such obligations, and to guarantee the payment of
the same to Bank.

RESOLVED FURTHER, that any and all of the instruments, agreements and documents
referred to above may contain such recitals, covenants, agreements and other
provisions as Bank may require and the Authorized Officers may approve, and the
execution of such instruments, agreements and documents by the authorized
officers shall be conclusive evidence of such approval, and that the Authorized
Officers are authorized from time to time to execute renewals or extensions of
any and all such instruments, agreements and documents.

RESOLVED FURTHER, that Bank is authorized to act upon the foregoing resolutions
until written notice of revocation is received by Bank, and that the authority
hereby granted shall apply with equal force and effect to the successors in
office of the Authorized Officers.

                        CORPORATE SECRETARY'S CERTIFICATE

I, Fred B. Gretsch, Secretary of Futech Interactive Products, Inc., a
corporation organized and existing under the laws of the State of Arizona (the
"Corporation"), hereby certify that the foregoing is a full, true and correct
copy of resolutions of the Board of Directors of the Corporation, duly and
regularly adopted by the Board of Directors of the Corporation in all respects
as required by law and the by-laws of the Corporation on November 24, 1998, at a
meeting at which a quorum of the Board of Directors of the Corporation was
present and the requisite number of such directors voted in favor of said
resolutions, or by the unanimous consent in writing of all members of the Board
of Directors of the Corporation to the adoption of said resolutions.

I further certify that said resolutions are still in full force and effect and
have not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for the Corporation
by virtue of such resolutions.

IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the Corporation,
and affixed the corporate seal of the Corporation (if required by the laws of
the jurisdiction in which the Corporation is incorporated), on
  ??????  , 1998.
----------

AUTHORIZED SIGNATURES:


/s/ Vincent W. Goett
---------------------------
Vincent W. Goett, President



/s/ Fred B. Gretsch
---------------------------------
Fred B. Gretsch, Secretary of
Futech Interactive Products, Inc.
An Arizona Corporation

Affix Corporate Seal Here
<PAGE>   10
[LOGO BANK OF AMERICA]

                                                                        F.R. U-1
                                                    This form is required by law
                                            (15 U.S.C. 78g and 78w; 12 CFR 221).
                                                            O.M.B. No. 7100-0115
                                                  Approval Expires July 31, 1998

                Board of Governors of the Federal Reserve System
     Statement of Purpose for an Extension of Credit Secured by Margin Stock

             Bank of America National Trust and Savings Association
                           (FEDERAL RESERVE FORM U-1)

Instructions:

(1)      This form must be completed when a bank extends credit secured directly
         or indirectly, in whole or in part, by any margin stock.

(2)      The term "margin stock" is defined in Regulation U (12 CFR 221) and
         includes, principally: (1) stocks that are registered on a national
         securities exchange or that are on the Federal Reserve Board's List of
         OTC Margin Stocks; (2) debt securities (bonds) that are convertible
         into margin stocks; and (3) shares of mutual funds, unless 95 per cent
         of the assets of the fund are continuously invested in U.S. government,
         agency, State, or municipal obligations.

(3)      Please print or type (if space is inadequate, attach separate sheet).

PART I   To be completed by borrower(s)

(1)      What is the amount of the credit being extended? $7,000,000.00

(2)      Will any part of this credit be used to purchase or carry margin stock?
         [ ] Yes  [X] No

         If the answer is "no," describe the specific purpose of the credit:
         Proceeds of the credit will be used for working capital financing and
         the issuance of standby letters of credit.

I (we) have read this form and certify that to the best of my (our) knowledge
and belief the information given is true, accurate, and complete, and that the
margin stock and any other securities collateralizing this credit are authentic,
genuine, unaltered, and not stolen, forged, or counterfeit.

Date:

Futech Interactive Products, Inc.

Signed: /s/ Vincent W. Goett
---------------------------------
Vincent W. Goett, President

                     THIS FORM SHOULD NOT BE SIGNED IN BLANK

                A Borrower who falsely certifies the purpose of a
                  credit on this form or otherwise willfully or
               intentionally evades the provisions of Regulation U
   will also violate Federal Reserve Regulation X, "Rules Governing Borrowers
                          Who Obtain Securities Credit"

                                                                               1
<PAGE>   11
PART II To be completed by bank only if the purpose of the credit is to purchase
or carry margin stock (Part 1(2) answered "yes").

(1)      List the margin stock securing this credit: do not include debt
         securities convertible into margin stock. The maximum loan value of
         margin stock is     per cent of its current market value under the
         current Supplement to Regulation U.

<TABLE>
<CAPTION>
                                                                                Date and source
                                                            Market Price          of valuation              Total market
         No. of Shares               Issue                   per share          (see note below)           value per issue
         -------------               -----                   ---------          ----------------           ---------------
<S>                                  <C>                    <C>                 <C>                        <C>
</TABLE>

(2)      List the debt securities convertible into margin stock securing this
         credit. The maximum loan value of such debt securities is       per
         cent of the current market value under the current Supplement to
         Regulation U.

<TABLE>
<CAPTION>
                                                                                Date and source
                                                                                  of valuation              Total market
         Principal Amount            Issue                  Market Price        (see note below)           value per issue
         ----------------            -----                   ---------          ----------------           ---------------
<S>                                  <C>                    <C>                 <C>                        <C>
</TABLE>

(3)      List other collateral including non-margin stock securing this credit.

<TABLE>
<CAPTION>
                                                           Date and source
                                                            of valuation                   Good faith
        Describe Briefly         Market Price              (see note below)                loan value
        ----------------         ------------              ----------------                ----------
<S>                              <C>                       <C>                             <C>
</TABLE>

Note: Bank need not complete "Date and source of valuation" if the market value
was obtained from regularly published information in a journal of general
circulation.

                                                                               2
<PAGE>   12
PART III                To be signed by a bank officer in all instances

         I am a duly authorized officer of the bank and understand that this
credit secured by margin stock may be subject to the credit restrictions of
Regulation U. I have read this form and any attachments, and I have accepted the
customer's statement in Part I in good faith as required by Regulation U**, and
I certify that to the best of my knowledge and belief, all the information given
is true, accurate, and complete. I also certify that if any securities that
directly secure the credit are not or will not be registered in the name of the
borrower or its nominee, I have or will cause to have examined the written
consent of the registered owner to pledge such securities. I further certify
that any securities that have been or will be physically delivered to the bank
in connection with this credit have been or will be examined, that all
validation procedures required by bank policy and the Securities Exchange Act of
1934 (section 17(f) as amended) have been or will be performed, and that I am
satisfied to the best of my knowledge and belief that such securities are
genuine and not stolen or forged and their faces have not been altered.

Date

                                            By: Deborah L. Kelly, Vice President

**To accept the customer`s statement in good faith, the officer of the bank must
be alert to the circumstances surrounding the credit and, if in possession of
any information that would cause a prudent person not to accept the statement
without inquiry, must have investigated and be satisfied that the statement is
truthful. Among the facts which would require such investigation are receipt of
the statement through the mail or from a third party.

         This Form must be retained by the Bank for at Least Three Years
                        after the Credit is Extinguished

                                                                               3
<PAGE>   13
[LOGO BANK OF AMERICA]                                       CONTINUING GUARANTY


                                   Borrowers:  Futech Interactive Products, Inc.
                                   Guarantors: Vincent W. Goett and
                                               Melissa Turner Goett

(1)      For valuable consideration, the undersigned ("Guarantors") jointly and
         severally unconditionally guarantee and promise to pay to Bank of
         America National Trust and Savings Association and any other subsidiary
         or affiliate of BankAmerica Corporation which has extended or may
         hereafter extend credit to Borrowers (each a "Bank"), or order, on
         demand, in lawful money of the United States, any and all indebtedness
         of Futech Interactive Products, Inc. ("Borrowers") to Bank. The word
         "indebtedness" is used herein in its most comprehensive sense and
         includes any and all advances, debts, obligations and liabilities of
         Borrowers or any one or more of them, heretofore, now, or hereafter
         made, incurred or created, whether voluntary or involuntary and however
         arising, whether direct or acquired by Bank by assignment or
         succession, whether due or not due, absolute or contingent, liquidated
         or unliquidated, determined or undetermined, and whether Borrowers may
         be liable individually or jointly with others, or whether recovery upon
         such indebtedness may be or hereafter become barred by any statute of
         limitations, or whether such indebtedness may be or hereafter become
         otherwise unenforceable.

(2)      The liability of Guarantors under this Guaranty (exclusive of liability
         under any other guaranties executed by Guarantors) shall not exceed at
         any one time the total of (a) Seven Million and No/100 Dollars
         ($7,000,000.00), for the principal amount of the indebtedness and (b)
         all interest, fees, and other costs and expenses relating to or arising
         out of the indebtedness or such part of the indebtedness as shall not
         exceed the foregoing limitation. Bank may permit the indebtedness of
         Borrowers to exceed Guarantors' liability, and may apply any amounts
         received from any source, other than from Guarantors, to the
         unguaranteed portion of Borrowers' indebtedness. This is a Continuing
         Guaranty relating to any indebtedness, including that arising under
         successive transactions which shall either continue the indebtedness or
         from time to time renew it after it has been satisfied. Any payment by
         Guarantors shall not reduce their maximum obligation hereunder, unless
         written notice to that effect be actually received by Bank at or prior
         to the time of such payment.

(3)      The obligations hereunder are joint and several, and independent of the
         obligations of Borrowers, and a separate action or actions may be
         brought and prosecuted against Guarantors whether action is brought
         against Borrowers or whether Borrowers be joined in any such action or
         actions and regardless of whether a trustee's sale is held under any
         deed of trust securing the indebtedness or regardless of whether a
         judicial foreclosure sale is held if any deed of trust securing the
         indebtedness is judicially foreclosed as a mortgage. Guarantors waive
         the benefit of any statute of limitations affecting their liability
         hereunder.

(4)      Guarantors authorize Bank, without notice or demand and without
         affecting their liability hereunder, from time to time, either before
         or after revocation hereof, to (a) renew, compromise, extend,
         accelerate or otherwise change the time for payment of, or otherwise
         change the terms of the indebtedness or any part thereof, including
         increase or decrease of the rate of interest thereon; (b) receive and
         hold security for the payment of this Guaranty or the indebtedness
         guaranteed, and exchange, enforce, waive, release, fail to perfect,
         sell, or otherwise dispose of any such security; (c) apply such
         security and direct the order or manner of sale thereof as Bank in its
         discretion may determine, except to the extent specifically prohibited
         by law; and (d) release or substitute any one or more of the endorsers
         or guarantors.

(5)      Guarantors waive any right to require Bank to (a) proceed against
         Borrowers; (b) proceed against or exhaust any security held from
         Borrowers; or (c) pursue any other remedy in Bank's power whatsoever.
         Guarantors waive any defense arising by reason of any disability or
         other defense of Borrowers, or the cessation from any cause whatsoever
         of the liability of Borrowers, or any claim that Guarantors'
         obligations exceed or are more burdensome than those of Borrowers.
         Guarantors waive any benefit of the provisions of Arizona Revised
         Statutes Sections 12-1641 and 12-1642 et seq., and Rule 17(f) of the
         Arizona Rules of Civil Procedures, which set forth certain rights and
         obligations among guarantors, debtors and creditors, to the extent
         applicable. Guarantors waive any right of subrogation, reimbursement,
         indemnification, and contribution (contractual,

                                                                               1
<PAGE>   14
any or otherwise), including without limitation, any claim or right of
subrogation under the Bankruptcy Code (Title 11 of the U.S. Code) or any
successor statute, arising from the existence or performance of this Guaranty
and Guarantors waive any fight to enforce any remedy which Bank now has or may
hereafter have against Borrowers, and waive any benefit of, and any right to
participate in, any security now or hereafter held by Bank. Bank may foreclose,
either by judicial foreclosure or by exercise of power of sale, any deed of
trust securing the indebtedness, and, even though the foreclosure may destroy or
diminish Guarantors' rights against Borrowers, Guarantors shall be liable to
Bank for any part of the indebtedness remaining unpaid after the foreclosure.
Guarantors waive any benefit of any statutory provision limiting the right of
Bank to recover a deficiency judgment, or to otherwise proceed, against any
person or entry obligated for payment of the indebtedness, after any judicial
foreclosure sale or trustee's sale of any collateral securing the indebtedness
including, without limitation, the benefits, if any, of Arizona Revised Statutes
Section 33-814, except to the extent otherwise required by law. Guarantors waive
any homestead or exemption rights. Guarantors waive all presentments, demands
for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance of this Guaranty and of the
existence, creation, or incurring of new or additional indebtedness.

(6)      Guarantors acknowledge and agree that they shall have the sole
         responsibility for obtaining from Borrowers such information concerning
         Borrowers' financial conditions or business operations as Guarantors
         may require, and that Bank has no duty at any time to disclose to
         Guarantors any information relating to the business operations or
         financial conditions of Borrowers.

(7)      In addition to Bank's rights of setoff, to secure all of Guarantors'
         obligations hereunder, Guarantors assign and grant to Bank a security
         interest in all moneys, securities and other property of Guarantors now
         or hereafter in the possession of Bank, and all deposit accounts of
         Guarantors maintained with Bank, and all proceeds thereof. Upon default
         or breach of any of Guarantors' obligations to Bank, Bank may apply any
         deposit account to reduce the indebtedness, and may foreclose any
         collateral as provided in the Uniform Commercial Code and in any
         security agreements between Bank and Guarantors.

(8)      Any obligations of Borrowers to Guarantors, now or hereafter existing,
         including but not limited to any obligations to Guarantors as subrogees
         of Bank or resulting from Guarantors' performance under this Guaranty,
         are hereby subordinated to the indebtedness. Such obligations of
         Borrowers to Guarantors if Bank so requests shall be enforced and
         performance received by Guarantors as trustees for Bank and the
         proceeds thereof shall be paid over to Bank on account of the
         indebtedness of Borrowers to Bank, but without reducing or affecting in
         any manner the liability of Guarantors under the provisions of this
         Guaranty.

(9)      This Guaranty may be revoked at any time by Guarantors in respect to
         future transactions, unless there is a continuing consideration as to
         such transactions which Guarantors do not renounce. Such revocation
         shall be effective upon actual receipt by Bank at the address shown
         below of written notice of revocation. Revocation shall not affect any
         of Guarantors' obligations or Bank's rights with respect to
         transactions which precede Bank's receipt of such notice, regardless of
         whether or not the indebtedness related to such transactions, before or
         after revocation, has been renewed, compromised, extended, accelerated,
         or otherwise changed as to any of its terms, including time for payment
         or increase or decrease of the rate of interest thereon, and regardless
         of any other act or omission of Bank authorized hereunder. Revocation
         by any one or more of Guarantors shall not affect any obligations of
         any nonrevoking Guarantors. If this Guaranty is revoked, returned, or
         canceled, and subsequently any payment or transfer of any interest in
         property by Borrowers to Bank is rescinded or must be returned by Bank
         to Borrowers, this Guaranty shall be reinstated with respect to any
         such payment or transfer, regardless of any such prior revocation,
         return, or cancellation.

(10)     Where any one or more of Borrowers are corporations or partnerships it
         is not necessary for Bank to inquire into the powers of Borrowers or of
         the officers, directors, partners or agents acting or purporting to act
         on their behalf, and any indebtedness made or created in reliance upon
         the professed exercise of such powers shall be guaranteed hereunder.

(11)     Bank may, without notice to Guarantors and without affecting
         Guarantors' obligations hereunder, assign the indebtedness and this
         Guaranty, in whole or in part. Guarantors agree that Bank may disclose
         to any prospective purchaser and any purchaser of all or part of the
         indebtedness any and all information in Bank's possession concerning
         Guarantors, this Guaranty and any security for this Guaranty.

(12)     Guarantors agree to pay all attorneys' fees, the allocated costs of
         Bank's in-house counsel, and all other costs

                                                                               2
<PAGE>   15
and expenses which may be incurred by Bank in the enforcement of this Guaranty,
including without limitation all costs and necessary disbursements in any legal
action or arbitration proceeding.

(13)     Any married person who signs this Guaranty hereby expressly agrees that
         recourse may be had against such person's separate property and
         community property to the extent permitted by law for all obligations
         under this Guaranty.

(14)     Where there is but a single Borrower, or where a single Guarantor
         executes this Guaranty, then all words used herein in the plural shall
         be deemed to have been used in the singular where the context and
         construction so require; and when there is more than one Borrower named
         herein, or when this Guaranty is executed by more than one Guarantor,
         the words "Borrowers" and "Guarantors" respectively shall mean all and
         any one or more of them.

(15)     This Guaranty shall be governed by and construed according to the laws
         of the State of Arizona, to the jurisdiction of which the parties
         hereto submit.

(16)     (a) Any controversy or claim between or among the parties, including
         but not limited to those arising out of or relating to this Guaranty or
         any agreements or instruments relating hereto or delivered in
         connection herewith and any claim based on or arising from an alleged
         tort, shall at the request of any party be determined by arbitration.
         The arbitration shall be conducted in accordance with the United States
         Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
         provision in this Guaranty, and under the Commercial Rules of the
         American Arbitration Association ("AAA"). The arbitrator(s) shall give
         effect to statutes of limitation in determining any claim. Any
         controversy concerning whether an issue is arbitrable shall be
         determined by the arbitrator(s). Judgment upon the arbitration award
         may be entered in any court having jurisdiction. The institution and
         maintenance of an action for judicial relief or pursuit of a
         provisional or ancillary remedy shall not constitute a waiver of the
         right of any party, including the plaintiff, to submit the controversy
         or claim to arbitration if any other party contests such action for
         judicial relief.

         (b) No provision of this paragraph shall limit the right of any party
         to this Guaranty to exercise self-help remedies such as setoff, to
         foreclose against or sell any real or personal property collateral or
         security, or to obtain provisional or ancillary remedies from a court
         of competent jurisdiction before, after, or during the pendency of any
         arbitration or other proceeding. The exercise of a remedy does not
         waive the right of either party to resort to arbitration. At Bank's
         option, foreclosure under a deed of trust or mortgage may be
         accomplished either by exercise of power of sale under the deed of
         trust or mortgage or by judicial foreclosure.

Executed this         3         day of December, 1998.
              -----------------

/s/ Vincent W. Goett
--------------------------------------
Vincent W. Goett, Guarantor
6400 North 48th Street
Paradise Valley, Arizona 85253
Soc. Sec. No. or I.D. No.: ###-##-####

/s/ Melissa Turner Goett
--------------------------------------
Melissa Turner Goett, Guarantor
6400 North 48th Street
Paradise Valley, Arizona 85253
Soc. Sec. No. or I.D. No.: ###-##-####

Address for notices to Bank:
Bank of America National Trust and Savings
Association
Private Banking, #9311
101 North 1st Avenue
Phoenix, Arizona 85003

                                                                               3
<PAGE>   16
[LOGO] BANK OF AMERICA                                       Continuing Guaranty

                              Borrowers:       Futech Interactive Products, Inc.
                              Guarantors:      F. Keith Withycombe and
                                               Patricia A. Withycombe

(1)      For valuable consideration, the undersigned ("Guarantors") jointly and
         severally unconditionally guarantee and promise to pay to Bank of
         America National Trust and Savings Association and any other subsidiary
         or affiliate of BankAmerica Corporation which has extended or may
         hereafter extend credit to Borrowers (each a "Bank"), or order, on
         demand, in lawful money of the United States, any and all indebtedness
         of Futech Interactive Products, Inc. ("Borrowers") to Bank. The word
         "indebtedness" is used herein in its most comprehensive sense and
         includes any and all advances, debts, obligations and liabilities of
         Borrowers or any one or more of them, heretofore, now, or hereafter
         made, incurred or created, whether voluntary or involuntary and however
         arising, whether direct or acquired by Bank by assignment or
         succession, whether due or not due, absolute or contingent, liquidated
         or unliquidated, determined or undetermined, and whether Borrowers may
         be liable individually or jointly with others, or whether recovery upon
         such indebtedness may be or hereafter become barred by any statute of
         limitations, or whether such indebtedness may be or hereafter become
         otherwise unenforceable.

(2)      The liability of Guarantors under this Guaranty (exclusive of liability
         under any other guaranties executed by Guarantors) shall not exceed at
         any one time the total of (a) Seven Million and No/100 Dollars
         ($7,000,000.00), for the principal amount of the indebtedness and (b)
         all interest, fees, and other costs and expenses relating to or arising
         out of the indebtedness or such part of the indebtedness as shall not
         exceed the foregoing limitation. Bank may permit the indebtedness of
         Borrowers to exceed Guarantors' liability, and may apply any amounts
         received from any source, other than from Guarantors, to the
         unguaranteed portion of Borrowers' indebtedness. This is a Continuing
         Guaranty relating to any indebtedness, including that arising under
         successive transactions which shall either continue the indebtedness or
         from time to time renew it after it has been satisfied. Any payment by
         Guarantors shall not reduce their maximum obligation hereunder, unless
         written notice to that effect be actually received by Bank at or prior
         to the time of such payment.

(3)      The obligations hereunder are joint and several, and independent of the
         obligations of Borrowers, and a separate action or actions may be
         brought and prosecuted against Guarantors whether action is brought
         against Borrowers or whether Borrowers be joined in any such action or
         actions and regardless of whether a trustee's sale is held under any
         deed of trust securing the indebtedness or regardless of whether a
         judicial foreclosure sale is held if any deed of trust securing the
         indebtedness is judicially foreclosed as a mortgage. Guarantors waive
         the benefit of any statute of limitations affecting their liability
         hereunder.

(4)      Guarantors authorize Bank, without notice or demand and without
         affecting their liability hereunder, from time to time, either before
         or after revocation hereof, to (a) renew, compromise, extend,
         accelerate or otherwise change the time for payment of, or otherwise
         change the terms of the indebtedness or any part thereof, including
         increase or decrease of the rate of interest thereon; (b) receive and
         hold security for the payment of this Guaranty or the indebtedness
         guaranteed, and exchange, enforce, waive, release, fail to perfect,
         sell, or otherwise dispose of any such security; (c) apply such
         security and direct the order or manner of sale thereof as Bank in its
         discretion may determine, except to the extent specifically prohibited
         by law; and (d) release or substitute any one or more of the endorsers
         or guarantors.

(5)      Guarantors waive any right to require Bank to (a) proceed against
         Borrowers; (b) proceed against or exhaust any security held from
         Borrowers; or (c) pursue any other remedy in Bank's power whatsoever.
         Guarantors waive any defense arising by reason of any disability or
         other defense of Borrowers, or the cessation from any cause whatsoever
         of the liability of Borrowers, or any claim that Guarantors'
         obligations exceed or are more burdensome than those of Borrowers.
         Guarantors waive any benefit of the provisions of Arizona Revised
         Statutes Sections 12-1641 and 12-1642 et seq., and Rule 17(f) of the
         Arizona Rules of Civil Procedures, which set forth certain rights and
         obligations among guarantors, debtors and creditors, to the extent
         applicable. Guarantors waive any right of subrogation, reimbursement,
         indemnification, and contribution (contractual,

                                                                               1
<PAGE>   17
(12)     Guarantors agree to pay all attorneys' fees, the allocated costs of
         Bank's in-house counsel, and all other costs and expenses which may be
         incurred by Bank in the enforcement of this Guaranty, including without
         limitation all costs and necessary disbursements in any legal action or
         arbitration proceeding.

(13)     Any married person who signs this Guaranty hereby expressly agrees that
         recourse may be had against such person's separate property and
         community property to the extent permitted by law for all obligations
         under this Guaranty.

(14)     Where there is but a single Borrower, or where a single Guarantor
         executes this Guaranty, then all words used herein in the plural shall
         be deemed to have been used in the singular where the context and
         construction so require; and when there is more than one Borrower named
         herein, or when this Guaranty is executed by more than one Guarantor,
         the words "Borrowers" and "Guarantors" respectively shall mean all and
         any one or more of them.

(15)     This Guaranty shall be governed by and construed according to the laws
         of the State of Arizona, to the jurisdiction of which the parties
         hereto submit.

(16)     (a) Any controversy or claim between or among the parties, including
         but not limited to those arising out of or relating to this Guaranty or
         any agreements or instruments relating hereto or delivered in
         connection herewith and any claim based on or arising from an alleged
         tort, shall at the request of any party be determined by arbitration.
         The arbitration shall be conducted in accordance with the United States
         Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
         provision in this Guaranty, and under the Commercial Rules of the
         American Arbitration Association ("AAA"). The arbitrator(s) shall give
         effect to statutes of limitation in determining any claim. Any
         controversy concerning whether an issue is arbitrable shall be
         determined by the arbitrator(s). Judgment upon the arbitration award
         may be entered in any court having jurisdiction. The institution and
         maintenance of an action for judicial relief or pursuit of a
         provisional or ancillary remedy shall not constitute a waiver of the
         right of any party, including the plaintiff, to submit the controversy
         or claim to arbitration if any other party contests such action for
         judicial relief.

         (b) No provision of this paragraph shall limit the right of any party
         to this Guaranty to exercise self-help remedies such as setoff, to
         foreclose against or sell any real or personal property collateral or
         security, or to obtain provisional or ancillary remedies from a court
         of competent jurisdiction before, after, or during the pendency of any
         arbitration or other proceeding. The exercise of a remedy does not
         waive the right of either party to resort to arbitration. At Bank's
         option, foreclosure under a deed of trust or mortgage may be
         accomplished either by exercise of power of sale under the deed of
         trust or mortgage or by judicial foreclosure.

Executed this 3rd day of December, 1998.



/s/ F. Keith Withycombe
--------------------------------------
F. Keith Withycombe, Guarantor
6237 North 59th Place
Paradise Valley, Arizona 85253
Soc. Sec. No. or I.D. No.: ###-##-####



/s/ Patricia A. Withycombe
--------------------------------------
Patricia A. Withycombe, Guarantor
6237 North 59th Place
Paradise Valley, Arizona 85253
Soc. Sec. No. or I.D. No.: ###-##-####



Address for notices to Bank:
Bank of America National Trust and Savings
Association
Private Banking, #9311
101 North 1st Avenue
Phoenix, Arizona 85003

                                                                               3