Exhibit 10.109
                     Phoenix Leasing Incorporated Agreement
                   SENIOR LOAN AND SECURITY AGREEMENT NO. 4003


     THIS  SENIOR  LOAN  AND  SECURITY   AGREEMENT  NO.  4003  (this   "Security
Agreement")   is  dated  as  of  October  19,  1998  between  PLAY  CO.  TOYS  &
ENTERTAINMENT  CORP.  DBA PLAY  CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO.,  a
Delaware corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").

                                    RECITALS

     A.  Borrower  desires to borrow  from Lender in one or more  borrowings  an
amount not to exceed  $500,000  in the  aggregate,  and Lender  desires to loan,
subject to the terms and  conditions  herein set forth,  such amount to Borrower
(each,  a "Loan"  and  collectively,  the  "Loans").  Such  borrowings  shall be
evidenced by one or more Senior  Secured  Promissory  Notes (each,  a "Note" and
collectively, the "Notes"), in the form attached hereto.

     B. As security for  Borrower's  obligations  to Lender under this  Security
Agreement,  the Notes and any  other  agreement  between  Borrower  and  Lender,
Borrower will grant to Lender  hereunder a first priority  security  interest in
certain of its  equipment,  machinery,  fixtures,  other items and  intangibles,
whether now owned by Borrower or hereafter  acquired,  and all substitutions and
replacements of and additions,  improvements,  accessions and  accumulations  to
said equipment, machinery and fixtures and other items, together with all rents,
issues, income, profits and proceeds therefrom (collectively,  the "Collateral")
which is described on the Note attached hereto or any subsequently-executed Note
entered  into by Lender  and  Borrower  and  which  incorporates  this  Security
Agreement by reference.

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

     SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins on
the date set forth above and shall continue  thereafter and be in effect so long
as and at any time any Note entered into pursuant to this Security  Agreement is
in effect. The Term and monthly payment amount payable with respect to each item
of Collateral shall be as set forth in and as stated in the respective  Note(s).
The terms of each Note hereto are subject to all  conditions  and  provisions of
this  Security  Agreement  as it may at any time be  amended.  Each  Note  shall
constitute  a  separate  and  independent  Loan and  contractual  obligation  of
Borrower  and  shall  incorporate  the  terms and  conditions  of this  Security
Agreement and any additional  provisions contained in such Note. In the event of
a conflict  between the terms and conditions of this Security  Agreement and any
provisions of such Note,  the provisions of such Note shall prevail with respect
to such Note only.

     SECTION 2.  NON-CANCELABLE  LOAN.  This  Security  Agreement  and each Note
cannot be canceled or terminated except as expressly  provided herein.  Borrower
agrees that its  obligations to pay all monthly  payment  amounts and other sums
payable hereunder (and under any Note) and the rights of Lender and any assignee
in and to such  monthly  payment  amounts  and  other  sums,  are  absolute  and
unconditional and are not subject to any abatement,  reduction, setoff, defense,
counterclaim  or  recoupment  due or  alleged to be due to, or by reason of, any
past,  present or future  claims which  Borrower may have  against  Lender,  any
assignee,  the  manufacturer or seller of the Collateral,  or against any person
for any reason whatsoever.

     SECTION 3. LENDER COMMITMENT.  (a) General Terms.  Subject to the terms and
conditions  of this  Security  Agreement  and so long as no Event of  Default or
event which with the giving of notice or passage of time, or both,  could become
an Event of  Default  has  occurred,  Lender  hereby  agrees to make one or more
senior secured Loans to Borrower,  subject to the following conditions: (i) each
Loan shall be evidenced by a Note; (ii) the total principal  amount of the Loans
shall not exceed $500,000 in the aggregate (the "Commitment"); (iii) at the time

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of each Loan,  no Event of  Default or event  which with the giving of notice or
passage of time,  or both,  could become an Event of Default shall have occurred
and be  continuing,  as  reasonably  determined  by  Lender,  and  certified  by
Borrower; (iv) Lender shall not be obligated to make any Loan after November 23,
1998 and satisfied the conditions  specified in the Commitment  Letter;  (v) for
each Loan,  Borrower  shall present to Lender a list of proposed  Collateral for
approval by Lender in its sole  discretion;  (vi) for each Loan,  Borrower shall
have  provided  Lender  with  each of the  closing  documents  described  in the
Commitment Letter between Lender and Borrower (the "Commitment  Letter" ) and in
Exhibit A hereto  (which  documents  shall be in form and  substance  reasonably
acceptable to Lender)and  satisfied the  conditions  specified in the Commitment
Letter;  (vii) Borrower is performing according to its business plan referred to
as "Play Co. Toys International  Projected 1999 Revised 10/12/97" (the "Business
Plan"), as may be amended from time to time in form and substance  acceptable to
Lender;  (viii)  there  shall  be  no  material  adverse  change  in  Borrower's
condition,  financial or otherwise,  that would materially impair the ability of
Borrower to meet its payment and other  obligations under this Loan (a "Material
Adverse Effect") as reasonably  determined by Lender, and Borrower so certifies,
from (yy) the date of the most recent financial statements delivered by Borrower
to Lender to (zz) the date of the proposed  Loan;  (ix)  Borrower  shall use the
proceeds  of all Loans  hereunder  to  purchase  or  reimburse  the  purchase of
Collateral; (x) at the time of each Loan, Borrower has reimbursed Lender for all
UCC filing and search costs,  inspection and labeling costs, and appraisal fees,
if any;  (xi) all  Collateral  has been marked and labeled by Lender or Lender's
agent; and (xii) Lender has received in form and substance acceptable to Lender:
(a) Borrower's  interim  financial  statements  signed by a financial officer of
Borrower,  (b)  prior  to each  funding,  evidence  satisfactory  to  Lender  of
Borrower's   $500,000  cash  position   and/or  bank  line   availability;   (c)
Subordination or Intercreditor Agreement from Finova Capital and (d) immediately
upon availability,  complete copies of the Borrower's audit reports for its most
recent fiscal year, which shall include at least Borrower's  balance sheet as of
the close of such year, and Borrower's statement of income and retained earnings
and of changes in financial  position for such year,  prepared on a consolidated
basis and certified by independent  public  accountants.  Such certificate shall
not be qualified or limited because of restricted or limited examination by such
accountant of any material portion of the company's records.  Such reports shall
be prepared in accordance  with  generally  accepted  accounting  principles and
practices  consistently  applied. In the event of conflict between the terms and
conditions of the Security  Agreement and the Commitment  Letter,  the terms and
conditions of this Security Agreement shall govern.

     (b) The  Notes.  Each Loan  shall be  evidenced  by a Note which may not be
prepaid in whole or in part. Each Note shall bear interest and be payable at the
times and in the manner provided therein.  Following payment of the Indebtedness
related to each Note, Lender shall promptly return such Note, marked "canceled,"
to Borrower.
                 
     SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a first
security interest in all Collateral; (b) This Security Agreement secures (i) the
payment of the  principal  of and  interest  on the Notes and all other sums due
thereunder and under this Security Agreement (the  "Indebtedness")  and (ii) the
performance by Borrower of all of its other covenants now or hereafter  existing
under the  Notes,  this  Security  Agreement  and any other  obligation  owed by
Borrower to Lender (the "Obligations").

     SECTION 5. BORROWER'S  REPRESENTATIONS AND WARRANTIES.  Borrower represents
and warrants that (a) it is in good standing  under the laws of the state of its
formation,  duly qualified to do business and will remain duly qualified  during
the term of each Loan in each  state  where  necessary  to carry on its  present
business and operations, including the jurisdiction(s) where the Collateral will
be located as specified on each Exhibit A to each Note,  except where failure to
be so  qualified  would  not have a  Material  Adverse  Effect;  (b) it has full
authority  to execute  and deliver  this  Security  Agreement  and the Notes and
perform the terms hereof and thereof,  and this Security Agreement and the Notes
have been duly  authorized,  executed and  delivered  and  constitute  valid and
binding obligations of Borrower  enforceable in accordance with their terms; (c)

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the  execution  and delivery of this  Security  Agreement and the Notes will not
contravene any law,  regulation or judgment  affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of  Borrower's  shareholders  or holder of any  indebtedness,  or filing
with,  or approval  of, any  governmental  agency or  commission,  which has not
already  been  obtained or  performed,  as  appropriate,  is a condition  to the
performance of the terms of this Security  Agreement or the Notes;  (e) there is
no action or proceeding  pending or threatened against Borrower before any court
or  administrative  agency  which  might have a Material  Adverse  Effect on the
business,  financial  condition or operations  of Borrower;  (f) at the time any
Loan is made  hereunder,  Borrower owns and will keep all of the Collateral free
and clear of all liens,  claims and encumbrances,  and, except for this Security
Agreement,  there is no deed of trust,  mortgage,  security  agreement  or other
third party interest against any of the Collateral;  (g) at the time any Loan is
made hereunder, Borrower has good and marketable title to the Collateral; (h) at
the time any Loan is made hereunder, all Collateral has been received, installed
and is ready for use and is  satisfactory  in all  respects  for the purposes of
this Security  Agreement;  (i) the  Collateral  is, and will remain at all times
under applicable law, removable  personal  property,  which is free and clear of
any lien or encumbrance except in favor of Lender, notwithstanding the manner in
which the Collateral  may be attached to any real  property;  (j) all credit and
financial  information  submitted to Lender herewith or at any other time is and
will at the time given be true and correct in all material respects; and (k) the
security  interest  granted to Lender  hereunder  is a first  priority  security
interest, and (l) on or before January 1, 2000, Borrower's computer system shall
be Year 2000 performance  compliant and will thus be able to accurately  process
date data from,  into and  between  the  twentieth  and  twenty-first  centuries
including leap year calculations.

     SECTION 6. METHOD AND PLACE OF PAYMENT.  Borrower  shall pay to Lender,  at
such  address as Lender  specifies in writing,  all amounts  payable to it under
this Security Agreement and the Notes.

     SECTION 7. LOCATION;  INSPECTION;  LABELS.  All of the Collateral  shall be
located at the address (the  "Collateral  Location")  shown on Exhibit A to each
Note and  shall  not be moved  without  Lender's  prior  written  consent  which
location  shall in all events be within the United  States.  All of the  records
regarding the Collateral shall be located at 550 Rancheros Drive, San Marcos, CA
92069,  or such other  location of which  Borrower has given notice to Lender in
accordance with this Security Agreement.  Lender shall have the right to inspect
Collateral, including records relating thereto, and Borrower's books and records
at any time (upon reasonable  notification)  during regular business hours, such
books and  records  to be  maintained  in  accordance  with  generally  accepted
accounting principles. Borrower shall be responsible for all labor, material and
freight  charges  incurred  in  connection  with any  removal or  relocation  of
Collateral which is requested by Borrower and consented to by Lender, as well as
for any charges due to the  installation or moving of the  Collateral.  Payments
under the Notes and under this  Security  Agreement  shall  continue  during any
period  in which  the  Collateral  is in  transit  during a  relocation.  During
Borrower's  regular  business  hours  and  upon at least  two  days'  notice  to
Borrower, Lender or its agent shall mark and label Collateral,  which labels (to
be provided by Lender) shall state that such Collateral is subject to a security
interest of Lender,  and Borrower shall keep such labels on the Collateral as so
labeled.

     SECTION 8. COLLATERAL  MAINTENANCE.  (a) General.  Borrower will reasonably
permit Lender to inspect each item of  Collateral  and its  maintenance  records
during  Borrower's  regular  business  hours.  Borrower will at its sole expense
comply with all applicable  laws,  rules,  regulations,  requirements and orders
with respect to the use, maintenance,  repair, condition,  storage and operation
of each item of Collateral.  Any addition or improvement  that is so required or
cannot be so removed will immediately  become Collateral of Lender.  (b) Service
and Repair. With respect to computer  equipment,  other than personal computers,
Borrower  has  entered  into,  and will  maintain in effect,  vendor's  standard
maintenance  contract or another  contract  satisfactory  to Lender for a period
equal to the term of each Loan and  extensions  thereto  which  provides for the

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maintenance  of the  Collateral in good  condition and working order and repairs
and  replacement  of parts  thereof,  all in  accordance  with the terms of such
maintenance  contract.  Borrower  shall have that  Collateral  certified for the
vendor's standard  maintenance  agreement before Lender acquires any interest in
the Collateral as provided in this Security Agreement. With respect to any other
Collateral,  Borrower  will at its sole expense  maintain and service and repair
any  damage to each  item of  Collateral  in a manner  consistent  with  prudent
industry practice and Borrower's own practice so that such item of Collateral is
at all times (i) in the same condition as when delivered to Borrower, except for
ordinary  wear and  tear,  and (ii) in good  operating  order  for the  function
intended by its manufacturer's warranties and recommendations.

     SECTION 9. LOSS OR DAMAGE.  Borrower assumes the entire risk of loss to the
Collateral through use, operation or otherwise.  Borrower hereby indemnifies and
holds harmless Lender from and against all claims, loss of Loan payments, costs,
damages,  and  expenses  relating  to or  resulting  from any  loss,  damage  or
destruction of the Collateral,  any such occurrence being  hereinafter  called a
"Casualty  Occurrence."  No later than the first  payment  date  following  such
Casualty Occurrence,  or, if there is no such payment date, no later than thirty
(30) days after such  Casualty  Occurrence,  Borrower  shall,  at its  election,
either: (a) repair the Collateral returning it to good operating  condition,  or
(b)  replace  the  Collateral  with  Collateral  acceptable  to  Lender  in  its
reasonable discretion, in good condition and repair taking all steps required by
Lender to perfect  Lender's  first priority  security  interest  therein,  which
replacement Collateral shall be subject to the terms of this Security Agreement,
or (c) on the  first  day  payment  is due on any Note  following  the  Casualty
Occurrence,  or if there is no such  payment  date,  thirty (30) days after such
Casualty  Occurrence,  pay to  Lender  an amount  equal to the  Balance  Due (as
defined below) for each lost or damaged item of Collateral.  The Balance Due for
each such item is the sum of:  (i) all  amounts  for each item which may be then
due or accrued to the payment date, plus (ii) as of such payment date, an amount
equal to the  product  of the  fraction  specified  below  times  the sum of all
remaining  payments  under the  respective  Note,  including  the  amount of any
mandatory  or optional  payment  required or permitted to be paid by Borrower to
Lender at the maturity of the Note.  The numerator of the fraction  shall be the
collateral  value  (as set  forth  on the  applicable  Note) of the item and the
denominator shall be the aggregate collateral value of all items under the Note.
Upon the making of such  payments,  Lender shall release such item of Collateral
from its lien hereunder.

     SECTION 10.  INSURANCE.  Borrower at its expense shall keep the  Collateral
insured against all risks of physical loss for at least the replacement value of
the  Collateral  (including,  in the  case  of  Collateral  which  is  vehicles,
comprehensive  and collision  coverage) and in no event for less than the amount
payable  following  a Casualty  Occurrence  (as  provided  in Section  9).  Such
insurance  shall  provide for a loss payable  endorsement  to Lender  and/or any
assignee  of  Lender.  Borrower  shall  maintain  commercial  general  liability
insurance,  including products liability and completed operations coverage, with
respect to loss or damage for personal  injury,  death or property  damage in an
amount not less than $2,000,000 in the aggregate, (and in the case of Collateral
which is vehicles,  in an amount not less than $1,000,000 covering bodily injury
and property  damage in a combined  single limit) naming Lender and/or  Lender's
assignee as additional insured. Such insurance shall contain insurer's agreement
to give thirty (30) days' advance  written notice to Lender before  cancellation
or material change of any policy of insurance.  Borrower will provide Lender and
any  assignee  of  Lender  with a  certificate  of  insurance  from the  insurer
evidencing Lender's or such assignee's interest in the policy of insurance. Such
insurance  shall  cover  any  Casualty  Occurrence  to any  unit of  Collateral.
Notwithstanding  anything in Section 9 or this Section 10 to the contrary,  this
Security  Agreement and Borrower's  obligations  hereunder  shall remain in full
force and effect with respect to any unit of Collateral  which is not subject to
a Casualty  Occurrence.  If Borrower  fails to provide or maintain  insurance as
required  herein,  Lender shall have the right,  but shall not be obligated,  to
obtain  such  insurance.  In that event,  Borrower  shall pay to Lender the cost
thereof.


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     SECTION 11. MISCELLANEOUS  AFFIRMATIVE COVENANTS. So long as any portion of
the Indebtedness is unpaid and as long as any of the Obligations are outstanding
Borrower will: (a) duly pay all  governmental  taxes and assessments at the time
they become due and payable; provided, however, Borrower may contest the same in
good  faith so long as no  payment  default  by  Borrower  has  occurred  and is
continuing; (b) comply with all applicable material governmental laws, rules and
regulations  relating  to its  business  and the  Collateral  where a failure to
comply  would have a Material  Adverse  Effect;  (c) take no action to adversely
affect  Lender's  security  interest  in the  Collateral  as a first  and  prior
perfected  security  interest;  (d)  furnish  Lender  with  its  annual  audited
financial  statements  within  ninety (90) days  following the end of Borrower's
fiscal year,  unaudited  quarterly  financial  statements within forty-five (45)
days after the end of each fiscal  quarter,  and within  thirty (30) days of the
end of each month a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet, all of which shall be certified
by an  officer  of  Borrower  as true  and  correct  and  shall be  prepared  in
accordance with generally accepted accounting  principles  consistently applied,
and such other  information as Lender may reasonably  request;  and (e) promptly
(but in no event more than five (5) days  after the  occurrence  of such  event)
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect,  and of the occurrence of any Event
of Default.

     SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save harmless
Lender and any assignees from and against all liabilities,  obligations, claims,
damages,  penalties,  causes of action, costs and expenses (including reasonable
attorneys' fees and expenses),  imposed upon or incurred by or asserted  against
Lender or any assignee of Lender by Borrower or any third party by reason of the
occurrence or existence (or alleged occurrence or existence) of any act or event
relating  to or  caused  by any  portion  of the  Collateral,  or its  purchase,
acceptance,  possession,  use, maintenance or transportation,  including without
limitation,  consequential  or special  damages of any kind,  any failure on the
part of  Borrower  to perform or comply  with any of the terms of this  Security
Agreement or any Note,  claims for latent or other  defects,  claims for patent,
trademark or copyright  infringement  and claims for personal  injury,  death or
property  damage,  including  those  based  on  Lender's  negligence  or  strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct.  In the event that any action, suit or proceeding is brought
against  Lender  by  reason  of any such  occurrence,  Borrower,  upon  Lender's
request,  will, at Borrower's  expense,  resist and defend such action,  suit or
proceeding  or cause the same to be resisted and defended by counsel  designated
and  approved  by Lender.  Borrower's  obligations  under this  Section 12 shall
survive the payment in full of all the  Indebtedness  and the performance of all
Obligations with respect to acts or events occurring or alleged to have occurred
prior to the payment in full of all the  Indebtedness and the performance of all
Obligations.

     SECTION 13. TAXES.  Borrower agrees to reimburse Lender (or pay directly if
instructed  by Lender) and any assignee of Lender for, and to indemnify and hold
Lender and any assignee harmless from, all fees (including,  but not limited to,
license,  documentation,  recording and registration  fees), and all sales, use,
gross receipts,  personal  property,  occupational,  value added or other taxes,
levies,  imposts,  duties,  assessments,  charges, or withholdings of any nature
whatsoever,  together with any penalties,  fines,  additions to tax, or interest
thereon  (the  foregoing  collectively  "Impositions"),  except  same  as may be
attributable to Lender's income, arising at any time prior to or during the term
of any  Notes  or of this  Security  Agreement,  or upon  termination  or  early
termination  of this  Security  Agreement  and  levied or  imposed  upon  Lender
directly or otherwise by any Federal,  state or local  government  in the United
States or by any foreign country or foreign or  international  taxing  authority
upon or with respect to (a) the Collateral,  (b) the  exportation,  importation,
registration,  purchase,  ownership,  delivery, leasing, financing,  possession,
use, operation, storage,  maintenance,  repair, return, sale, transfer of title,
or other disposition  thereof,  (c) the rentals,  receipts,  or earnings arising
from the Collateral, or any disposition of the rights to such rentals, receipts,
or earnings,  (d) any payment pursuant to this Security  Agreement or the Notes,

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or (e) this Security Agreement,  the Notes or any transaction or any part hereof
or thereof.

     SECTION 14. RELEASE OF LIENS.  Upon payment of all of the  Indebtedness and
performance  of all of the  Obligations,  Lender shall  execute UCC  termination
statements  and such other  documents as Borrower  shall  reasonably  request to
evidence the release of Lender's lien relating to the Collateral.

     SECTION 15.  ASSIGNMENT.  WITHOUT  LENDER'S  PRIOR  WRITTEN  CONSENT  WHICH
CONSENT WILL NOT BE  UNREASONABLY  WITHHELD OR DELAYED,  BORROWER  SHALL NOT (a)
ASSIGN,  TRANSFER,  PLEDGE,  HYPOTHECATE  OR OTHERWISE  DISPOSE OF THIS SECURITY
AGREEMENT, ANY NOTE, ANY COLLATERAL,  OR ANY INTEREST THEREIN, (b) LEASE OR LEND
COLLATERAL  OR PERMIT IT TO BE USED BY ANYONE OTHER THAN  BORROWER OR BORROWER'S
EMPLOYEES,  CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY
OR TRANSFER ITS PROPERTIES  SUBSTANTIALLY  AS AN ENTIRETY TO ANY OTHER PERSON OR
ENTITY  EXCEPT TO A SUCCESSOR  IN INTEREST  TO ALL OR  SUBSTANTIALLY  ALL OF THE
BUSINESS OF BORROWER;  PROVIDED,  HOWEVER, THAT, THE FINANCIAL CONDITION OF SUCH
SUCCESSOR  IS GREATER THAN OR EQUAL TO BORROWER AS  DETERMINED  IN GOOD FAITH BY
LENDER AND THE  SUCCESSOR'S  BUSINESS  AND ITS MAJOR  INVESTORS  ARE  REASONABLY
ACCEPTABLE  TO  LENDER.  LENDER  MAY  ASSIGN  ANY OF THE  NOTES,  THIS  SECURITY
AGREEMENT OR ITS SECURITY  INTEREST IN ANY OR ALL  COLLATERAL,  OR ANY OR ALL OF
THE  ABOVE,  IN WHOLE OR IN PART TO ONE OR MORE  ASSIGNEES  OR  SECURED  PARTIES
WITHOUT  NOTICE TO BORROWER.  If Borrower is given notice of such  assignment it
agrees to acknowledge receipt thereof in writing and Borrower shall execute such
additional  documentation  as  Lender's  assignee  and/or  secured  party  shall
reasonably require at Lender's expense.  Each such assignee and/or secured party
shall have all of the rights,  but (except as provided in this  Section 15) none
of the  obligations,  of Lender  under  this  Security  Agreement,  unless  such
assignee  or  secured  party  expressly  agrees to assume  such  obligations  in
writing. Borrower shall not assert against any assignee and/or secured party any
defense,   counterclaim  or  offset  that  Borrower  may  have  against  Lender.
Notwithstanding  any such  assignment,  and  providing  no Event of Default  has
occurred and is continuing,  Lender, or its assignees, secured parties, or their
agents or assigns,  shall not interfere with  Borrower's  right to quietly enjoy
use  of  Collateral  subject  to the  terms  and  conditions  of  this  Security
Agreement. Subject to the foregoing, the Notes and this Security Agreement shall
inure to the benefit of, and are binding upon,  the  successors and assignees of
the parties  hereto.  Borrower  acknowledges  that any such assignment by Lender
will not change Borrower's  duties or obligations under this Security  Agreement
and the Notes or increase any burden or risk on Borrower.

     SECTION 16. DEFAULT.  (a) Events of Default. Any of the following events or
conditions  shall  constitute an "Event of Default"  hereunder:  (i)  Borrower's
failure to pay any monies due to Lender  hereunder  or under any Note beyond the
tenth (10th) day after the same is due; (ii)  Borrower's  failure to comply with
its  obligations  under  Section 10 or Section 15; (iii) any  representation  or
warranty  of Borrower  made in this  Security  Agreement  or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security  Agreement or the Notes shall prove to have been  incorrect in any
material respect when made or given;  (iv) Borrower's  failure to comply with or
perform any material term,  covenant or condition of this Security  Agreement or
any Note or under any other agreement  between  Borrower and Lender or under any
lease or mortgage of real  property  covering the location of the  Collateral if
such  failure to comply or perform is not cured by Borrower  within  thirty (30)
days after Borrower knows of the  noncompliance or nonperformance or notice from
Lender or such longer period that  Borrower is  diligently  attempting to effect
such cure;  (v) seizure of any of the Collateral  under legal process;  (vi) the
filing by or against  Borrower or any guarantor  under any guaranty  executed in
connection  with  this  Security  Agreement  ("Guarantor")  of  a  petition  for
reorganization or liquidation under the Bankruptcy Code or any amendment thereto
or under any other insolvency law providing for the relief of debtors; (vii) the
voluntary or involuntary making of an assignment of a substantial portion of its
assets by Borrower or by any  Guarantor  for the benefit of its  creditors,  the
appointment of a receiver or trustee for Borrower or any Guarantor or for any of
Borrower's or Guarantor's  assets, the institution by or against Borrower or any
Guarantor of any formal or informal  proceeding  for  dissolution,  liquidation,

<PAGE>

settlement  of claims  against or winding up of the  affairs of  Borrower or any
Guarantor  provided that in the case of all such involuntary  proceedings,  same
are not dismissed within sixty (60) days after  commencement;  (viii) the making
by Borrower or by any  Guarantor  of a transfer of all or a material  portion of
Borrower's  or  Guarantor's  assets or inventory  not in the ordinary  course of
business;  or (ix) any default or breach by any Guarantor of any of the terms of
its guaranty to Lender in connection with this Security Agreement.

     (b) Remedies. If any Event of Default has occurred,  Lender may in its sole
discretion exercise one or more of the following remedies with respect to any or
all of the  Collateral:  (i) declare due any or all of the  aggregate sum of all
remaining  payments  under the Notes,  including  the amount of any mandatory or
optional  payment  required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments");  (ii) proceed by appropriate court
action or actions either at law or in equity to enforce  Borrower's  performance
of the  applicable  covenants  of the Notes and this  Security  Agreement  or to
recover  all damages  and  expenses  incurred by Lender by reason of an Event of
Default;  (iii) except as provided by law,  without court order or prior demand,
enter upon the  premises  where the  Collateral  is located  and take  immediate
possession of and remove it without liability of Lender to Borrower or any other
person or entity; (iv) terminate this Security Agreement and sell the Collateral
at public or private  sale, or otherwise  dispose of, hold,  use or lease any or
all of the Collateral in a commercially  reasonable  manner; or (v) exercise any
other  right or remedy  available  to it under  applicable  law.  If Lender  has
declared due any or all of the Remaining Payments, Borrower will pay immediately
to Lender,  without  duplication,  (A) the Remaining  Payments,  (B) all amounts
which may be then due or  accrued,  and (C) all  other  amounts  due under  this
Security  Agreement and under the Notes (Lender's  Return, as referred to below,
means the amounts described in clauses (A), (B) and (C) above). The net proceeds
of any  sale or lease  of such  Collateral  will be  credited  against  Lender's
Return.  The net proceeds of a sale of the  Collateral  pursuant to this Section
16(b) is defined as the sales price of the  Collateral  less  selling  expenses,
including,  without  limitation,  costs of  remarketing  the  Collateral and all
refurbishing  costs and commissions paid with respect to such  remarketing.  The
net  proceeds of a lease of the  Collateral  pursuant to this  Section  16(b) is
defined  as the  amount  equal to the  monthly  payments  due under  such  lease
(discounted  at 6% per annum  compounded  monthly on the basis of a 360 day year
(the  "Discount  Rate") plus the residual  value of the Collateral at the end of
the basic term of such lease, as reasonably determined by Lender, and discounted
at the Discount Rate.

     Borrower  agrees  to pay  all  reasonable  out-of-pocket  costs  of  Lender
incurred in enforcement of this Security Agreement,  the Notes or any instrument
or agreement required under this Security Agreement,  including, but not limited

<PAGE>

to reasonable  attorneys'  fees and  litigation  expenses and fees of collection
agencies ("Remedy Expenses").  At Lender's request,  Borrower shall assemble the
Collateral  and make it  available to Lender at such time and location as Lender
may reasonably  designate.  Borrower  waives any right it may have to redeem the
Collateral.

     Declaration  that any or all amounts under this Security  Agreement  and/or
the Notes are immediately due and payable and Lender's taking  possession of any
or all Equipment shall not terminate this Security Agreement or any of the Notes
unless  Lender so notifies  Borrower in writing.  None of the above  remedies is
intended to be exclusive but each is cumulative  and may be enforced  separately
or concurrently.

     In addition to the  foregoing  remedies,  if an Event of Default  hereunder
shall have occurred and be continuing,  Lender shall have the right to cause its
representative or  representatives  to attend any meeting of Borrower's Board of
Directors or any committee thereof.  In such case, Borrower shall provide Lender
with the same notice of any such Board or committee meeting that is given to the
members of Borrower's Board or committee thereof.

     (c) Application of Proceeds. The proceeds of any sale of all or any part of
the  Collateral  and the  proceeds  of any  remedy  afforded  to  Lender by this
Security  Agreement  shall be paid to and  applied as  follows:  

     First,  to the  payment  of  reasonable  costs  and  expenses  of  suit  or
foreclosure,  if any, and of the sale, if any,  including,  without  limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy  Expenses,  all expenses,  liabilities and advances  incurred or made
pursuant to this  Security  Agreement or any Note by Lender in  connection  with
foreclosure,  suit, sale or enforcement of this Security Agreement or the Notes,
and taxes,  assessments or liens superior to Lender's  security interest granted
by this Security Agreement;
                                                     
     Second,  to the payment of all other  amounts not  described  in item Third
below due under this Security Agreement and all Notes;

     Third, to pay Lender an amount equal to Lender's Return,  to the extent not
previously paid by Borrower; and

Fourth, to the payment of any surplus to Borrower or to whomever may lawfully be
entitled to receive it.

     (d)  Effect  of  Delay;  Waiver;  Foreclosure  on  Collateral.  No delay or
omission of Lender,  in exercising  any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender  or such  holder  shall be taken to  extend  to any  subsequent  Event of
Default, or to impair the rights of Lender in respect of any damages suffered as
a result of the Event of Default. The giving, taking or enforcement of any other
or additional  security,  collateral or guaranty for the payment or discharge of
the Indebtedness  and performance of the Obligations  shall in no way operate to
prejudice,  waive or affect  the  security  interest  created  by this  Security
Agreement or any rights,  powers or remedies exercised  hereunder or thereunder.
Lender  shall not be required  first to  foreclose  on the  Collateral  prior to
bringing an action against  Borrower for sums owed to Lender under this Security
Agreement or under any Note.

     SECTION 17. LATE  PAYMENTS.  Borrower shall pay Lender a late charge of 10%
of any payment  owed Lender by Borrower  which is not paid when due (taking into
account applicable grace periods), for every month such payment is not paid when
due,  but in no event an amount  greater  than the  highest  rate  permitted  by
applicable  law. If such  amounts  have not been  received by Lender at Lender's
place of business or by Lender's  designated  agent by the date such amounts are
due under this Security  Agreement or the Notes,  Lender shall bill Borrower for
such charges.  Borrower  acknowledges that invoices for amounts due hereunder or
under the Notes are sent by Lender for Borrower's  convenience only.  Borrower's

<PAGE>

non-receipt  of an invoice will not relieve  Borrower of its  obligation to make
payments hereunder or under the Notes.

     SECTION 18. PAYMENTS BY LENDER.  If Borrower shall fail to make any payment
or  perform  any  act  required  hereunder  (including,   but  not  limited  to,
maintenance of any insurance required by Section 10), then Lender may, but shall
not be required  to,  after such notice to Borrower as is  reasonable  under the
circumstances,  make such payment or perform such act with the same effect as if
made or performed by Borrower.  Borrower will upon demand  reimburse  Lender for
all sums paid and all reasonable costs and expenses  incurred in connection with
the performance of any such act.

     SECTION 19. FINANCING STATEMENTS. Borrower hereby appoints Lender (and each
of Lender's officers,  employees or agents designated by Lender) with full power
of substitution  by Lender,  as Borrower's  attorney,  with power to execute and
deliver on Borrower's behalf, financing statements and other documents necessary
to perfect  and/or  give  notice of  Lender's  security  interest  in any of the
Collateral.  Notwithstanding  the above,  Borrower will, upon Lender's  request,
execute all financing statements pursuant to the Uniform Commercial Code and all
such other documents reasonably requested by Lender to perfect Lender's security
interests  hereunder.  Borrower  authorizes Lender to file financing  statements
signed only by Lender  (where such  authorization  is  permitted  by law) at all
places where Lender deems necessary.

     SECTION  20.  NATURE  OF  TRANSACTION.   Lender  makes  no   representation
whatsoever,   express  or  implied,   concerning  the  legal  character  of  the
transaction evidenced hereby, for tax or any other purpose.

     SECTION 21. SUSPENSION OF LENDER'S  OBLIGATIONS.  The obligations of Lender
hereunder  will be  suspended to the extent that Lender is hindered or prevented
from  complying  therewith  because  of labor  disturbances,  including  but not
limited to strikes and lockouts, acts of God, fires, floods, storms,  accidents,
industrial unrest, acts of war, insurrection, riot or civil disorder, any order,
decree,  law  or  governmental  regulations  or  interference,  failure  of  the
manufacturer  to deliver  any item of  Collateral  or any cause  whatsoever  not
within the sole and exclusive control of Lender.

     SECTION 22.  LENDER'S  EXPENSE.  Borrower  shall pay Lender all  reasonable
costs  and  expenses  including  reasonable  attorney's  fees  and  the  fees of
collection  agencies,  incurred  by Lender  (a) in  enforcing  any of the terms,
conditions or provisions hereof and related to the exercise of its remedies, and
(b) in connection with any bankruptcy or  post-judgment  proceeding,  whether or
not suit is filed and, in each and every action,  suit or proceeding,  including
any and all appeals and petitions therefrom.

     SECTION 23. ALTERATIONS;  ATTACHMENTS.  No alterations or attachments shall
be made to the Collateral  without Lender's prior written  consent,  which shall
not be given for  changes  that will affect the  reliability  and utility of the
Collateral or which cannot be removed without damage to the Collateral, or which
in any way affect the value of the  Collateral  for purposes of resale or lease.
All  attachments  and  improvements  to the  Collateral  shall be  deemed  to be
"Collateral"  for  purposes  of the  Security  Agreement,  and a first  priority
security interest therein shall immediately vest in Lender.

     SECTION 24. CHATTEL PAPER. (a) One executed copy of the Security  Agreement
will be marked "Original" and all other counterparts will be duplicates.  To the
extent, if any, that this Security Agreement  constitutes chattel paper (as such
term is defined in the Uniform  Commercial  Code as in effect in any  applicable
jurisdiction) no security  interest in the Security  Agreement may be created in
any documents other than the "Original." (b) There shall be only one original of
each Note and it shall be marked  "Original," and all other counterparts will be
duplicates.  To the extent,  if any, that any Notes to this  Security  Agreement
constitutes  chattel paper (or as such term is defined in the Uniform Commercial
Code as in effect in any applicable  jurisdiction)  no security  interest in any
Note(s) may be created in any documents other than the "Original."


<PAGE>

     SECTION 25.  COMMITMENT  FEE.  Borrower has paid to Lender a commitment fee
("Fee") of $2,500.  The Fee shall be applied by Lender first to reimburse Lender
for all out-of-pocket UCC and other search costs, inspections and labeling costs
and appraisal fees, if any, incurred by Lender,  and then  proportionally to the
first  monthly  payment  for each  Note  hereunder  in the  proportion  that the
Collateral value for such Note bears to Lender's entire commitment. However, the
portion  of the Fee  which is not  applied  to such  monthly  payments  shall be
non-refundable  except  if  Lender  defaults  in its  obligation  to fund  Loans
pursuant to Section 3.

     SECTION  26.  NOTICES.  All  notices  hereunder  shall  be in  writing,  by
registered mail, or reliable messenger or delivery service (including  overnight
service)  and shall be  directed,  as the case may be, to Lender at 2401  Kerner
Boulevard,  San Rafael,  California  94901,  Attention:  Asset Management and to
Borrower at 550 Rancheros Drive, San Marcos, CA 92069, Attention: Jim Frakes.

     SECTION 27.  MISCELLANEOUS.  (a) Borrower  shall  provide  Lender with such
corporate resolutions,  financial statements and other documents as Lender shall
reasonably  request  from  time  to  time.  (b)  Borrower  represents  that  the
Collateral  hereunder is used solely for business  purposes.  (c) Time is of the
essence with respect to this Security Agreement.  (d) Borrower acknowledges that
Borrower has read this Security  Agreement and the Notes,  understands  them and
agrees  to be bound  by their  terms  and  further  agrees  that  this  Security
Agreement  and the Notes  constitute  the entire  agreement  between  Lender and
Borrower  with respect to the subject  matter  hereof and supersede all previous
agreements,  promises,  or representations.  (e) This Security Agreement and the
Notes may not be changed,  altered or modified except by an instrument signed by
an officer or authorized  representative of Lender and Borrower. (f) Any failure
of Lender to require  strict  performance by Borrower or any waiver by Lender of
any provision  herein or in a Note shall not be construed as a consent or waiver
of any other breach of the same or any other provision.  (g) If any provision of
this Security  Agreement or any Note is held invalid,  such invalidity shall not
affect any other provisions  hereof or thereof.  (h) The obligations of Borrower
to pay the Indebtedness and perform the Obligations shall survive the expiration
or  earlier  termination  of this  Security  Agreement  and each Note  until all
Obligations of Borrower to Lender have been met and all  liabilities of Borrower
to Lender and any  assignee  have been paid in full.  (i)  Borrower  will notify
Lender at least 30 days before changing its name, principal place of business or
chief executive office. (j) Borrower will, at its expense,  promptly execute and
deliver to Lender such documents and assurances (including financing statements)
and take such further action as Lender may reasonably  request in order to carry
out the intent of this Security Agreement and Lender's rights and remedies.

     SECTION 28.  JURISDICTION AND WAIVER OF JURY TRIAL. This Security Agreement
and each Note shall be deemed to have been made under and shall be  governed  by
the laws of the  State of  California  in all  respects,  including  matters  of
construction,  validity and performance. At Lender's sole discretion, option and
election,  jurisdiction  and venue  for any legal  action  between  the  parties
arising out of or relating to this  Security  Agreement  or any Note shall be in
the  Superior  Court of Marin  County,  California,  or, in cases where  federal
diversity jurisdiction is available, in the United States District Court for the
Northern District of California located in San Francisco,  California. BORROWER,
TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN
ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT,  ANY NOTE, ANY
SECURITY DOCUMENTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.

     IN WITNESS WHEREOF, Borrower and Lender have caused this Security Agreement
to be executed as of the date and year first above written.

PHOENIX LEASING INCORPORATED            PLAY CO. TOYS & ENTERTAINMENT CORP.
                                        DBA PLAY CO. TOYS, TOYS INTERNATIONAL 
                                        AND TOY CO.
By: __                                  By:
Name:                                   Name (Print):
Title:__                                Title:

HEADQUARTERS LOCATION:
550 Rancheros Drive
San Marcos, CA 92069
County of San Diego






<PAGE>
EXHIBIT A TO
SENIOR LOAN AND SECURITY AGREEMENT NO. 4003
DATED OCTOBER 19, 1998

                               CLOSING MEMORANDUM

1*       Duly executed Senior Loan and Security Agreement.

2. Duly  executed  Senior  Security  Promissory  Note with  Exhibit A Collateral
description  attached. 

     3. Insurance certificates  reflecting coverage required under Section 10 of
the Senior Loan and Security Agreement.

     4.* Resolutions of Borrower's board of directors.

     5. UCC-1 Financing Statements with respect to the Collateral.

     6. UCC search (Lender will obtain).

     7.  Certificate of Chief  Financial  Officer  stating that (i) there are no
liens,  charges,  security  interests  or other  encumbrances  that  may  affect
Lender's  right,  title and  interest in the  Collateral  and there are no UCC-1
financing  statements  filed or in the process of being filed against any of the
Collateral,  (ii) Borrower is performing  according to Borrower's business plan,
(iii) no change which is a Material Adverse Effect has occurred in the financial
condition of Borrower, (iv) no default has occurred, and (v) the representations
and  warranties in Section 5 of the Senior Loan and Security  Agreement are true
and correct as if made on the date of the Loan.

     8.*  Certificate  from  the  Secretary  of  State  of  Borrower's  state of
incorporation,  and from the state in which Borrower's chief executive office is
located, if different, stating the Borrower is in good standing or is authorized
to transact business,  as the case may be, dated not more than thirty days prior
to the first Loan (Lender will obtain).

     9.* Borrower's Business Plan.

     10. Borrower's most recent financial statements.

     11. List of proposed Collateral.

     12. Purchase documentation verifying Borrower's ownership of equipment.

     13. See Section 3 of the Senior Loan and Security  Agreement for additional
conditions to closing. 14. Subordination/Intercreditor Agreement from Finova and
other entities.

     * First Loan only.

     ** Required if any Equipment is a fixture, i.e., attached to real property,
or located in certain states.





<PAGE>
NOTE NO. 01
TO SENIOR LOAN AND SECURITY AGREEMENT NO. 4003
DATED AS OF OCTOBER 19, 1998
BETWEEN PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER

                         SENIOR SECURED PROMISSORY NOTE

$232,098.21                         _________________, 199___


     FOR VALUE RECEIVED,  the undersigned,  PLAY CO. TOYS & ENTERTAINMENT  CORP.
DBA PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO.,  a  Delaware  corporation
("Borrower"),   hereby   promises  to  pay  to  the  order  of  PHOENIX  LEASING
INCORPORATED,  or its assigns (the  "Lender")  the  principal sum of Two Hundred
Thirty-two Thousand Ninety-eight and 21/100 Dollars ($232,098.21), together with
interest  thereon until the  principal is fully  repaid.  Principal and interest
shall be payable in  consecutive  monthly  installments,  each of which shall be
equal to the percentage  specified below of the principal sum and in the amounts
each month specified below.

         Month             Payment Amount            Percentage

         1-60     $5,312.73         2.289%

     The first  payment  shall be due on the first day of the month  immediately
following  the date of this Note  (unless the date of this Note is the first day
of the month in which case such payment is due on that day), and each succeeding
payment  shall be made on the first day of each  succeeding  month.  An  interim
payment  will be due on the same date as the first  payment  for the period from
the date Lender funds the  principal  amount of this Note until the first day of
the  following  month and  shall be equal to 1/30 of the  monthly  loan  payment
multiplied by the number of days, if any,  between (and  including)  the funding
date and the first day of the following month.

     This Note may not be prepaid in whole or in part.

     Borrower  shall pay Lender a late charge of 10% of any payment  owed Lender
by Borrower  which is not paid when due (taking  into account  applicable  grace
periods),  for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law.

     Payments of principal and interest  hereunder shall be made in lawful money
of the  United  States of  America  at the  offices  of  Lender  at 2401  Kerner
Boulevard, San Rafael, California 94901, or such other place as the Lender shall
designate to the Borrower in writing.

     This Note is secured by a Senior Loan and Security  Agreement,  dated as of
October 19, 1998 between  Borrower and Lender (the "Security  Agreement") and is
entitled to the benefits of the Security  Agreement which contains,  among other
things,  provisions  for (i)  events of  default  and the  Lender's  rights  and
remedies  following an event of default (which include,  but are not limited to,
acceleration of this Note),  (ii) Collateral which secures the repayment of this
Note and is more particularly described on Exhibit A, and (iii) other rights and
remedies of Lender.

     This Note may be declared due prior to its expressed  maturity date only in
the events, on the terms and in the manner provided in the Security Agreement.

     This Note shall be deemed to have been made under and shall be  governed by
the laws of the  State of  California  in all  respects,  including  matters  of
construction,  validity and performance. At Lender's sole discretion, option and
election,  jurisdiction  and venue  for any legal  action  between  the  parties
arising out of or relating to this Note shall be in the Superior  Court of Marin

<PAGE>

County,  California,  or,  in cases  where  federal  diversity  jurisdiction  is
available,  in the United  States  District  Court for the Northern  District of
California located in San Francisco, California.

     The Borrower hereby  expressly waives  presentment for payment,  demand for
payment,  notice of dishonor,  protest, notice of protest, notice of nonpayment,
and all lack of diligence or delays in collection or enforcement of this Note.





BORROWER:


PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL
AND TOY CO.


By:

Name (Print):

Title:












<PAGE>

                                  EXHIBIT A to
                     SENIOR SECURED PROMISSORY NOTE NO. 01



                             (Insert Exhibit A here)





<PAGE>
                              OFFICER'S CERTIFICATE


     The undersigned, ____________________, hereby certifies that:

     (i) I am the  __________________ of PLAY CO. TOYS & ENTERTAINMENT CORP. DBA
PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO., a Delaware  corporation  (the
"Borrower");

     (ii) as such officer,  I am familiar with the terms and  conditions of that
certain Senior Loan and Security  Agreement (the "Security  Agreement") dated as
of  October  19,  1998  between   Borrower  and  PHOENIX  LEASING   INCORPORATED
("Lender");

     (iii) the equipment,  machinery, furniture, fixtures and other items on the
attached  list are  free  and  clear  of any and all  liens,  charges,  security
interests  or  other  encumbrances  that may  affect  Lender's  right,  title or
interest  in and to the  equipment  and  other  items,  and no  UCC-1  financing
statements or other grants of security interests have been or are in the process
of being filed against any of such equipment or other items;

     (iv) Borrower is performing according to Borrower's business plan described
in Section 3 of the Security  Agreement,  a true copy of which business plan has
been delivered to Lender;

     (v) there has been no material adverse change in the financial condition of
Borrower from the date of its most recent financial  statements,  true copies of
which have been delivered to Lender;

     (vi) as of the date hereof, no Event of Default (as defined in the Security
Agreement) or event which with the giving of notice or passage of time, or both,
could become an Event of Default has occurred and is continuing; and

     (vii) the  representations  and  warranties  in  Section 5 of the  Security
Agreement are true and correct as if made on the date of the Loan.

     IN WITNESS WHEREOF, I hereby execute this certificate on this ______ day of
_______________, 19__.


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





<PAGE>
NOTE NO. 02
TO SENIOR LOAN AND SECURITY AGREEMENT NO. 4003
DATED AS OF OCTOBER 19, 1998
BETWEEN PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER

SENIOR SECURED PROMISSORY NOTE

$188,048.92                _________________, 199___


     FOR VALUE RECEIVED,  the undersigned,  PLAY CO. TOYS & ENTERTAINMENT  CORP.
DBA PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO.,  a  Delaware  corporation
("Borrower"),   hereby   promises  to  pay  to  the  order  of  PHOENIX  LEASING
INCORPORATED,  or its assigns (the  "Lender")  the  principal sum of One Hundred
Eighty-eight  Thousand  Forty-eight and 92/100 Dollars  ($188,048.92),  together
with  interest  thereon  until the  principal  is fully  repaid.  Principal  and
interest shall be payable in  consecutive  monthly  installments,  each of which
shall be equal to the percentage specified below of the principal sum and in the
amounts each month specified below.

         Month             Payment Amount            Percentage

         1-60     $4,304.44         2.289%

     The first  payment  shall be due on the first day of the month  immediately
following  the date of this Note  (unless the date of this Note is the first day
of the month in which case such payment is due on that day), and each succeeding
payment  shall be made on the first day of each  succeeding  month.  An  interim
payment  will be due on the same date as the first  payment  for the period from
the date Lender funds the  principal  amount of this Note until the first day of
the  following  month and  shall be equal to 1/30 of the  monthly  loan  payment
multiplied by the number of days, if any,  between (and  including)  the funding
date and the first day of the following month.

     This Note may not be prepaid in whole or in part.

     Borrower  shall pay Lender a late charge of 10% of any payment  owed Lender
by Borrower  which is not paid when due (taking  into account  applicable  grace
periods),  for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law.

     Payments of principal and interest  hereunder shall be made in lawful money
of the  United  States of  America  at the  offices  of  Lender  at 2401  Kerner
Boulevard, San Rafael, California 94901, or such other place as the Lender shall
designate to the Borrower in writing.

     This Note is secured by a Senior Loan and Security  Agreement,  dated as of
October 19, 1998 between  Borrower and Lender (the "Security  Agreement") and is
entitled to the benefits of the Security  Agreement which contains,  among other
things,  provisions  for (i)  events of  default  and the  Lender's  rights  and
remedies  following an event of default (which include,  but are not limited to,
acceleration of this Note),  (ii) Collateral which secures the repayment of this
Note and is more particularly described on Exhibit A, and (iii) other rights and
remedies of Lender.

     This Note may be declared due prior to its expressed  maturity date only in
the events, on the terms and in the manner provided in the Security Agreement.

     This Note shall be deemed to have been made under and shall be  governed by
the laws of the  State of  California  in all  respects,  including  matters  of
construction,  validity and performance. At Lender's sole discretion, option and
election,  jurisdiction  and venue  for any legal  action  between  the  parties
arising out of or relating to this Note shall be in the Superior  Court of Marin

<PAGE>
County,  California,  or,  in cases  where  federal  diversity  jurisdiction  is
available,  in the United  States  District  Court for the Northern  District of
California located in San Francisco, California.

     The Borrower hereby  expressly waives  presentment for payment,  demand for
payment,  notice of dishonor,  protest, notice of protest, notice of nonpayment,
and all lack of diligence or delays in collection or  enforcement  of this Note.
BORROWER:

PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL
AND TOY CO.


By:

Name (Print):

Title:

                                  EXHIBIT A to
                      SENIOR SECURED PROMISSORY NOTE NO. 02



                             (Insert Exhibit A here)





<PAGE>
                              OFFICER'S CERTIFICATE


The undersigned, ____________________, hereby certifies that:

     (i) I am the  __________________ of PLAY CO. TOYS & ENTERTAINMENT CORP. DBA
PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO., a Delaware  corporation  (the
"Borrower");

     (ii) as such officer,  I am familiar with the terms and  conditions of that
certain Senior Loan and Security  Agreement (the "Security  Agreement") dated as
of  October  19,  1998  between   Borrower  and  PHOENIX  LEASING   INCORPORATED
("Lender");

     (iii) the equipment,  machinery, furniture, fixtures and other items on the
attached  list are  free  and  clear  of any and all  liens,  charges,  security
interests  or  other  encumbrances  that may  affect  Lender's  right,  title or
interest  in and to the  equipment  and  other  items,  and no  UCC-1  financing
statements or other grants of security interests have been or are in the process
of being filed against any of such equipment or other items;

     (iv) Borrower is performing according to Borrower's business plan described
in Section 3 of the Security  Agreement,  a true copy of which business plan has
been delivered to Lender;

     (v) there has been no material adverse change in the financial condition of
Borrower from the date of its most recent financial  statements,  true copies of
which have been delivered to Lender;

     (vi) as of the date hereof, no Event of Default (as defined in the Security
Agreement) or event which with the giving of notice or passage of time, or both,
could become an Event of Default has occurred and is continuing; and

     (vii) the  representations  and  warranties  in  Section 5 of the  Security
Agreement are true and correct as if made on the date of the Loan.

     IN WITNESS WHEREOF, I hereby execute this certificate on this ______ day of
_______________, 19__.


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






<PAGE>
NOTE NO. 03
TO SENIOR LOAN AND SECURITY AGREEMENT NO. 4003
DATED AS OF OCTOBER 19, 1998
BETWEEN PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO.
AS BORROWER AND
PHOENIX LEASING INCORPORATED AS LENDER

                         SENIOR SECURED PROMISSORY NOTE

$71,322.25                 _________________, 199___


     FOR VALUE RECEIVED,  the undersigned,  PLAY CO. TOYS & ENTERTAINMENT  CORP.
DBA PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO.,  a  Delaware  corporation
("Borrower"),   hereby   promises  to  pay  to  the  order  of  PHOENIX  LEASING
INCORPORATED,  or its assigns (the  "Lender") the  principal sum of  Seventy-One
Thousand Three Hundred Twenty-Two and 25/100 Dollars ($71,322.25), together with
interest  thereon until the  principal is fully  repaid.  Principal and interest
shall be payable in  consecutive  monthly  installments,  each of which shall be
equal to the percentage  specified below of the principal sum and in the amounts
each month specified below.

         Month             Payment Amount            Percentage

         1-60     $1,632.57         2.289%

     The first  payment  shall be due on the first day of the month  immediately
following  the date of this Note  (unless the date of this Note is the first day
of the month in which case such payment is due on that day), and each succeeding
payment  shall be made on the first day of each  succeeding  month.  An  interim
payment  will be due on the same date as the first  payment  for the period from
the date Lender funds the  principal  amount of this Note until the first day of
the  following  month and  shall be equal to 1/30 of the  monthly  loan  payment
multiplied by the number of days, if any,  between (and  including)  the funding
date and the first day of the following month.

This Note may not be prepaid in whole or in part.

     Borrower  shall pay Lender a late charge of 10% of any payment  owed Lender
by Borrower  which is not paid when due (taking  into account  applicable  grace
periods),  for every month such payment is not paid when due, but in no event an
amount greater than the highest rate permitted by applicable law.

     Payments of principal and interest  hereunder shall be made in lawful money
of the  United  States of  America  at the  offices  of  Lender  at 2401  Kerner
Boulevard, San Rafael, California 94901, or such other place as the Lender shall
designate to the Borrower in writing.

     This Note is secured by a Senior Loan and Security  Agreement,  dated as of
October 19, 1998 between  Borrower and Lender (the "Security  Agreement") and is
entitled to the benefits of the Security  Agreement which contains,  among other

<PAGE>

things,  provisions  for (i)  events of  default  and the  Lender's  rights  and
remedies  following an event of default (which include,  but are not limited to,
acceleration of this Note),  (ii) Collateral which secures the repayment of this
Note and is more particularly described on Exhibit A, and (iii) other rights and
remedies of Lender.

     This Note may be declared due prior to its expressed  maturity date only in
the events, on the terms and in the manner provided in the Security Agreement.

     This Note shall be deemed to have been made under and shall be  governed by
the laws of the  State of  California  in all  respects,  including  matters  of
construction,  validity and performance. At Lender's sole discretion, option and
election,  jurisdiction  and venue  for any legal  action  between  the  parties
arising out of or relating to this Note shall be in the Superior  Court of Marin
County,  California,  or,  in cases  where  federal  diversity  jurisdiction  is
available,  in the United  States  District  Court for the Northern  District of
California located in San Francisco, California.

     The Borrower hereby  expressly waives  presentment for payment,  demand for
payment,  notice of dishonor,  protest, notice of protest, notice of nonpayment,
and all lack of diligence or delays in collection or enforcement of this Note.





BORROWER:

PLAY CO. TOYS & ENTERTAINMENT CORP.
DBA PLAY CO. TOYS, TOYS INTERNATIONAL
AND TOY CO.


By:

Name (Print):

Title:


                                  EXHIBIT A to
                      SENIOR SECURED PROMISSORY NOTE NO. 03



                             (Insert Exhibit A here)





<PAGE>
                              OFFICER'S CERTIFICATE


     The undersigned, ____________________, hereby certifies that:

     (i) I am the  __________________ of PLAY CO. TOYS & ENTERTAINMENT CORP. DBA
PLAY CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY CO., a Delaware  corporation  (the
"Borrower");

     (ii) as such officer,  I am familiar with the terms and  conditions of that
certain Senior Loan and Security  Agreement (the "Security  Agreement") dated as
of  October  19,  1998  between   Borrower  and  PHOENIX  LEASING   INCORPORATED
("Lender");

     (iii) the equipment,  machinery, furniture, fixtures and other items on the
attached  list are  free  and  clear  of any and all  liens,  charges,  security
interests  or  other  encumbrances  that may  affect  Lender's  right,  title or
interest  in and to the  equipment  and  other  items,  and no  UCC-1  financing
statements or other grants of security interests have been or are in the process
of being filed against any of such equipment or other items;

     (iv) Borrower is performing according to Borrower's business plan described
in Section 3 of the Security  Agreement,  a true copy of which business plan has
been delivered to Lender;

     (v) there has been no material adverse change in the financial condition of
Borrower from the date of its most recent financial  statements,  true copies of
which have been delivered to Lender;

     (vi) as of the date hereof, no Event of Default (as defined in the Security
Agreement) or event which with the giving of notice or passage of time, or both,
could become an Event of Default has occurred and is continuing; and

     (vii) the  representations  and  warranties  in  Section 5 of the  Security
Agreement are true and correct as if made on the date of the Loan.

     IN WITNESS WHEREOF, I hereby execute this certificate on this ______ day of
_______________, 19__.


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






<PAGE>
                         CORPORATE RESOLUTION TO BORROW

     RESOLVED:  That this corporation,  PLAY CO. TOYS & ENTERTAINMENT  CORP. DBA
PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO., borrow funds from PHOENIX LEASING
INCORPORATED,  a California corporation,  ("Lender") and grant as collateral for
such  borrowings  such items of personal  property and  fixtures,  and upon such
terms and  conditions,  as the officer or officers  hereinafter  authorized,  in
their discretion, may deem necessary or advisable;  provided,  however, that the
aggregate  principal amount of borrowings  hereunder shall not exceed the sum of
$500,000.

     RESOLVED FURTHER: That:


     (Print or type name) (Title of Corporate Officer) (specimen signature) or

     (Print or type name) (Title of Corporate Officer) (specimen signature)

     of this  corporation  (this officer or officers  authorized to act pursuant
hereto being hereinafter designated as "authorized officers"),  are individually
authorized,  directed and empowered, in the name of this corporation, to execute
and deliver to Lender,  and Lender is requested to accept,  any notes,  security
agreements,  and other documents or agreements that may be required by Lender in
connection with such borrowings.

     RESOLVED FURTHER: That the authorized officers are individually authorized,
directed and empowered,  in the name of this  corporation,  to do or cause to be
done all such further acts and things as they shall deem  necessary,  advisable,
convenient,  or proper in connection with the execution and delivery of any such
notes, security agreements,  and other documents or agreements and in connection
with or  incidental to the carrying of the same into effect,  including  without
limitation, the execution,  acknowledgment,  and delivery of all instruments and
documents which may reasonably be required by Lender under or in connection with
any such borrowing.

     RESOLVED  FURTHER:  That Lender is authorized to act upon these resolutions
until written  notice of their  revocation is delivered to Lender,  and that the
authority  hereby  granted  shall  apply  with  equal  force  and  effect to the
successors in office of the officers herein named.

     I,  _______________________,  Secretary  of PLAY CO.  TOYS &  ENTERTAINMENT
CORP.  DBA  PLAY  CO.  TOYS,  TOYS  INTERNATIONAL  AND TOY  CO.,  a  corporation
incorporated under the laws of the State of Delaware, do hereby certify that the
foregoing  is a full,  true and  correct  copy of  resolutions  of the  Board of
Directors of the said  corporation,  duly and regularly passed or adopted by the
Board of Directors of said  corporation as required by law and by the by-laws of
the said corporation on the _______ day of __________________________, 19__.

     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
above are the signatures of the officers authorized to sign for this corporation
by virtue of the said resolutions.

IN WITNESS WHEREOF,  I have hereunto set my hand as such Secretary,  and affixed
the   corporate   seal  of  the   said   corporation,   this   _______   day  of
__________________, 19__.


AFFIX CORPORATE                             
   SEAL HERE               SECRETARY OF PLAY CO. TOYS & ENTERTAINMENT CORP.
                           DBA PLAY CO. TOYS, TOYS INTERNATIONAL
                           AND TOY CO.

   [PERSON WHO SIGNS HERE MUST BE DIFFERENT FROM PERSON(S) WHO SIGNED ABOVE.]






<PAGE>
         INSTRUCTIONS FOR COMPLETING
         REAL PROPERTY WAIVER DOCUMENTS




To:      PLAY CO. TOYS & ENTERTAINMENT CORP.
         DBA PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO.
         Borrower

     If you lease the real  property  on which your  business  is  located,  the
attached  Waiver must be signed by your landlord.  Your landlord should mark the
(_____ Landlord/Real Property Lessor) block in the last paragraph of the Waiver.

     If you lease the real  property on which your  business is located but your
landlord is, in turn,  leasing the real  property from another  party,  then two
Waivers must be signed. A Waiver must be signed by your landlord who should mark
the (_____  Sublandlord/Real  Property Sublessor) block in the last paragraph of
the  Waiver,  and a Waiver must also be signed by the other party from whom your
landlord  is  leasing  the real  property.  That  party  should  mark the (_____
Landlord/Real Property Lessor) block in the last paragraph of the Waiver.

     If you own the real property on which your business is located and there is
a mortgage,  the attached  Waiver must be signed by your mortgage  holder.  Your
mortgage holder should mark the (_____ Mortgagee) block in the last paragraph of
the Waiver.  If a Deed of Trust rather than a mortgage is  involved,  the (_____
Beneficiary (Deed of Trust)) block in the last paragraph of the Waiver should be
marked by the holder of the Deed of Trust.

     If you own the real  property  on which your  business is located and it is
free and clear of  mortgages,  the  attached  Waiver must be signed by you.  You
should mark the (_____ Owner) block in the last paragraph of the Waiver.

         THE SIGNATURE(S) OF ALL APPROPRIATE SIGNERS MUST BE NOTARIZED.


           A LEGAL DESCRIPTION OF THE REAL PROPERTY MUST BE ATTACHED.






<PAGE>
         REAL PROPERTY WAIVER

To:      PHOENIX LEASING INCORPORATED
         2401 Kerner Boulevard
         San Rafael, CA 94901
         Attention:  Asset Management

Re:      PLAY CO. TOYS & ENTERTAINMENT CORP.
         DBA PLAY CO. TOYS, TOYS INTERNATIONAL AND TOY CO.
         Borrower

     As holder  ("Holder") of an interest in the real property ("Real Property")
described below, I (we) (1) acknowledge and consent to your agreement to finance
and  install on the Real  Property  the  equipment  (the  "Equipment")  financed
pursuant to Senior Loan and Security Agreement dated as of October 19, 1998, and
Senior Secured Promissory Note(s) thereto between you and Borrower, (2) disclaim
any ownership or other  interest in subject  Equipment and other  Equipment that
may be added from time to time, and (3) recognize your right to enter,  and will
permit  you to enter  upon  the Real  Property,  but  only for the  purposes  of
inspecting or removing the Equipment.

     This Real Property  Waiver shall be binding upon the heirs,  successors and
assigns of Holder.

     I (we),  as Holder,  am (are) the (Please  Check  Appropriate  Line Below):
___Beneficiary  (Deed of Trust)  ___Mortgagee  ___Landlord/Real  Property Lessor
___Sublandlord/Real  Property  Sublessor  ___Owner  with  respect  to  the  Real
Property.

Signed,

--------------------------------------
Full Legal Name of Holder

--------------------------                           --------------------------
Signature         Title                     Date

Real Property located at:                   One Mills Circle #302
                                            Ontario, CA 01764







<PAGE>
     (For use when agreement is executed in California)


ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         ALL-PURPOSE CERTIFICATE
         (For use when agreement is executed in California)

State of California

County of ______________________

     On   _____________________   before   me   _______________________________,
personally appeared ________________________________, personally known to me (or
proved 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 in 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)




ACKNOWLEDGMENT OF A NOTARY PUBLIC:


         REGISTERED LIMITED LIABILITY PARTNERSHIP ACKNOWLEDGMENT
         (For use when agreement is executed in California)

STATE OF          )
                                    ) ss:
COUNTY OF         )

     On this _____ day of ________________,  19__, before me, a Notary Public in
and for said County, personally appeared ____________________,  personally known
to me (or proved to me on the basis of  satisfactory  evidence) to be the person
who  executed  the  within  instrument  on  behalf  of said  registered  limited
liability  partnership and acknowledged to me that he (or she) executed the same
in  his/her  authorized  capacity  as the free  act and deed of said  registered
limited liability partnership for the purposes therein stated.

--------------------------------
My commission expires:                               NOTARY PUBLIC
[Notary Seal]





<PAGE>
     (For use when agreement is executed in States other than California)



ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         INDIVIDUAL ACKNOWLEDGMENT

STATE OF          )
                                            ) ss:
COUNTY OF                  )

     On this  ______ day of  ____________________,  199___,  before me, a Notary
Public     in     and     for     said     County,      personally      appeared
______________________________,  known  to me to be the  person  whose  name  is
subscribed to the within  instrument,  and acknowledged that he/she executed the
same.


Notary Public in and for the
State of
County of

(SEAL)                     My commission expires                       




ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         PARTNERSHIP ACKNOWLEDGMENT

STATE OF          )
         ) ss:
COUNTY OF         )

     On this _____ day of ________________,  19__, before me, a Notary Public in
and for said County, personally appeared ____________________,  personally known
to me (or proved to me on the basis of  satisfactory  evidence) to be the person
who  executed  the  within   instrument  on  behalf  of  said   partnership  and
acknowledged  to me that he (or she)  executed  the same in  his/her  authorized
capacity as the free act and deed of said  partnership for the purposes  therein
stated.


My commission expires:                               NOTARY PUBLIC
[Notary Seal]





<PAGE>



         (For use when agreement is executed in States other than California)



ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         LIMITED LIABILITY COMPANY ACKNOWLEDGMENT

STATE OF          )
                                    ) ss:
COUNTY OF         )

     On this _____ day of ________________,  19__, before me, a Notary Public in
and for said County, personally appeared ____________________,  personally known
to me (or proved to me on the basis of  satisfactory  evidence) to be the person
who executed the within  instrument on behalf of said limited  liability company
and acknowledged to me that he (or she) executed the same in his/her  authorized
capacity  as the free act and deed of said  limited  liability  company  for the
purposes therein stated.


My commission expires:                               NOTARY PUBLIC
[Notary Seal]






ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         CORPORATE ACKNOWLEDGMENT

STATE OF          )
                                    ) ss:
COUNTY OF         )

     On this _____ day of _____________, 19__, before me, a Notary Public in and
for said County,  personally appeared ______________  personally known to me (or
proved   to  me  on   the   basis   of   satisfactory   evidence)   to  be   the
___________________ of the corporation that executed the within instrument,  and
acknowledged to me that he/she executed the within  instrument on behalf of said
corporation  and that  the  within  instrument  was  signed  on  behalf  of said
corporation  by authority of its board of  directors,  and that the within named
officer of said  corporation  executed the same as the free act and deed of said
corporation for the purposes therein stated.


My commission expires:                               NOTARY PUBLIC
[Notary Seal]





<PAGE>



         (For use when agreement is executed in States other than California)



ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         TRUST ACKNOWLEDGMENT

STATE OF          )
                                    ) ss:
COUNTY OF         )

     On this _____ day of ________________,  19__, before me, a Notary Public in
and         for         said         County,         personally         appeared
_______________________________________________________,  personally known to me
(or proved to me on the basis of  satisfactory  evidence)  to be the  Trustee of
_______________________________________________________________________________
(Name of Trust)

who executed the within instrument in his/her  authorized  capacity on behalf of
said Trust and acknowledged to me that he (or she) executed the same as the free
act and deed of said Trust for the purposes therein stated.


My commission expires:                               NOTARY PUBLIC
[Notary Seal]





ACKNOWLEDGMENT OF A NOTARY PUBLIC:

         FOREIGN LIMITED LIABILITY PARTNERSHIP ACKNOWLEDGMENT

STATE OF          )
                                    ) ss:
COUNTY OF         )

     On this _____ day of ________________,  19__, before me, a Notary Public in
and for said County, personally appeared ____________________,  personally known
to me (or proved to me on the basis of  satisfactory  evidence) to be the person
who executed the within  instrument on behalf of said foreign limited  liability
partnership and acknowledged to me that he (or she) executed the same in his/her
authorized  capacity  as the  free  act and  deed of  said  partnership  for the
purposes therein stated.



My commission expires:                               NOTARY PUBLIC
[Notary Seal]





<PAGE>



         CONTINUING GUARANTY

     THIS  CONTINUING  GUARANTY  AGREEMENT  ("Guaranty")  is  executed by UNITED
TEXTILES & TOYS CORP, a ____________________ corporation ("Guarantor"), in favor
of PHOENIX  LEASING  INCORPORATED,  a California  corporation  ("Lender") at the
request  of PLAY  CO.  TOYS &  ENTERTAINMENT  CORP.  DBA  PLAY  CO.  TOYS,  TOYS
INTERNATIONAL AND TOY CO. ("Borrower").

     WHEREAS,  Lender  will make loans to Borrower  secured by certain  property
which may be personal  property,  real  property  or other  items  pursuant to a
Senior  Loan and  Security  Agreement  No.  4003  dated as of October  19,  1998
("Security Agreement") which term "Security Agreement" in this Guaranty includes
any and all promissory notes and other  agreements now or hereafter  executed by
Borrower in connection with the Security Agreement between Lender and Borrower.

     WHEREAS,  Guarantor  acknowledges  that  Lender  would not  enter  into the
Security  Agreement  or make any  loans to  Borrower  pursuant  thereto,  unless
Guarantor enters into and delivers this Guaranty.

     WHEREAS,  it is of a business  benefit to  Guarantor  that  Lender make the
loans under the Security Agreement to Borrower.

     NOW, THEREFORE,  to induce Lender to enter into the Security Agreement with
Borrower,  and in  consideration  of the  benefits  accruing  from the  Security
Agreement to Guarantor by virtue of its business  relationship with Borrower and
for  other  good  and  valuable  consideration,   receipt  of  which  is  hereby
acknowledged,   Guarantor  agrees,  subject  to  the  Terms  and  Conditions  of
Continuing  Guaranty attached hereto and made a part hereof, (i) to guaranty the
full  satisfaction  and payment of  Borrower's  Obligations  (as defined in such
Terms and Conditions) to Lender and (ii) to be liable for, and legally bound by,
all other terms,  conditions,  covenants and obligations set forth in such Terms
and Conditions.

     IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty on
the date set forth below,  and by such  signature  acknowledges  and agrees that
Guarantor has read and is in agreement with the attached Terms and Conditions of
Continuing Guaranty.

DATED: _______________________

         [GUARANTOR'S SIGNATURE ON THIS DOCUMENT MUST BE NOTARIZED]



UNITED TEXTILES & TOYS CORP.  ("Guarantor")

By:                        
Name (Print):                       
Title:                              
Address:                   
Telephone Number:                           
Federal Tax I.D. Number:                             





<PAGE>



         CORPORATE ACKNOWLEDGMENT

STATE OF          )
    ) ss:
COUNTY OF                  )

     On this ________ day of ______________________, 199___, before me, a Notary
Public     in     and     for     said     County,      personally      appeared
____________________________________, personally known to me (or proved to me on
the basis of satisfactory  evidence) to be the ______________ of the corporation
that executed the within instrument, and acknowledged to me that he/she executed
the  within  instrument  on  behalf  of said  corporation  and that  the  within
instrument was signed on behalf of said corporation by authority of its board of
directors,  and that the within named officer of said  corporation  executed the
same as the free  act and  deed of said  corporation  for the  purposes  therein
stated.


My commission expires:                               NOTARY PUBLIC
[Notary Seal]





<PAGE>




     Insert here the pre-printed, duplexed copy of

     TERMS AND CONDITIONS OF CONTINUING GUARANTY - LOAN

     (This  version  is for both the FrLn and AsLn  Continuing  Guaranty - Short
Form)






<PAGE>


         CORPORATE RESOLUTION AUTHORIZING EXECUTION OF GUARANTY

     WHEREAS, PHOENIX LEASING INCORPORATED ("Lender"),  is willing to enter into
a senior loan and security agreement or senior loan and security agreements with
PLAY CO. TOYS & ENTERTAINMENT  CORP. DBA PLAY CO. TOYS, TOYS  INTERNATIONAL  AND
TOY CO.  ("Borrower")  if the  obligations  of Borrower  arising  thereunder are
guaranteed by this corporation; and

     WHEREAS,  it is  of a  business  benefit  to  this  corporation  that  such
agreement or agreements be entered into by Lender and Borrower;

     NOW,  THEREFORE,  BE  IT  RESOLVED  that  this  corporation  guarantee  the
obligations  of Borrower to Lender under the terms and conditions of any loan or
other senior loan and security agreement or senior loan and security  agreements
entered into between  Lender and Borrower  prior to actual  receipt by Lender of
written notice of revocation of this resolution as to future agreements.

BE IT FURTHER RESOLVED that:
<TABLE>
<CAPTION>

<S>                                         <C>                                                  <C>
--------------------------                  --------------------------                           ------------------------
    (Print or type name)                    (Title of Corporate Officer)                          (specimen signature)
or
--------------------------                  --------------------------                           ------------------------
    (Print or type name)                    (Title of Corporate Officer)                          (specimen signature)
</TABLE>


     of this  corporation  are hereby  individually  authorized  and directed on
behalf of this  corporation  to execute a guaranty in such form as may be agreed
upon by any of said  officers and Lender,  and the  signatures of either of said
officers to the guaranty shall evidence their agreement.

     RESOLVED  FURTHER that Lender is authorized  to act upon these  Resolutions
until  written  notice of their  revocation  is delivered to Lender and that the
authority  hereby  granted  shall  apply  with  equal  force  and  effect to the
successors in office of the officers herein named.

     I,  ________________,   Secretary  of  UNITED  TEXTILES  &  TOYS  CORP.,  a
corporation  incorporated  under  the laws of the State of  Delaware,  do hereby
certify that the foregoing is a full,  true and correct copy of  resolutions  of
the Board of Directors of said corporation, duly and regularly passed or adopted
by the Board of  Directors  of said  corporation  as  required by law and by the
by-laws of said corporation, on the ___ day of ________________, 19__.

     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
above are the signatures of the officers authorized to sign for this corporation
by virtue of said resolutions.

     IN WITNESS  WHEREOF,  I have  hereunto set my hand as such  Secretary,  and
affixed the corporate seal of said corporation,  this ___ day of ______________,
19__.


AFFIX CORPORATE                             
   SEAL HERE               SECRETARY OF UNITED TEXTILES & TOYS CORP.

      [PERSON WHO SIGNS HERE MUST BE DIFFERENT FROM PERSON(S) WHO SIGNED ABOVE.]