<PAGE>

                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
    Principal          Loan Date       Maturity       Loan No.      Call     Collateral       Account         Officer     Initials
<S>                   <C>            <C>             <C>           <C>       <C>            <C>              <C>         <C>
  $2,500,000.00       07-15-2001      12-15-2001      9056-125                  070          5005526481        DAC27
------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Borrower:  Fotoball USA, Inc.            Lender:  US Bank National Association
           6740 Cobra Way                         Kearny Mesa Business Banking
           San Diego, CA 92121                    9005 Complex Drive
                                                  San Diego, CA 92123

================================================================================

LOAN TYPE. This is a Variable Rate (0.00% over prime rate). Revolving Line of
Credit Loan to a Corporation for $2,500,000.00 due on December 15, 2001. This is
a secured renewal loan.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[GRAPHIC OMITTED] Personal, Family, or Household Purposes or Personal
                  Investment.
[GRAPHIC OMITTED] Business (including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: Current Productions.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $2,500,000.00 as follows:


          Amount paid on Borrower's account:


          $2,500,000.00 Payment on Loan # 125 Extension        $2,500,000.00
                                                               -------------

          Note Principal:                                      $2,500,000.00
                                                               -------------


CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:

          Prepaid Finance Charges Paid In Cash:                    $650.00
             $650.00 Documentation Fees
                                                               -------------
          Total Charges Paid in Cash                               $650.00

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER PRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JULY 15, 2001.

BORROWER:
Fotoball USA, Inc.

By:  /s/ Michael Favish
     ------------------------------------------
     Michael Favish, Chairman/Chief Executive Officer

<PAGE>

                                 PROMISSORY NOTE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
     Principal           Loan Date       Maturity       Loan No.      Call     Collateral       Account         Officer     Initials
<S>                     <C>             <C>            <C>           <C>      <C>             <C>              <C>         <C>
   $2,500,000.00        07-15-2001      12-15-2001      9056-125                  070          5005526481        DAC27
------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Borrower:  Fotoball USA Inc.             Lender:  U.S. Bank National Association
           6740 Cobra Way                         Kearny Mesa Business Banking
           San Diego, CA 92121                    9005 Complex Drive
                                                  San Diego, CA 92123
================================================================================

Principal Amount: $2,500,000.00                      Date of Note: July 15, 2001

PROMISE TO PAY. Fotoball USA, Inc. ("Borrower") promises to pay to U.S. Bank
National Association ("Lender"), or order, in lawful money of the United States
of America, the principal amount of Two Million Five Hundred Thousand & 00/100
Dollars ($2,500,000.00) or so much as may be outstanding, together with interest
on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on December 15, 2001. In addition, Borrower
will pay regular monthly payments of accrued, unpaid interest beginning August
15, 2001, and all subsequent interest payments are due on the same day of each
month after that. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a
year of 360 days, multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding. Borrower will
pay Lender at Lender's address shown above or at such other place as Lender may
designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the prime rate (the "Index").
The unpaid principal balance will bear interest at an annual rate equal to the
percentage point described below plus the prime rate announced by the Lender.
Lender will tell Borrower the current index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each time that the prime
rate changes. The interest rate to be applied to the unpaid principal balance of
this Note will be at a rate of 0.00 percentage points over the index. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law.

Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due (b) Borrower fails to comply with or
to perform when due any other material term, obligation, covenant, or condition
contained in this Note or any agreement related to this Note, or in any other
agreement or loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay this
Note or perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material respect
either now or at the time made or furnished. (e) Borrower becomes insolvent, a
receiver is appointed for any part of Borrower's property, Borrower makes an
assignment for the benefit of creditors, or any proceeding is commenced either
by Borrower or against Borrower under any bankruptcy or insolvency laws. (f)
Borrower is in default under any other note, security agreement, lease agreement
or lease schedule, loan agreement or other agreement, whether now existing or
hereafter made, between Borrower and U.S. Bancorp or any direct or indirect
subsidiary of U.S. Bancorp. (g) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (h) Any guarantor dies or
any of the other events described in this default section occurs with respect to
any guarantor of this Note. (i) A material adverse change occurs in Borrower's
financial condition.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable interest rate on this Note to 5.500 percentage points
over the index. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's reasonable attorneys' fees
and Lender's reasonable legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
will pay any court costs, in addition to all other sums provided by law. This
Note has been delivered to Lender and accepted by Lender in the State of
California. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Sacramento County, the State of
California. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender of Borrower against
the other. This Note shall be governed by and construed in accordance with the
laws of the State of California.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.

LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests be
confirmed in writing. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an

<PAGE>

                                 PROMISSORY NOTE
                                   (CONTINUED)

07-15-2001
Loan No. 9056-125                                                         Page 2
================================================================================


authorized person or (b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
lender.

LATE CHARGE. If a payment is 15 days or more past due, borrower will be charged
a late charge of 5% of the delinquent payment.

RENEWAL AND EXTENSION. This Note is given in renewal and extension and not in
novation of the following described indebtedness: That certain Promissory Note
dated December 20,1995, in the amount of $1,000,000.00 executed by Borrower
payable to Lender. It is further agreed that all liens and security interest
securing said indebtedness are hereby renewed and extended to secure the Note
and all renewals, extensions and modifications thereof.

GENERAL PROVISIONS: Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

BORROWER:

Fotoball USA Inc.

By: /s/ Michael Favish
    --------------------------------------------------
    Michael Favish, Chairman/Chief Executive Officer

LENDER:

U.S. Bank National Association

By: /s/ Darla Clark
    --------------------------------------------------
    Authorized Officer


<PAGE>

                                 LOAN AGREEMENT


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
   Principal           Loan Date       Maturity       Loan No.      Call     Collateral       Account         Officer     Initials
<S>                   <C>            <C>             <C>           <C>       <C>            <C>              <C>         <C>
 $2,500,000.00        07-15-2001      12-15-2001      9056-125                  070          5005526481        DAC27
------------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Borrower:  Fotoball USA Inc.             Lender:  U.S. Bank National Association
           6740 Cobra Way                         Kearny Mesa Business Banking
           San Diego, CA 92121                    9005 Complex Drive
                                                  San Diego, CA 92123
================================================================================

THIS LOAN AGREEMENT between Fotoball USA, Inc. ("Borrower") and U.S. Bank
National Association ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans". Borrower understands and agrees that: (a) In
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.

TERM. This Agreement shall be effective as of July 15, 2001, and shall continue
thereafter until all indebtedness of Borrower to Lender his been performed in
full and the parties terminate this Agreement in writing.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.

     Agreement. The word "Agreement" means this Loan Agreement, as this Loan
     Agreement may be amended or modified from time to time, together with all
     exhibits and schedules attached to this Loan Agreement from time to time.

     Account. The word "Account" means a trade account, account receivable, or
     other right to payment for goods sold or services rendered owing to
     Borrower (or to a third party grantor acceptable to Lender).

     Account Debtor. The words "Account Debtor" mean the person or entity
     obligated upon an Account.

     Advance. The word "Advance" means a disbursement of Loan funds under this
     Agreement.

     Borrower. The word "Borrower" means Fotoball USA, Inc. The word "Borrower"
     also includes, as applicable, all subsidiaries and affiliates of Borrower
     as provided below in the paragraph tilled "Subsidiaries and Affiliates."

     Borrowing Base. The words "Borrowing Base" mean, as determined by Lender
     from time to time, the lesser of (a) $2,500,000.00, or (b) 80.000% of the
     aggregate amount of Eligible Accounts.

     Business Day. The words "Business Day" mean a day on which commercial banks
     are open for business in the State of California.

     CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
     Compensation, and Liability Act of 1980, as amended.

     Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.

     Collateral. The word "Collateral" means and includes without limitation all
     property and assets granted as collateral security for a Loan, whether real
     or personal property, whether granted directly or indirectly, whether
     granted now or in the future, and whether granted in the form of a security
     interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien, charge, lien or title retention contract, lease or
     consignment intended as a security device, or any other security or lien
     interest whatsoever, whether created by law, contract, or otherwise. The
     word "Collateral" includes without limitation all collateral described
     below in the section titled "COLLATERAL".

     Debt. The word "Debt" means all of Borrower's liabilities excluding
     Subordinated Debt.

     Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
     Borrower's Accounts which contain selling terms and conditions acceptable
     to Lender. The net amount of any Eligible Account against which Borrower
     may borrow shall exclude all returns, discounts, credits, and offsets of
     any nature. Unless otherwise agreed to by Lender in writing. Eligible
     Accounts do not include:

          (a) Accounts with respect to which the Account Debtor is an officer,
          an employee or agent of Borrower.

          (b) Accounts with respect to which the Account Debtor is a subsidiary
          of, or affiliated with or related to Borrower or its shareholders,
          officers, or directors.

          (c) Accounts with respect to which goods are placed on consignment,
          guaranteed sale, or other terms by reason of which the payment by the
          Account Debtor may be conditional.


<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001                                                                Page 2
Loan No 9056-125
================================================================================

          (d) Accounts with respect to which the Account Debtor is not a
          resident of the United States, except to the extent such Accounts are
          supported by insurance, bonds or other assurances satisfactory to
          Lender.

          (e) Accounts with respect to which Borrower is or may become liable to
          the Account Debtor for goods sold or services rendered by the Account
          Debtor to Borrower.

          (f) Accounts which are subject to dispute, counterclaim, or setoff.

          (g) Accounts with respect to which the goods have not been shipped or
          delivered, or the services have not been rendered, to the Account
          Debtor.

          (h) Accounts with respect to which Lender, in its reasonable
          discretion, deems the creditworthiness or financial condition of the
          Account Debtor to be unsatisfactory.

          (i) Accounts of any Account Debtor who has filed or has had filed
          against it a petition in bankruptcy or an application for relief under
          any provision of any state or federal bankruptcy, insolvency, or
          debtor-in-relief acts; or who has had appointed a trustee, custodian,
          or received for the assets of such Account Debtor; or who has made an
          assignment for the benefit of creditors or has become insolvent or
          fails generally to pay its debts (including its payrolls) as such
          debts become due.

          (j) Accounts with respect to which the Account Debtor is the United
          States government or any department or agency of the United States.

          (k) Accounts which have not been paid in full within 60 days from the
          invoice date. The entire balance of any Account of any single Account
          debtor will be ineligible whenever the portion of the Account which
          has not been paid within 60 days from the invoice date is in excess of
          20.000% of the total amount outstanding on the Account.

          (l) That portion of the Accounts of any single Account Debtor which
          exceeds 10.00% of all Borrower's Accounts except concentrations of up
          to 20.00% allowable for Disney, McDonalds, Warner Bros., Coca-Cola,
          Six Flags, J.C. Penney's, Wal-Mart, Target, Toys R Us and any other
          recognized national retailer or theme park.

          (m) Foreign, contra, and bankrupt company accounts, and minus the
          entire account balance of any customer extended terms in excess of
          "net 60".

     ERISA. The word "ERISA" means the Employee Retirement Income Security Act
     of 1974. as amended.

     Event of Default. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "EVENTS OF DEFAULT."

     Expiration Date. The words "Expiration Date" mean the date of termination
     of Lender's commitment to lend under this Agreement.

     Grantor. The word "Grantor" means and includes without limitation each and
     all of the persons or entities granting a Security interest in any
     Collateral for the indebtedness, including without Iimitation all Borrowers
     granting such a Security interest.

     Guarantor. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with any indebtedness.

     Indebtedness. The word "Indebtedness" means and includes without limitation
     all Loans, together with all other obligations, debts and liabilities of
     Borrower to Lender, or any one or more of them, as well as all claims by
     Lender against Borrower, or any one or more of them; whether now or
     hereafter existing, voluntary or involuntary, due or not due, absolute or
     contingent, liquidated or unliquidated; whether Borrower may be liable
     individually or jointly with others; whether Borrower may be obligated as a
     guarantor, surety, or otherwise; whether recovery upon such indebtedness
     may be or hereafter may become barred by any statute of limitations; and
     whether such indebtedness may be or hereafter may become otherwise
     unenforceable.

     Lender. The word "Lender" means U.S. Bank National Association, its
     successors and assigns.

     Line of Credit. The words "Line of Credit" mean the credit facility
     described in the Section titled "LINE OF CREDIT" below.

     Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
     Borrower's readily marketable securities.

     Loan. The word "Loan" or "Loans" means and includes without limitation any
     and all commercial loans and financial accommodations from Lender to
     Borrower, whether now or hereafter existing, and however evidenced,
     including without limitation those loans and financial accommodations
     described herein or described on any exhibit or schedule attached to this
     Agreement from time to time.

     Note. The word "Note" means and includes without limitation Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9056-125                                                          Page 3
================================================================================

     Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
     interests securing indebtedness owed by Borrower to Lender; (b) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
     or carriers, or other like liens arising in the ordinary course of business
     and securing obligations which are not yet delinquent; (d) purchase money
     liens or purchase money security interests upon or in any property acquired
     or held by Borrower in the ordinary course of business to secure
     indebtedness outstanding on the date of this Agreement or permitted to be
     incurred under the paragraph of this Agreement titled "Indebtedness and
     Liens"; (e) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (f) those liens and security interests which in the aggregate
     constitute an immaterial and insignificant monetary amount with respect to
     the net value of Borrower's assets.

     Related Documents. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the indebtedness.

     Security Agreement. The words "Security Agreement" mean and include without
     limitation any agreements, promises, covenants, arrangements,
     understandings or other agreements, whether created by law, contract, or
     otherwise, evidencing, governing, representing, or creating a Security
     Interest.

     Security Interest. The words "Security Interest" mean and include without
     limitation any type of collateral security, whether in the form of a lien,
     charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien or title retention contract, tease or consignment intended as
     a security device, or any other security or lien interest whatsoever,
     whether created by law, contract, or otherwise.

     SARA. The word "SARA" means the Superfund Amendments and Reauthortzation
     Act of 1986 as now or hereafter amended.

     Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
     liabilities of Borrower which have been subordinated by written agreement
     to indebtedness owed by Borrower to Lender in form and substance acceptable
     to Lender.

     Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
     assets excluding all intangible assets (i.e., goodwill, trademarks,
     patents, copyrights, organizational expenses, and similar intangible items,
     but including leaseholds and leasehold improvements) less total Debt.

     Working Capital. The words "Working Capital" mean Borrower's current
     assets, excluding prepaid expenses, less Borrower's current liabilities.

LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.

     Conditions Precedent to each Advance. Lender's obligation to make any
     Advance to or for the account of Borrower under this Agreement is subject
     to the following conditions precedent, with all documents, instruments,
     opinions, reports, and other items required under this Agreement to be in
     form and substance satisfactory to Lender.

          (a) Lender shall have received evidence that this Agreement and all
          Related Documents have been duly authorized, executed, and delivered
          by Borrower to Lender.

          (b) Lender shall have received such opinions of counsel, supplemental
          opinions, and documents as Lender may reasonably request.

          (c) The security interests in the Collateral shall have been duty
          authorized, created, and perfected with first lien priority and shall
          be in full force and effect.

          (d) All guaranties required by Lender for the line of Credit shall
          have been executed by each Guarantor, delivered to Lender, and be in
          full force and effect.

          (e) Lender, at its option and for its sole benefit, shall have
          conducted an audit of Borrower's Accounts, books, records, and
          operations, and Lender shall be reasonably satisfied as to their
          condition.

          (f) Borrower shall have paid to Lender all fees, costs, and expenses
          specified in this Agreement and the Related Documents as are then due
          and payable.

          (g) There shall not exist at the time of any Advance a condition which
          would constitute an Event of Default under this Agreement, and
          Borrower shall have delivered to Lender the compliance certificate
          called for in the paragraph below titled "Compliance Certificate."

     Making Loan Advances. Advances under the Line of Credit may be requested
     either orally or in writing by authorized persons. Lender may, but need
     not, require that all oral requests be confirmed in writing. Each Advance
     shall be conclusively deemed to have been made at the request of and for
     the benefit of Borrower (a) when credited to any deposit account of
     Borrower maintained with Lender or (b) when advanced in accordance with the
     instructions of an authorized person. Lender, at its option, may set a
     cutoff time, after which all requests for Advances will be treated as
     having been requested on the next succeeding Business Day.


<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9056-125                                                          Page 4
================================================================================


     Mandatory Loan Repayments. If at any time the aggregate principal amount of
     the outstanding Advances shall exceed the applicable Borrowing Base,
     Borrower, immediately upon written notice from Lender, shall pay to Lender
     an amount equal to the difference between the outstanding principal balance
     of the Advances and the Borrowing Base. On the Expiration Date, Borrower
     shall pay to Lender in full the aggregate unpaid principal amount of all
     Advances then outstanding and all accrued unpaid interest, together with
     all other applicable fees, costs and charges, if any, not yet paid.

     Loan Account. Lender shall maintain on its books a record of account in
     which Lender shall make entries for each Advance and such other debits and
     credits as shall be appropriate in connection with the credit facility.
     Lender shall provide Borrower with periodic statements of Borrower's
     account, which statements shall be considered to be correct and
     conclusively binding on Borrower unless Borrower notifies Lender to the
     contrary within thirty (30) days after Borrower's receipt of any such
     statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others,
if required) shall grant to Lender Security Interests in such property and
assets as Lender may require (the "Collateral"), including without limitation
Borrower's present and future Accounts and general intangibles. Lender's
Security Interests in the Collateral shall be continuing liens and shall include
the proceeds and products of the Collateral, including without limitation the
proceeds of any insurance. With respect to the Collateral, Borrower agrees and
represents and warrants to Lender:

     Perfection of Security Interests. Borrower agrees to execute such financing
     statements and to take whatever other actions are reasonably requested by
     Lender to perfect and continue Lender's Security Interests in the
     Collateral. Upon request of Lender, Borrower will deliver to Lender any and
     all of the documents evidencing or constituting the Collateral, and
     Borrower will note Lender's interest upon any and all chattel paper if not
     delivered to Lender for possession by Lender. Contemporaneous with the
     execution of this Agreement, Borrower will execute one or more UCC
     financing statements and any similar statements as may be required by
     applicable law, and will file such financing statements and all such
     similar statements in the appropriate location or locations. Borrower
     hereby appoints Lender as its irrevocable attorney-in-fact for the purpose
     of executing any documents necessary to perfect or to continue any Security
     Interest. Lender may at any time, and without further authorization from
     Borrower, file a carbon, photograph, facsimile, or other reproduction of
     any financing statement for use as a financing statement. Borrower will
     reimburse Lender for all expenses for the perfection, termination, and the
     continuation of the perfection of Lender's security interest in the
     Collateral. Borrower promptly will notify Lender of any change in
     Borrower's name including any change to the assumed business names of
     Borrower. Borrower also promptly will notify Lender of any change in
     Borrower's Social Security Number or Employer Identification Number.
     Borrower further agrees to notify Lender in writing prior to any change in
     address or location of Borrower's principal governance office or should
     Borrower merge or consolidate with any other entity.

     Collateral Records. Borrower does now, and at all times hereafter shall,
     keep correct and accurate records of the Collateral, all of which records
     shall be available to Lender or Lender's representative upon demand for
     inspection and copying at any reasonable time. With respect to the
     Accounts, Borrower agrees to keep and maintain such records as Lender may
     reasonably require, including without limitation information concerning
     Eligible Accounts and Account balances and agings.

     Collateral Schedules. Concurrently with the execution and delivery of this
     Agreement, Borrower shall execute and deliver to Lender a schedule of
     Accounts and Eligible Accounts, in form and substance reasonably
     satisfactory to the Lender. Thereafter and at such frequency as Lender
     shall require, Borrower shall execute and deliver to Lender such
     supplemental schedules of Eligible Accounts and such other matters and
     information relating to Borrower's Accounts as Lender may reasonably
     request.

     Representations and Warranties Concerning Accounts. With respect to the
     Accounts, Borrower represents and warrants to Lender, (a) Each Account
     represented by Borrower to be an Eligible Account for purposes of this
     Agreement conforms to the requirements of the definition of an Eligible
     Account; (b) All Account information listed on schedules delivered to
     Lender will be true and correct, subject to immaterial variance; and (c)
     Lender, its assigns, or agents shall have the right at any time and at
     Borrower's expense to inspect, examine, and audit Borrower's records and to
     confirm with Account Debtors the accuracy of such Accounts.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:

     Organization. Borrower is a corporation which is duly organized, validly
     existing, and in good standing under the laws of the State of Delaware and
     is validly existing and in good standing in all states in which Borrower is
     doing business. Borrower has the fun power and authority to own its
     properties and to transact the businesses in which it is presently engaged
     or presently proposes to engage. Borrower also is duly qualified as a
     foreign corporation and is in good standing in all states in which the
     failure to so qualify would have a material adverse effect on its
     businesses or financial condition except for states in which failure to be
     validly existing and in good standing would not have a material adverse
     effect on the Borrower's business.

     Authorization. The execution, delivery, and performance of this agreement
     and all related documents by Borrower, to the extent to be executed,
     delivered or performed by Borrower, have been duly authorized by all
     necessary action by Borrower; do not require the consent or approval of any
     other person, regulatory authority or governmental body; and do not
     conflict with, result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization, or bylaws,
     or any agreement or other instrument binding upon Borrower or (b) any law
     governmental regulation, court decree, or order applicable to Borrower.

     Financial Information. Each financial statement of Borrower supplied to
     Lender truly and completely disclosed Borrower's financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's financial condition subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
LOAN NO 9056-125                                                          Page 5
================================================================================

     Legal Effect. This Agreement constitutes, and any instrument or agreement
     required hereunder to be given by Borrower when delivered will constitute,
     legal, valid and binding obligations of Borrower enforceable against
     Borrower in accordance with their respective terms.

     Properties. Except for Permitted Liens. Borrower owns and has good title to
     all of Borrower's properties free and clear of all Security Interests, and
     has not executed any security documents or financing statements relating to
     such properties. All of Borrower's properties are titled in Borrower's
     legal name, and Borrower has not used, or filed a financing statement
     under, any other name for at least the last five (5) years.

     Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
     "disposal," "release," and "threatened release" as used in this Agreement,
     shall have the same meanings as set forth in the "CERCLA," "SARA," the
     Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
     the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901. et
     seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
     Safety Code, Section 25100, et seq., or other applicable state or Federal
     laws, rules, or regulations adopted pursuant to any of the foregoing.
     Except as disclosed to and acknowledged by Lender in writing, Borrower
     represents and warrants that: (a) During the period of Borrower's ownership
     of the properties, there has been no use, generation, manufacture, storage,
     treatment, disposal, release or threatened release of any hazardous waste
     or substance by any person on, under, about or from any of the properties.
     (b) Borrower has no knowledge of, or reason to believe that there has been
     (i) any use, generation, manufacture, storage, treatment, disposal,
     release, or threatened release of any hazardous waste or substance on,
     under, about or from the properties by any prior owners or occupants of any
     of the properties, or (ii) any actual or threatened litigation or claims of
     any kind by any person relating to such matters. (c) Neither Borrower nor
     any tenant, contractor, agent or other authorized user of any of the
     properties shall use, generate, manufacture, store, treat, dispose of, or
     release any hazardous waste or substance on, under, about or from any of
     the properties; and any such activity shall be conducted in compliance with
     all applicable federal, state, and local laws, regulations, and ordinances,
     including without limitation those laws, regulations and ordinances
     described above. Borrower authorizes Lender and its agents to enter upon
     the properties to make such inspections and tests as Lender may deem
     appropriate to determine compliance of the properties with this section of
     the Agreement. Any inspections or tests made by Lender shall be at
     Borrower's expense and for Lender's purposes only and shall not be
     construed to create any responsibility or liability on the part of Lender
     to Borrower or to any other person. The representations and warranties
     contained herein are based on Borrower's due diligence in investigating the
     properties for hazardous waste and hazardous substances. Borrower hereby
     (a) releases and waives any future claims against Lender for indemnity or
     contribution in the event Borrower becomes liable for cleanup or other
     costs under any such laws, and (b) agrees to indemnify and hold harmless
     Lender against any and all claims, losses, liabilities, damages, penalties,
     and expenses which Lender may directly or indirectly sustain or suffer
     resulting from a breach of this section of the Agreement or as a
     consequence of any use, generation, manufacture, storage, disposal, release
     or threatened release of a hazardous waste or substance on the properties.
     The provisions of this section of the Agreement, including the obligation
     to indemnity, shall survive the payment of the indebtedness and the
     termination or expiration of this Agreement and shall not be affected by
     Lender's acquisition of any interest in any of the properties whether by
     foreclosure or otherwise.

     Litigation and Claims. No material litigation, claim, investigation,
     administrative proceeding or similar action (including those for unpaid
     taxes) against Borrower is pending or threatened, and no other event has
     occurred which in any case may materially adversely affect Borrower's
     financial condition or properties, other than litigation, claims, or other
     events, if any, that have been in any case disclosed to and acknowledged by
     Lender in writing.

     Taxes. To the best of Borrower's knowledge, all tax returns and reports of
     Borrower that are or were required to be filed, have been filed, and all
     taxes, assessments and other governmental charges have been paid in full,
     except those presently being or to be contested by Borrower in good faith
     in the ordinary course of business and for which adequate reserves have
     been provided.

     Lien Priority. Unless otherwise previously disclosed to Lender in writing,
     Borrower has not entered into or granted any Security Agreements, or
     permitted the filing or attachment of any Security Interests on or
     affecting any of the Collateral directly or indirectly securing repayment
     of Borrower's Loan and Note, that would be prior or that may in any way be
     superior to Lender's Security Interests and rights in and to such
     Collateral.

     Binding Effect. This Agreement, the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related Documents are binding upon Borrower as well as upon Borrower's
     successors, representatives and assigns, and are legally enforceable in
     accordance with their respective terms.

     Commercial Purposes. Borrower intends to use the Loan proceeds solely for
     business or commercial related purposes.

     Employee Benefit Plans. Each employee benefit plan as to which Borrower may
     have any liability compiles in all material respects with all applicable
     requirements of law and regulations, and (i) no Reportable Event nor
     Prohibited Transaction (as defined in ERISA) has occurred with respect to
     any such plan, (ii) Borrower has not withdrawn from any such plan or
     initiated steps to do so, (iii) no steps have been taken to terminate any
     such plan, and (iv) there are no unfunded liabilities other than those
     previously disclosed to Lender in writing.

     Location of Borrower's Offices and Records. Borrower's place of business,
     or Borrower's chief executive office, if Borrower has more than one place
     of business, is located at 6740 Cobra Way, San Diego, CA 92121. Unless
     Borrower has designated otherwise in writing this location is also the
     office or offices where Borrower keeps its records concerning the
     Collateral.

     Information. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No. 9056-125                                                         Page 6
================================================================================

     Survival of Representations and Warranties. Borrower understands and agrees
     that Lender, without independent investigation, is relying upon the above
     representations and warranties in extending Loan Advances to Borrower.
     Borrower further agrees that the foregoing representations and warranties
     shall be continuing in nature and shall remain in full force and effect
     until such time as Borrower's indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above, whichever
     is the last to occur.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:

     Litigatlon. Promptly inform Lender in writing of (a) all material adverse
     changes in Borrower's financial condition, and (b) all existing and all
     threatened litigation, claims, investigations, administrative proceedings
     or similar actions affecting Borrower or any Guarantor which could
     materially affect the financial condition of Borrower or the financial
     condition of any Guarantor.

     Financial Records. Maintain its books and records in accordance with
     generally accepted accounting principles, applied on a consistent basis and
     permit Lender to examine and audit Borrower's books and records at all
     reasonable times.

     Financial Statements. Furnish Lender with, as soon as available, but in no
     event later than one hundred twenty (120) days after the end of each fiscal
     year. Borrower's balance sheet and income statement for the year ended,
     audited by a certified public accountant satisfactory to Lender and, as
     soon as available, but in no event later than forty five (45) days after
     the end of each fiscal quarter, Borrower's balance sheet and profit and
     loss statement for the period ended, prepared and certified as correct to
     the best knowledge and belief by Borrower's chief financial officer or
     other officer or person acceptable to Lender. All financial reports
     required to be provided under this Agreement shall be prepared in
     accordance with generally accepted accounting principles, applied on a
     consistent basis, and certified by Borrower as being true and correct.

     Additional Information. Furnish such additional information and statements,
     lists of assets and liabilities, agings of receivables and payables,
     inventory schedules, budgets, forecasts, tax returns, and other reports
     with respect to Borrower's financial condition and business operations
     Lender may reasonably request from time to time.

     Financial Covenants and Ratios. Comply with the following covenants and
     ratios:

          Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
          than $9,000,000.00.

          Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net
          Worth of less than 0.75 to 1.00.

          Working Capital. Maintain Working Capital in excess of $7,000,000.00.

          Current Ratio. Maintain a ratio of Current Assets to Current
          Liabilities in excess of 2.00 to 1.00.

     The following provisions shall apply for purposes of determining compliance
     with the foregoing financial covenants and ratios: Compliance with the
     foregoing ratios/amounts shall be determined by calculating the
     ratios/amounts as of the end of each quarter. Except as provided above, all
     computations made to determine compliance with the requirements contained
     in this paragraph shall be made in accordance with generally accepted
     accounting principles, applied on a consistent basis, and certified by
     Borrower as being true and correct.

     Insurance. Maintain fire and other risk insurance, public liability
     insurance, and such other insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts, coverages and with
     insurance companies reasonably acceptable to Lender. Borrower, upon request
     of Lender, will deliver to Lender from time to time the policies or
     certificates of insurance in form satisfactory to Lender, including
     stipulations that coverages will not be cancelled or diminished without at
     least ten (10) days' prior written notice to Lender. Each insurance policy
     also shall include an endorsement providing that coverage in favor of
     Lender will not be impaired in any way by any act, omission or default of
     Borrower or any other person. In connection with all policies covering
     assets in which Lender holds or is offered a security interest for the
     Loans, Borrower will provide Lender with such loss payable or other
     endorsements as Lender may require.

     Insurance Reports. Furnish to Lender, upon request of Lender, reports on
     each existing insurance policy showing such information as Lender may
     reasonably request, including without limitation the following: (a) the
     name of the insurer; (b) the risks insured; (c) the amount of the policy;
     (d) the properties insured; (e) the then current property values on the
     basis of which insurance has been obtained, and the manner of determining
     those values; and (f) the expiration date of the policy. In addition, upon
     request of Lender (however not more often than annually), Borrower will
     have an independent appraiser satisfactory to Lender determine, as
     applicable, the actual cash value or replacement cost of any Collateral.
     The cost of such appraisal shall be paid by Borrower.

     Other Agreements. Comply with all terms and conditions of all other
     agreements, whether now or hereafter existing, between Borrower and any
     other party and notify Lender immediately in writing of any default in
     connection with any other material agreements.

     Loan Fees and Charges. In addition to all other agreed upon fees and
     charges, pay the following: Borrower agrees to pay Lender, prior to or
     contemporaneously with the initial advance of Loan proceeds, a
     nonrefundable documentation fee in the amount of $650.00.

     Loan Proceeds. Use all Loan proceeds solely for Borrower's business
     operations, unless specifically consented to the contrary by Lender in
     writing.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001                                                                Page 7
Loan No 9056-125
================================================================================

     Taxes, Charges and Liens. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits. Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver to Lender at any time a written statement of any assessments,
     taxes, charges, levies, liens and claims against Borrower's properties,
     income, or profits.

     Performance. Perform and comply with all terms, conditions, and provisions
     set forth in this Agreement and in the Related Documents in a timely
     manner, and promptly notify Lender if Borrower learns of the occurrence of
     any event which constitutes an Event of Default under this Agreement or
     under any of the Related Documents.

     Operations. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner and in compliance in all material respects
     with all applicable federal, state and municipal laws, ordinances, rules
     and regulations respecting its properties, charters, businesses and
     operations, including without limitation, compliance with the Americans
     With Disabilities Act and with all minimum funding standards and other
     requirements of ERISA and other laws applicable to Borrower's employee
     benefit plans.

     Inspection. Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral for the Loan or Loans and Borrower's other
     properties and to examine or audit Borrower's books, accounts, and records
     and to make copies and memoranda of Borrower's books, accounts, and
     records. If Borrower now or at any time hereafter maintains any records
     (including without limitation computer generated records and computer
     software programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit Lender free access to such records at all reasonable times and to
     provide Lender with copies of any records it may request, all at Borrower's
     expense.

     Compliance Certificate. Unless waived in writing by Lender, provide Lender
     not required and at the time of each disbursement of Loan proceeds with a
     certificate executed by Borrower's chief financial officer, or other
     officer or person acceptable to Lender, certifying that the representations
     and warranties set forth in this Agreement are true and correct as of the
     date of the certificate and further certifying that, as of the date of the
     certificate, no Event of Default exists under this Agreement.

     Environmental Compliance and Reports. Borrower shall comply in all material
     respects with all environmental protection federal, state and local laws,
     statutes, regulations and ordinances; not cause or permit to exist, as a
     result of an intentional or unintentional action or omission on its part or
     on the part of any third party, on property owned and/or occupied by
     Borrower, any environmental activity where damage may result to the
     environment, unless such environmental activity is pursuant to and in
     compliance with the conditions of a permit issued by the appropriate
     federal, state or local governmental authorities; shall furnish to Lender
     promptly and in any event within thirty (30) days after receipt thereof a
     copy of any notice, summons, lien, citation, directive, letter or other
     communication from any governmental agency or instrumentality concerning
     any intentional or unintentional action or omission on Borrower's part in
     connection with any environmental activity whether or not there is damage
     to the environment and/or other natural resources.

     Additional Assurances. Make, execute and deliver to Lender such promissory
     notes, mortgages, deeds of trust, security agreements, financing
     statements, instruments, documents and other agreements as Lender or its
     attorneys may reasonably request to evidence and secure the Loans and to
     perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

     Indebtedess and Liens. (a) Except for trade debt incurred in the normal
     course of business and indebtedness to Lender contemplated by this
     Agreement, create, incur or assume indebtedness for borrowed money,
     including capital leases, (b) except as allowed as a permitted lien, sell,
     transfer, mortgage, assign, pledge, lease, grant a security interest in, or
     encumber any of Borrower's assets, or (c) sell with recourse any of
     Borrower's accounts, except to Lender.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9066-125                                                          Page 8
================================================================================

     Continuity of Operations, (a) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (b) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change ownership, change its name, disserve or
     transfer or sell Collateral out of the ordinary course of business, (c) pay
     any dividends on Borrower's stock (other than dividends payable in its
     stock), provided, however that notwithstanding the foregoing, but only so
     long as no Event of Default has occurred and is continuing or would result
     from the payment of dividends, if Borrower is a "Subchapter S Corporation"
     (as defined in the Internal Revenue Code of 1986. as amended). Borrower may
     pay cash dividends on its stock to its shareholders from time to time in
     amounts necessary to enable the shareholders to pay income taxes and make
     estimated income tax payments to satisfy their liabilities under federal
     and state law which arise solely from their status as Shareholders of a
     Subchapter S Corporation because of their ownership of shares of stock of
     Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
     altar or amend Borrower's capital structure.

     Loans, Acquisitions and Guaranties, (a) Loan, invest in or advance money or
     assets, (b) purchase, create or acquire any interest in any other
     enterprise or entity, or (c) incur any obligation as surely or guarantor
     other than in the ordinary course of business.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement. Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
flies a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.

ACCESS LAWS. Without limiting the generality of any provision of this agreement
requiring Borrower to comply with, applicable laws, rules, and regulations.
Borrower agrees that it will at all times comply with applicable laws relating
to disabled access including, but not limited to, as applicable titles of the
Americans with Disabilities Act of 1990.

AGINGS OF ACCOUNTS RECEIVABLE. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower shall deliver to Lender within
twenty (20) days after the end of each month, a detailed aging of Borrower's
accounts and contracts receivable and accounts payable as of the last day of
that month, together with an explanation of any adjustments made at the end of
that month, all in a form acceptable to Lender.

ADDITIONAL COVENANTS.
Borrower covenants and agrees with Lender that, while this Agreement is in
effect; 1) Annually and at mid-year, accounts receivable audit is required. 2)
Advances on line will be for the purpose of supporting working capital only. The
line will not be used for long term financing or acquisition other companies
without consent from Lender. 3) Borrower to maintain primary relationship with
Lender and to include all depository accounts. The Merrill Lynch account will be
transferred. 4) Borrower to notify Lender of any major supplier interruption. 5)
Borrower to notify Lender of any termination and/or non-renewal of any license
agreement in which Borrower is a licensee. 6) Borrower to provide copies of any
new major licensing agreements/extension. 7) Borrower to furnish 10-Qs quarterly
within forty five (45) days of quarter end and Borrower to provide 10-Ks
annually.

ADDITIONAL DEFINITIONS.
Current Assets- The words "Current Assets" mean Borrower's cash on hand plus
Borrower's receivables plus inventory.

Current Liabilities- The words "Current Liabilities" mean all Borrower's notes
payable plus Borrower's accounts payable plus Borrower's income taxes payable
plus Borrower's account plus Borrower's current portion of long term debt.

Current Ratio- The words "Current Ratio" mean Borrower's total Current Assets
divided by Borrowers total Current Liabilities.

BORROWER'S SUBMISSION OF TAX RETURNS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will furnish to Lender,
concurrent with the filing thereof, a copy of Borrower's filed federal tax
returns including all applicable schedules.

BORROWING BASE CERTIFICATE. Unless waived in writing by Lender, Borrower agrees
to provide Lender with a Borrower's Certificate monthly and with each advance.
Each "Borrower's Certificate" shall be in form acceptable to Lender, duly
executed by Borrower and detailing the status of the Line of Credit as of the
date thereon.

RIGHT OF SET OFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the indebtedness against any and all such accounts.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

     Default on Indebtedness. Failure of Borrower to make any payment when due
     on the Loans.

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9066-125                                                          Page 9
================================================================================

     Other Defaults. Failure of Borrower or any Grantor to comply with or to
     perform with due any other material term, obligation, covenant or condition
     contained in this Agreement or in any of the Related Documents, or failure
     of Borrower to comply with or to perform any other term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     Default in Favor of Third Parties. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans or perform their respective
     obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Borrower or any Grantor under this
     Agreement or the Related Documents is false or misleading in any material
     respect at the time made or furnished, or becomes false or misleading at
     any time thereafter.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any Security
     Agreement to create a valid and perfected Security Interest) at any time
     and for any reason.

     Insolvency. The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the indebtedness, or by any
     governmental agency. This includes a garnishment, attachment, or levy on or
     of any of Borrower's deposit accounts with Lender.

     Events Affecting Guarantor. Any of the proceeding events occurs with
     respect to any Guarantor of any of the indebtedness or any Guarantor dies
     or becomes incompetent, or revokes or disputes the validity of, or
     liability under, any Guaranty of the indebtedness.

     Change in Ownership. Any change in ownership of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in Borrower's financial
     condition.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
loan Advances or disbursements), and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     Applicable Law. This Agreement has been delivered to Lender and accepted by
     Lender in the State of California. If there is a lawsuit, Borrower agrees
     upon Lender's request to submit to the jurisdiction of the courts of
     Sacramento County, the State of California. Lender and Borrower hereby
     waive the right to any jury trial in any action, proceeding, or
     counterclaim brought by either Lender or Borrower against the other. This
     Agreement shall be governed by and construed in accordance with the laws of
     the State of California.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Multiple Parties; Corporate Authority. All obligations of Borrower under
     this Agreement shall be joint and several, and all references to Borrower
     shall mean each and every Borrower. This means that each of the persons
     signing below is responsible for all obligations in this Agreement.

     Consent to Loan Participation. Borrower agrees and consents to Lender's
     sale or transfer, whether now or later, of one or more participation
     interests in the Loans to one or more purchasers, whether related or
     unrelated to Lender, Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers, any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan, and Borrower hereby waives any rights to privacy it may have
     with respect to such matters. Borrower additionally waives any and all
     notices of sale of participation interests, as well as all notices of any
     repurchase of such participation interests. Borrower also agrees that the
     purchasers of any such

<PAGE>

                                 LOAN AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9066-125                                                         Page 10
================================================================================

     participation interests will be considered as the absolute owners of such
     interests in the Loans and will have all the rights granted under the
     participation agreement or agreements governing the sale of such
     participation interests. Borrower further waives all rights of offset or
     counterclaim that it may have now or later against Lender or against any
     purchaser of such a participation interest and unconditionally agrees that
     either Lender or such purchaser may enforce Borrower's obligation under the
     Loans irrespective of the failure or insolvency of any holder of any
     interest in the Loans. Borrower further agrees that the purchaser of any
     such participation interests may enforce its interests irrespective of any
     personal claims or defenses that Borrower may have against Lender.

     Costs and Expenses. Borrower agrees to pay upon demand all of Lenders
     reasonable expenses, including without limitation, reasonable attorneys'
     fees, incurred in connection with the preparation, execution, enforcement,
     modification and collection of this Agreement or in connection with the
     Loans made pursuant to this Agreement. Lender may pay someone else to help
     collect the loans and to enforce this Agreement, and Borrower will pay that
     amount. This includes, subject to any limits under applicable law, Lender's
     reasonable attorneys' fees and Lender's reasonable legal expenses, whether
     or not there is a lawsuit, including attorneys fees for bankruptcy
     proceedings (including efforts to modify or vacate any automatic stay or
     injunction), appeals, and any anticipated post-judgment collection
     services. Borrower also will pay any court costs, in addition to all other
     sums provided by law.

     Notices. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given at the address shown above. Any party may change
     its address for notices under this Agreement by giving formal written
     notice to the other parties, specifying that the purpose of the notice is
     to change the party's address. To the extent permitted by applicable law,
     if there is more than one Borrower, notice to any Borrower will constitute
     notice to all Borrowers. For notice purposes, Borrower will keep Lender
     informed at a times of Borrower's current address(es).

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any persons
     circumstances such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provisions shall be deemed to be modified to be within the
     limits of enforceability or validity; however, if the offending provision
     cannot be so modified, it shall be stricken and all other provision of this
     Agreement in all other respects shall remain valid and enforceable.

     Subsidiaries and Affiliates of Borrower. To the extent the context of any
     provisions of this Agreement makes it appropriate, including without
     limitation any representation, warranty or covenant, the word "Borrow" as
     used herein shall include all subsidiaries and affiliates of Borrower.
     Notwithstanding the foregoing however, under no circumstances shall this
     Agreement be construed to require Lender to make any Loan or other
     financial accommodation to any subsidiary or affiliate of Borrower.

     Successors and Assigns. All covenants and agreements contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender, its successors and assigns. Borrower shall not,
     however, have the right to assign its rights under this Agreement or any
     interest therein, without the prior written consent of Lender.

     Survival. All warranties, representations, and covenants made by Borrower
     in this Agreement or in any certificate or other instrument delivered by
     Borrower to Lender under this Agreement shall be considered to have bean
     relied upon by Lender and will survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     Time is of the Essence. Time is of the essence in the performance of this
     Agreement.

     Waiver. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement. No prior waiver by Lender, nor any
     course of dealing between Lender and Borrower, or between Lender and any
     Grantor, shall constitute a waiver of any of Lender's rights or of any
     obligations of Borrower or of any Grantor as to any future transactions.
     Whenever the consent of Lender is required under this Agreement, the
     granting of such consent by Lender in any instance shall not constitute
     continuing consent in subsequent instances where such consent is required,
     and in all cases such consent may be granted or withheld in the sole
     discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JULY 15, 2001.

BORROWER:
Fotoball USA Inc.

By: /s/ Michael Favish
    ---------------------------------------------------
    Michael Favish, Chairman/Chief Executive Officer

LENDER:

U.S. Bank National Association

By: /s/ Darla Clark
    ---------------------------------------------------
    Authorized Officer


<PAGE>

                          COMMERCIAL SECURITY AGREEMENT

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
    Principal         Loan Date        Maturity        Loan No.     Call    Collateral       Account       Officer   Initials
<S>                  <C>             <C>              <C>          <C>     <C>            <C>              <C>      <C>
  $2,500,000.00      07-15-2001       12-15-2001       9056-125                 070        5005526481       DAC27
------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Borrower:  Fotoball USA Inc.            Lender:  U.S. Bank National Association
           6740 Cobra Way                        Kearny Mesa Business Banking
           San Diego, CA 92121                   9005 Complex Drive
                                                 San Diego, CA 92123


================================================================================

THIS COMMERCIAL SECURITY AGREEMENT is entered into between Fotoball USA, Inc.
(referred to below as "Grantor"); and U.S. Bank National Association (referred
to below as "Lender"). For valuable consideration, Grantor grants to Lender a
security interest in the Collateral to secure the indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.

     Agreement. The word "Agreement" means this Commercial Security Agreement,
     as this Commercial Security Agreement may be amended or modified from time
     to time, together with all exhibits and schedules attached to this
     Commercial Security Agreement from time to time.

     Collateral. The word "Collateral" means the following described property of
     Grantor, whether now owned or hereafter acquired, whether now existing or
     hereafter arising, and wherever located:

          All inventory, chattel paper, accounts, equipment and general
          intangibles

     In addition, the word "Collateral" includes all the following, whether now
     owned or hereafter acquired, whether now existing or hereafter arising, and
     wherever located:

          (a) All attachments, accessions, accessories, tools, parts, supplies,
          increases, and additions to and all replacements of and substitutions
          for any property described above.

          (b) All products and produce of any of the property described in this
          Collateral section.

          (c) All accounts, general intangibles, instruments, rents, monies,
          payments, and all other rights, arising out of a sale, lease, or other
          disposition of any of the property described in this Collateral
          section.

          (d) All proceeds (including insurance proceeds) from the sale,
          destruction, loss, or other disposition of any of the property
          described in this Collateral section.

          (e) At records and data relating to any of the property described in
          this Collateral section, whether in the form of a writing, photograph,
          microfilm, microfiche, or electronic media, together with all of
          Grantor's right, title, and interest in and to all computer software
          required to utilize, create, maintain, and process any such records or
          data on electronic media.

     Event of Default. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "Events of Default".

     Grantor. The word "Grantor" means Fotoball USA, Inc., its successors and
     assigns

     Guarantor. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with the indebtedness.

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note, including all principal and interest, together with all other
     indebtedness and costs and expenses for which Grantor is responsible under
     this Agreement or under any of the Related Documents. In addition, the word
     "indebtedness" includes all other obligations, debts and liabilities, plus
     interest thereon, of Grantor, or any one or more of them, to lender, as
     well as all claims by Lender against Grantor, or any one or more of them,
     whether existing now or later; whether they are voluntary or involuntary,
     due or not due, direct or indirect, absolute or contingent, liquidated or
     unliquidated; whether Grantor may be liable individually or jointly with
     others; whether Grantor may be obligated as guarantor, surety,
     accommodation party or otherwise; whether recovery upon such indebtedness
     may be or hereafter may become barred by any statute of limitations; and
     whether such indebtedness may be or hereafter may become otherwise
     unenforceable.

     Lender. The word "Lender" means U.S. Bank National Association, its
     successors and assigns.

     Note. The word "Note" means the note or credit agreement dated July 15,
     2001, in the principal amount of $2,500,000.00 from Fotoball USA., Inc. to
     Lender, together with all renewals of, extensions of, modifications of,
     refinancing of, consolidations of and substitutions for the note or credit
     agreement.

     Related Documents. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the indebtedness.

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No 9056-125                                                          Page 2
================================================================================

RIGHT OF SETOFF. Grantor hereby grants Lender a contractual security interest in
and hereby assigns, conveys, delivers, pledges, and transfers all of Grantor's
right, title and interest in and to Grantor's accounts with Lender (whether
checking, savings, or some other account), including all accounts held jointly
with someone else and all accounts Grantor may open in the future, excluding,
however, all IRA and Keogh accounts, and all trust accounts for which the grant
of a security interest would be prohibited by law. Grantor authorizes Lender, to
the extent permitted by applicable law to charge or setoff all indebtedness
against any and all such accounts.

OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:

     Perfection of Security Interest. Grantor agrees to execute such financing
     statements and to take whatever other actions are reasonably requested by
     Lender to perfect and continue Lender's security interest in the
     Collateral. Upon request of Lender, Grantor will deliver to Lender any and
     all of the documents evidencing or constituting the Collateral, and Grantor
     will note Lender's interest upon any and all chattel paper if not delivered
     to Lender for possession by Lender. Grantor hereby appoints Lender as its
     irrevocable attorney-in-fact for the purpose of executing all documents
     necessary to perfect or to continue the security interest granted in this
     agreement. Lender may at any time, and without further authorization from
     Grantor, file a carbon, photographic or other reproduction of any financing
     statement or of this Agreement for use as a financing statement. Grantor
     will reimburse Lender for all reasonable expenses for the perfection and
     the continuation of the perfection of Lender's security interest in the
     Collateral. Grantor promptly will notify Lender before any change in
     Grantor's name including any change to the assumed business names of
     Grantor. This is a continuing Security Agreement and will continue in
     effect even though all or any part of the indebtedness is paid in full and
     even though for a period of time Grantor may not be indebted to Lender.

     No Violation. The execution and delivery of this Agreement will not violate
     any law or agreement governing Grantor or to which Grantor is a party, and
     its certificate or articles of incorporation and bylaws do not prohibit any
     term or condition of this Agreement.

     Enforceability of Collateral. To the extent the Collateral consists of
     accounts, chattel paper, or general intangibles, the collateral is
     enforceable in accordance with its terms, is genuine, and complies with
     applicable laws concerning form, content and manner of preparation and
     execution, and all persons appearing to be obligated on the Collateral have
     authority and capacity to contract and are in fact obligated as they appear
     to be on the Collateral. At the time any account becomes subject to a
     security interest in favor of Lender, the account shall be a good and valid
     account representing bona fide indebtedness incurred by the account debtor,
     for merchandise held subject to delivery instructions or theretofore
     shipped or delivered pursuant to a contract of sale, or for services
     theretofore performed by Grantor with or for the account debtor, there
     shall be no setoffs or counterclaims against any such accounts.

     Location of the Collateral. Grantor, upon request of Lender, will deliver
     to Lender in form satisfactory to Lender a schedule of real properties and
     Collateral locations relating to Grantor's operations, including without
     limitation the following: (a) all real property owned or being purchased by
     Grantor; (b) all real property being rented or leased by Grantor; (c) all
     storage facilities owned, rented, leased, or being used by Grantor, and (d)
     all other properties where Collateral is or may be located. Except in the
     ordinary course of its business, Grantor shall not remove the Collateral
     from its existing locations without the prior written consent of Lender.

     Removal of Collateral. Grantor shall keep the Collateral (or to the extent
     the Collateral consists of intangible property such as accounts, the
     records concerning the Collateral) at Grantor's address shown above, or at
     such other locations as are acceptable to Lender. Except in the ordinary
     course of its business, including the sales of inventory, Grantor shall not
     remove the Collateral from its existing locations without the prior written
     consent of Lender. To the extent that the Collateral consists of vehicles,
     or other titled property, Grantor shall not take or permit any action which
     would require application for certificates of title for the vehicles
     outside the State of California, without the prior written consent of
     Lender.

     Transactions Involving Collateral. Except for inventory sold or accounts
     collected in the ordinary course of Grantor's business. Grantor shall not
     sell, offer to sell, or otherwise transfer or dispose of the Collateral.
     While Grantor is not in default under this Agreement, Grantor may sell
     inventory, but only in the ordinary course of its business and only to
     buyers who qualify as a buyer in the ordinary course of business. A sale in
     the ordinary course of Grantor's business does not include a transfer in
     partial or total satisfaction of a debt or any bulk sale. Grantor shall not
     pledge, mortgage, encumber or otherwise permit the Collateral to be subject
     to any lien, security interest, encumbrance, or charge, other than the
     security interest provided for in this Agreement, without the prior written
     consent of Lender. This includes security interests even if junior in right
     to the security interests granted under this Agreement.

     Title. Grantor represents and warrants to Lender that it holds good and
     marketable title to the Collateral, free and clear of all liens and
     encumbrances except for the lien of this Agreement. No financing statement
     covering any of the Collateral is on file in any public office other than
     those which reflect the security interest created by this Agreement or to
     which Lender has specifically consented. Grantor shall defend Lender's
     rights in the Collateral against the claims and demands of all other
     persons.

     Collateral Schedules and Locations. As often as Lender shall require, and
     insofar as the Collateral consists of accounts and general intangibles,
     Grantor shall deliver to Lender schedules of such Collateral, including
     such information as Lender may require, including without limitation names
     and addresses of account debtors and agings of accounts and general
     intangibles. Insofar as the Collateral consists of inventory and equipment,
     Grantor shall deliver to Lender, as often as Lender shall require, such
     lists, descriptions, and designations of such Collateral as Lender may
     require to identify the nature, extent, and location of such Collateral.
     Such information shall be submitted for Grantor and each of its
     subsidiaries or related companies except as is reasonable in the context of
     Grantor's business.

     Maintenance and Inspection of Collateral. Grantor shall maintain all
     tangible Collateral in good condition and repair. Grantor will not commit
     or permit damage to or cause intentional destruction of the Collateral or
     any part of the Collateral except as is reasonable in the context of
     Grantor's business. Lender and its designated representatives and agents
     shall have the right at all reasonable times to examine, inspect, and audit
     the Collateral wherever located.

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)

07-15-2001
Loan No. 9056-125                                                         Page 3
================================================================================

     Taxes, Assessments and Liens. Grantor will pay when due all taxes,
     assessments and liens upon the Collateral, its use or operation, upon this
     Agreement, upon any promissory note or notes evidencing the indebtedness,
     or upon any of the other Related Documents. Grantor may withhold any such
     payment or may elect to contest any lien if Grantor is in good faith
     conducting an appropriate proceeding to contest the obligation to pay and
     so long as Lender's interest in the Collateral is not jeopardized in
     Lender's reasonable opinion. If the Collateral is subjected to a lien which
     is not discharged within fifteen (15) days, Grantor shall deposit with
     Lender cash, a sufficient corporate surety bond or other security
     satisfactory to Lender in an amount adequate to provide for the discharge
     of the lien plus any interest, costs, attorney's fees or other charges that
     could accrue as a result of foreclosure or sale of the Collateral. In any
     contest Grantor shall defend itself and Lender and shall satisfy any final
     adverse judgment before enforcement against the Collateral. Grantor shall
     name Lender as an additional obligee under any surety bond furnished in the
     contest proceedings.

     Compliance with Governmental Requirements. Grantor shall comply, in all
     material respects, promptly with all laws, ordinances, rules and
     regulations of all governmental authorities, now or hereafter in effect,
     applicable to the ownership, production, disposition, or use of the
     Collateral. Grantor may contest in good faith any such law, ordinance or
     regulation and withhold compliance during any proceeding, including
     appropriate appeals, so long as Lender's interest in the Collateral, in
     Lender's opinion, is not jeopardized.

     Hazardous Substances. Grantor represents and warrants that the Collateral
     never has been, and never will be so long as this Agreement remains a lien
     on the Collateral, used for the generation, manufacture, storage,
     transportation, treatment, disposal, release or threatened release of any
     hazardous waste or substance, as those terms are defined in the
     Comprehensive Environmental Response, Compensation, and Liability Act of
     1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
     Amendments and Reauthortzatlon Act of 1986, Pub. L. No. 99-499 ("SARA"),
     the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
     seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
     et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health
     and Safety Code, Section 25100, et seq., or other applicable state or
     Federal laws, rules, or regulations adopted pursuant to any of the
     foregoing. The terms "hazardous waste" and "hazardous substance" shall also
     include, without limitation, petroleum and petroleum by-products or any
     fraction thereof and asbestos. The representations and warranties contained
     herein are based on Grantor's due diligence in investigating the Collateral
     for hazardous wastes and substances.

     Grantor hereby (a) releases and waives any future claims against Lender for
     indemnity or contribution in the event Grantor becomes liable for cleanup
     or other costs under any such laws, and (b) agrees to indemnify and hold
     harmless Lender against any and all claims and losses resulting from a
     breach of this provision of this Agreement. This obligation to indemnity
     shall survive the payment of the indebtedness and the satisfaction of this
     Agreement.

     Maintenance of Casualty Insurance. Grantor shall procure and maintain all
     risks insurance, including without limitation fire, theft and liability
     coverage together with such other insurance as Lender may reasonably
     require with respect to the Collateral, in form, amounts, coverages and
     basis reasonably acceptable to Lender and issued by a company or companies
     reasonably acceptable to Lender. Grantor, upon request of Lender, will
     deliver to Lender from time to time the policies or certificates of
     insurance in form satisfactory to Lender. including stipulations that
     coverages will not be cancelled or diminished without at least ten (10)
     days' prior written notice to Lender and not including any disclaimer of
     the insurer's liability for failure to give such a notice. Each insurance
     policy also shall include an endorsement providing that coverage in favor
     of Lender will not be impaired in any way by any act, omission or default
     of Grantor or any other person. In connection with all policies covering
     assets in which Lender holds or is offered a security interest, Grantor
     will provide Lender with such loss payable or other endorsements as Lender
     may require, if Grantor at any time fails to obtain or maintain any
     insurance as required under this Agreement, Lender may (but shall not be
     obligated to) obtain such insurance as Lender deems appropriate, including
     if it so chooses "single interest insurance," which will cover only
     Lender's interest in the Collateral.

     Application of Insurance Proceeds. Grantor shall promptly notify Lender of
     any material loss or damage to the Collateral. Lender may make proof of
     loss if Grantor fails to do so within fifteen (15) days of the casualty.
     All proceeds or any insurance on the Collateral, including accrued proceeds
     thereon, shall be held by Lender as part of the Collateral. If Lender
     consents to repair or replacement of the damaged or destroyed Collateral,
     Lender shall, upon satisfactory proof of expenditure, pay or reimburse
     Grantor from the proceeds for the reasonable cost of repair or restoration.
     if Lender does not consent to repair or replacement of the Collateral,
     Lender shall retain a sufficient amount of the proceeds to pay all of the
     indebtedness, and shall pay the balance to Grantor. Any proceeds which have
     not been disbursed within six (6) months after their receipt and which
     Grantor has not committed to the repair or restoration of the Collateral
     shall be used to prepay the indebtedness.

     Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
     reports on each existing policy of insurance showing such information as
     Lender may reasonably request including the following: (a) the name of the
     insurer; (b) the risks insured; (c) the amount of the policy; (d) the
     property insured; (e) the then current value on the basis of which
     insurance has been obtained and the manner of determining that value; and
     (f) the expiration date of the policy. In addition, Grantor shall upon
     request by Lender (however not more often that annually) have an
     independent appraiser satisfactory to Lender determine, as applicable, the
     cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until the occurrence of
an Event of Default and except as otherwise provided below with respect to
accounts, Grantor may have possession of the tangible personal property and
beneficial use of all the Collateral and may use it in any lawful manner not
inconsistent with this agreement or the Related Documents, provided that
Grantor's right to possession and beneficial use shall not apply to any
Collateral where possession of the Collateral by Lender is required by law to
perfect Lender's security interest in such Collateral. Until otherwise notified
by Lender, Grantor may collect any of the Collateral consisting of accounts. At
any time that an Event of Default exists, Lender may exercise its rights to
collect the accounts and to notify

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)

07-15-2001                                                                PAGE 4
LOAN NO 9056-125
================================================================================

account debtors to make payments directly to Lender for application to the
indebtedness. If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral if Lender
takes such action for that purpose as Grantor shall request or as Lender, in
Lender's reasonable discretion, shall deem appropriate under the circumstances,
but failure to honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.

EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the dale of repayment by Grantor. All such
expenses shall become a part of the indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.

EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:

     Default on Indebtedness. Failure of Grantor to make any payment when due on
     the indebtedness.

     Other Defaults. Failure of Grantor to comply with or to perform any other
     material term, obligation, covenant or condition contained in this
     Agreement or in any of the Related Documents or in any other note, security
     agreement, lease agreement or lease schedule, loan agreement or other
     agreement, whether now existing or hereafter made, between Grantor and U.S.
     Bancorp or any direct or indirect subsidiary of U.S. Bancorp.

     Default in Favor of Third Parties. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans or perform their respective
     obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Grantor under this Agreement, the
     Note or the Related Documents is false or misleading in any material
     respect, either now or at the time made or furnished.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     documents to create a valid and perfected security interest or lien) at any
     time and for any reason.

     Insolvency. The dissolution or termination of Grantor's existence as a
     going business, the insolvency of Grantor, the appointment of a receiver
     for any part of Grantor's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Grantor.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help
     repossession or any other method, by any creditor of Grantor or by any
     governmental agency against the Collateral or any other collaters securing
     the indebtedness. This includes a garnishment of any of Grantor's deposit
     accounts with Lender.

     EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
     to any Guarantor of any of the indebtedness or such Guarantor dies or
     becomes incompetent.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

     Accelerate Indebtedness. Lender may declare the entire indebtedness,
     including any prepayment penalty which Grantor would be required to pay,
     immediately due and payable, without notice.

     Assemble Collateral. Lender may require Grantor to deliver to Lender all or
     any portion of the Collateral and any and all certificates of title and
     other documents relating to the Collateral. Lender may require Grantor to
     assemble the Collateral and make it available to Lender at a place to be
     designated by Lender. Lender also shall have full power to enter upon the
     property of Grantor to take possession of and remove the Collateral. If the
     Collateral contains other goods not covered by this Agreement at the time
     of repossession, Grantor agrees Lender may take such other goods, provided
     that Lender makes reasonable efforts to return them to Grantor after
     repossession.

     Sell the Collateral. Lender shall have full power to sell, lease, transfer,
     or otherwise deal with the Collateral or proceeds thereof in its own name
     or that of Grantor. Lender may sell the Collateral at public auction or
     private sale. Unless the Collateral threatens to decline speedily in value
     or is of a type customarily sold on a recognized market, Lender will give
     Grantor reasonable notice of the time after which any private sale or any
     other intended disposition of the Collateral is to be made. The
     requirements of reasonable notice shall be met if such notice is given at
     least ten (10) days, or such

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)

07-15-2001                                                                PAGE 5
LOAN NO 9056-125
================================================================================

     lesser time as required by state law, before the time of the sale or
     disposition. All reasonable expenses relating to the disposition of the
     Collateral, including without limitation the reasonable expenses of
     retaking, holding, insuring, preparing for sale and selling the Collateral,
     shall become a part of the indebtedness secured by this Agreement and shall
     be payable on demand, with interest at the Note rate from date of
     expenditure until repaid.

     Appoint Receiver. To the extent permitted by applicable law, Lender shall
     have the following rights and remedies regarding the appointment of a
     receiver: (a) Lender may have a receiver appointed as a matter of right,
     (b) the receiver may be an employee of Lender and may serve without bond,
     and (c) all fees of the receiver and his or her attorney shall become part
     of the indebtedness secured by this Agreement and shall be payable on
     demand, with interest at the Note rate from date of expenditure until
     repaid.

     Collect Revenues, Apply Accounts. Lender, either itself or through a
     receiver, may collect the payments, rents, income, and revenues from the
     Collateral. Lender may at any time in its discretion transfer any
     Collateral into its own name or that of its nominee and receive the
     payments, rents, income, and revenues therefrom and hold the same as
     security for the indebtedness or apply it to payment of the indebtedness in
     such order of preference as Lender may determine. Insofar as the Collateral
     consists of accounts, general intangibles, insurance policies, instruments,
     chattel paper, choses in action, or similar property, Lender may demand,
     collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
     realize on the Collateral as Lender may determine, whether or not
     indebtedness or Collateral is then due. For these purposes, Lender may, on
     behalf of and in the name of Grantor, receive, open and dispose of mail
     addressed to Grantor; change any address to which mail and payments are to
     be sent; and endorse notes, checks, drafts, money orders, documents of
     title, instruments and items pertaining to payment, shipment, or storage of
     any Collateral. To facilitate collection, Lender may notify account debtors
     and obligors on any Collateral to make payments directly to Lender.

     Obtain Deficiency. If Lender chooses to sell any or all of the Collateral.
     Lender may obtain a judgment against Grantor for any deficiency remaining
     on the indebtedness due to Lender after application of all amounts received
     from the exercise of the rights provided in this Agreement. Grantor shall
     be liable for a deficiency even if the transaction described in this
     subsection is a sale of accounts or chattel paper.

     Other Rights and Remedies. Lender shall have all the rights and remedies of
     a secured creditor under the provisions of the Uniform Commercial Code, as
     may be amended from time to time. In addition, Lender shall have and may
     exercise any or all other rights and remedies it may have available at law,
     in equity, or otherwise.

     Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
     by this Agreement or the Related Documents or by any other writing, shall
     be cumulative and may be exercised singularly or concurrently. Election by
     Lender to pursue any remedy shall not exclude pursuit of any other remedy,
     and an election to make expenditures or to take action to perform an
     obligation of Grantor under this Agreement, after Grantor's failure to
     perform, shall not affect Lender's right to declare a default and to
     exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     Applicable Law. This Agreement has been delivered to Lender and accepted by
     Lender in the State of California. If there is a lawsuit, Grantor agrees
     upon Lender's request to submit to the jurisdiction of the courts of
     Sacramento County, the State of California. Lender and Grantor hereby waive
     the right to any jury trial in any action, proceeding, or counterclaim
     brought by either Lender or Grantor against the other. This Agreement shall
     be governed by and construed in accordance with the laws of the State of
     California.

     Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lenders
     reasonable costs and expenses, including reasonable attorneys' fees and
     Lender's reasonable legal expenses, incurred in connection with the
     enforcement of this Agreement. Lender may pay someone else to help enforce
     this Agreement, and Grantor shall pay the reasonable costs and expenses of
     such enforcement. Costs and expenses include Lender's reasonable attorneys'
     fees and reasonable legal expenses whether or not there is a lawsuit,
     including attorneys' fees and legal expenses for bankruptcy proceedings
     (and including efforts to modify or vacate any automatic stay or
     injunction), appeals, end any anticipated post-judgment collection
     services. Grantor also shall pay all court costs and such additional fees
     as may be directed by the court.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Multiple Parties; Corporate Authority. All obligations of Grantor under
     this Agreement shall be joint and several, and all references to Grantor
     shall mean each and every Grantor. This means that each of the persons
     signing below is responsible for all obligations in this Agreement.

     Notices. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given at the address shown above. Any party may change
     its address for notices under this Agreement by giving formal written
     notice to the other parties, specifying that the purpose of the notice is
     to change

<PAGE>

                          COMMERCIAL SECURITY AGREEMENT
                                   (CONTINUED)

07-15-2001                                                                PAGE 6
LOAN NO 9056-125
================================================================================

     the party's address. To the extent permitted by applicable law, if there is
     more than one Grantor, notice to any Grantor will constitute notice to all
     Grantors. For notice purposes, Grantor will keep Lender informed at an
     times of Grantor current address(es).

     Power of Attorney. Grantor hereby appoints Lender effective upon the
     occurrence of an Event of Default as its true and lawful attorney-in-fact,
     irrevocably, with full power of substitution to do the followIng: (a) to
     demand, collect, receive, receipt for, sue and recover all sums of money or
     other property which may now or hereafter become due, owing or payable from
     the Collateral; (b) to execute, sign and endorse any and all claims,
     instruments, receipts, checks, drafts or warrants issued in payment for the
     Collateral; (c) to settle or compromise any and all claims arising under
     the Collateral, and, in the place and stead of Grantor, to execute and
     deliver its release and settlement for the claim; and (d) to file any claim
     or claims or to take any action or institute or take part in any
     proceedings, either in its own name or in the name of Grantor, or
     otherwise, which in the discretion of Lender may seem to be necessary or
     advisable. This power is given as security for the indebtedness, and the
     authority hereby conferred is and shall be irrevocable and shall remain in
     full force and effect until renounced by Lender.

     Preference Payments. Any monies Lender pays because of an asserted
     preference claim in Borrower's bankruptcy will become a part of the
     indebtedness and, all Lender's option, shall be payable by Borrower as
     provided above in the "EXPEDITURES BY LENDER" paragraph.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity, however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     Successor Interests. Subject to the limitations set forth above on transfer
     of the Collateral, this Agreement shall be binding upon and inure to the
     benefit of the parties, their successors and assigns.

     Waiver. Lender shall not be deemed to have waived any rights under this
     Agreement unless such waiver is given in writing and signed by Lender. No
     delay or omission on the part of Lender in exercising any right shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement. No prior waiver by Lender, nor any
     course of dealing between Lender and Grantor, shall constitute a waiver of
     any of Lender's rights or of any of Grantor's obligations as to any future
     transactions. Whenever the consent of Lender is required under this
     Agreement, the granting of such consent by Lender in any instance shall not
     constitute continuing consent to subsequent instances where such consent is
     required and in all cases such consent may be granted or withheld in the
     sole discretion of Lender.

     Waiver of Co-obligator's Rights. If more than one person is obligated for
     the indebtedness, Borrower irrevocably waives, disclaims and relinquishes
     all claims against such other person which Borrower has or would otherwise
     have by virtue of payment of the indebtedness or any part thereof,
     specifically including but not limited to all rights of indemnity,
     contribution or exoneration.

ADDENDUM TO COMMERCIAL SECURITY AGREEMENT. An exhibit, titled "ADDENDUM TO
COMMERCIAL SECURITY AGREEMENT," is attached to this Agreement and by this
reference is made a part of this Agreement just as if all the provisions, terms
and conditions of the Exhibit had been fully set forth in this Agreement.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT DATED JULY 1 5, 2001.

GRANTOR:
Fotoball USA, Inc.



By: /s/ Michael Favish
    --------------------------------------------------
    Michael Favish, Chairman/Chief Executive Officer

<PAGE>

                    ADDENDUM TO COMMERCIAL SECURITY AGREEMENT

================================================================================

BORROWER:  FOTOBALL USA, INC.            LENDER:  U.S. BANK NATIONAL ASSOCIATION
           6740 COBRA WAY                         KEARNY MESA BUSINESS BANKING
           SAN DIEGO, CA 92121                    9005 COMPLEX DRIVE
                                                  SAN DIEGO, CA 92123
================================================================================

This ADDENDUM TO COMMERCIAL SECURITY AGREEMENT is attached to and by this
reference is made a part of each Security Agreement, dated July 15, 2001, and
executed in connection with a loan or other financial accommodations between
U.S. Bank National Association and Fotoball USA, Inc.

THIS ADDENDUM TO COMMERCIAL SECURITY AGREEMENT is attached to and made a part of
the certain Commercial Security Agreement dated July 15, 2001 (the "Security
Agreement") between Fotoball USA, Inc. (the "Grantor") and U.S. Bank National
Association, a national banking association (the "Lender"). Capitalized terms
used in this Addendum and not defined herein but defined in the Security
Agreement shall have the meanings ascribed to such terms under the Security
Agreement.

For valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Grantor and the Lender agree as follows with respect to the
Security Agreement, notwithstanding any language to the contrary contained in
the Security Agreement:

1. References in the Security Agreement to the term "Uniform Commercial Code"
shall be deemed to refer to Revised Article 9 of the Uniform Commercial Code, as
adopted in the State whose laws govern the Security Agreement, or, if Revised
Article 9 has not been so adopted, as promulgated by the National Commissioners
on Uniform State Laws.

2. Grantor agrees that Lender may file financing statements containing a
description of the Collateral broader than that set forth in the Security
Agreement. Grantor also agrees to execute and cooperate with Lender in obtaining
from third parties control agreements in form satisfactory to Lender with
respect to Collateral consisting of, or including, investment property, deposit
accounts, letter-of-credlt rights, and electronic chattel paper. If any
Collateral is in the possession of a bailee, Grantor will join with Lender in
notifying the bailee of Lender's interest and in obtaining from the bailee an
acknowledgment that the bailee holds the Collateral for Lender's benefit.

3. Grantor represents that the information set forth in the Security Agreement
with respect to Grantor's name, location and organizational structure is
correct. Grantor will not change its name, its location, its jurisdiction of
organization, or its organizational structure without giving Lender at least
thirty (30) days' prior written notice and will periodically provide Lender with
evidence that no change has occurred.

4. To the extent that Grantor uses any amounts loaned to purchase Collateral,
Grantor's repayment of the loan amounts shall apply on a "first-in-first-out"
basis so that the portion of the loan amounts used to purchase a particular item
of Collateral shall be paid in the chronological order in which the Grantor
purchased the Collateral.

5. To the extent that Collateral includes chattel paper, at the time Grantor
creates any chattel paper, Grantor shall place a legend on the chattel paper
indicating that Lender has a security interest in the chattel paper.

6. Grantor will not license any Collateral.

7. Lender's rights described in the paragraph of the Security Agreement titled
"Grantor's Right to Possession and to Collect Accounts" apply to Collateral
consisting of accounts and/or any other rights to payment.

8. In addition to the events described in the "Events of Default" section of the
Security Agreement, it shall also constitute an Event of Default under the
Security Agreement if Lender receives at any time following execution of the
Security Agreement any information indicating that Lender's security interest is
not prior to all other security interests or other interests in the Collateral,
except as otherwise agreed by Lender.

9. In addition to the Lender's rights and remedies as described in the section
of the Security Agreement headed "Sell the Collateral," if an Event of Default
occurs under the Security Agreement Lender may dispose of any of the Collateral
at public auction or private sale in its then present condition or following
such preparation and processing as Lender deems commercially reasonable. Lender
has no duty to prepare or process the Collateral prior to sale. Lender may
disclaim warranties of title, possession, quiet enjoyment and the like. Such
actions by Lender shall not affect the commercial reasonableness of the sale.
Further, Lender may comply with any applicable state or federal law requirements
in connection with a disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness of any sale of the
Collateral.

10. To the extent that the Collateral listed in the Security Agreement includes
general intangibles, it also includes without limitation all software and
payment intangibles; to the extent such Collateral includes accounts, it also
includes without limitation all health-care insurance receivables; in the event
such Collateral includes inventory, chattel paper, accounts, equipment and
general intangibles, it also includes without limitation all of the property
described above in this paragraph plus all instruments, deposit accounts, letter
of credit rights, investment property, money, documents, as-extracted collateral
and fixtures. In any event, the Collateral listed in the Security Agreement
includes all supporting obligations as to any such Collateral and all products
of such collateral.

In the event of any direct conflict between the terms of the Security Agreement
and this Addendum, the terms of this Addendum shall control. If the term
"Borrower" is used in the signature line below, the Grantor and the person or
entity listed under the term "Borrower" are the same person or entity.

THIS ADDENDUM TO COMMERCIAL SECURITY AGREEMENT IS EXECUTED ON JULY I5, 2001.

BORROWER:
Fotoball USA, Inc.


By: /s/ Michael Favish
    ------------------------------------------------------
    Michael Favish, Chairman/Chief Executive Officer


LENDER:

U.S. Bank National Association

By: /s/ Darla Clark
    ------------------------------------------------------
    Authorized Officer


<PAGE>


                             Rider to Loan Agreement
                              and related documents
                                 by and between
                         U.S. Bank National Association
                                   ("Lender")
                                       and
                               Fotoball USA, Inc.
                                  ("Borrower")
                           Dated: As of July 15, 2001

1.        Rider. This Rider is being executed at the same time as the following
documents and such other documents as Lender may require of even date herewith
by and between Lender and Borrower:

     i.   Disbursement Request and Authorization.
     ii.  Corporate Resolution to Borrow.
     iii. Loan Agreement.
     iv.  Promissory Note (the "Note").
     v.   Commercial Security Agreement and Addendum thereto (the "Security
          Agreement").
     vi.  Agreement to Provide Insurance.

2.        Letters of Credit.

          2.1 Definitions. The following definitions are inserted into the
section of the Loan Agreement entitled DEFINITIONS as if fully set forth
therein:

                    LETTERS OF CREDIT. The words "Letters of Credit" shall have
          the meaning set forth in the section below entitled LETTERS OF CREDIT
          SUBLIMIT.

                    LETTER OF CREDIT AGREEMENTS. The words "Letter of Credit
          Agreements" shall have the meaning set forth in the section below
          entitled LETTERS OF CREDIT SUBLIMIT.

                    LETTER OF CREDIT OBLIGATIONS. The words "Letter of Credit
          Obligations" shall mean the aggregate amount of all possible drawings
          under all Letters of Credit plus all amounts drawn under any Letter of
          Credit and not reimbursed by the Borrower under the applicable Letter
          of Credit Agreement.

          2.2 Calculation of the Line of Credit. The first sentence of the
          section of the Loan Agreement entitled LINE OF CREDIT is hereby
          amended and restated in its entirety as follows:

          Lender agrees to make Advances to Borrower from time to time from the
          date of this Agreement to the Expiration Date, provided the aggregate
          amount of such Advances outstanding at any time does not exceed the
          sum of (a) the Borrowing Base and (b) the total amount of Letters of
          Credit issued and outstanding.

          2.3 Letters of Credit Sublimit. The following additional sections
entitled LETTERS OF CREDIT SUBLIMIT
and LETTERS OF CREDIT CASH COLLATERAL are hereby added to page 3 of the Loan
Agreement, immediately preceding the section entitled COLLATERAL:

          LETTERS OF CREDIT SUBLIMIT. Lender shall issue letters of credit
          (individually, a "Letter of Credit" and collectively, "Letters of
          Credit") upon application of the Borrower, subject to (a) compliance
          by the Borrower with all conditions precedent set forth in the section
          entitled CONDITIONS PRECEDENT TO EACH ADVANCE hereof, (b) entry by the
          Borrower into applications, agreements (including, without limitation,
          reimbursement agreements) and other documents deemed appropriate by
          Lender for the issuance of such Letters of Credit, (c) payment by the
          Borrower of commissions, fees and interest as agreed upon between
          Borrower and Lender with respect to each such Letter of Credit, and,
          if required by Lender, the pledging of immediately available funds or
          similar cash collateral in the amount of each such Letter of Credit
          with such cash collateral to be held in a cash collateral account as
          security for Borrower's Letter of Credit Obligations with respect to
          each such Letter of Credit, (d) satisfaction of Lender with the form,
          substance and beneficiary of each such Letter of Credit, and (e) the

<PAGE>

          absence of any statutory or regulatory change or directive affecting
          the issuance by Lender of letters of credit. All Letters of Credit
          shall expire no later than one year after the issuance thereof. If any
          Letter of Credit shall be outstanding after the Expiration Date, the
          Borrower shall deliver cash collateral in the face amount of such
          Letter of Credit, to be held subject to the section entitled LETTERS
          OF CREDIT CASH COLLATERAL hereof. The aggregate face amount of all
          Letters of Credit shall not exceed $1,500,000, and the total of the
          aggregate face amount of all Letters of Credit plus the Loans shall
          not exceed the Borrowing Base.

          LETTERS OF CREDIT CASH COLLATERAL. In addition to the other remedies
          provided in this Agreement, if any other Event of Default shall have
          occurred and Lender shall have declared the principal balance of the
          Loans due and payable, Borrower shall pay to Lender an amount equal to
          all Letter of Credit Obligations (to the extent Borrower has not
          already done so pursuant to subsection (c) of the section above
          entitled LETTERS OF CREDIT SUBLIMIT). Such payment shall be in
          immediately available funds or in similar cash collateral acceptable
          to Lender and shall be pledged to Lender. Such amount shall be held by
          Lender in a cash collateral account until the outstanding Letters of
          Credit are terminated without payment or are paid and Letter of Credit
          Obligations with respect thereto are payable. In the event Borrower
          defaults in the payment of any Letter of Credit Obligations, the
          proceeds of the cash collateral account shall be applied to the
          payment thereof. Borrower acknowledges and agrees that Lender would
          not have an adequate remedy at law for failure by Borrower to pay
          immediately to Lender the amount provided under this section, and that
          Lender shall have the right to require Borrower to perform
          specifically such undertaking whether or not any of the Letter of
          Credit Obligations are due and payable. Upon the failure of Borrower
          to make any payment required under this section, Lender may proceed to
          use all remedies available at law or equity to enforce the obligation
          of Lender to pay or reimburse the Bank. The balance of any payment due
          under this section shall bear interest payable on demand until paid in
          full at a per annum rate equal to the Prime Rate, as announced by
          Lender from time to time, plus 2.00%.

3.        Right to Cure.

          3.1 Loan Agreement Insert. The following section is added to the Loan
Agreement (on page 7 following the INSECURITY subsection of the EVENTS OF
DEFAULT section) as if fully set forth therein:

          RIGHT TO CURE. Notwithstanding any contrary provision of this
          Agreement or of any agreement or document related hereto, an Event of
          Default shall have occurred under this Agreement as the result of a
          breach by Borrower of the covenants in the subsections of the
          Agreement entitled FINANCIAL STATEMENTS, ADDITIONAL INFORMATION,
          FINANCIAL COVENANTS AND RATIOS, INSURANCE REPORTS AND INSPECTION (all
          of which subsections are within the section entitled AFFIRMATIVE
          COVENANTS) or the covenants in the section of the Agreement entitled
          BORROWER'S SUBMISSION OF TAX RETURNS or the covenants in the
          subsection of the Security Agreement of even date herewith by and
          between Borrower and Lender (the "Security Agreement") entitled
          INSURANCE REPORTS (which subsection is within the section of the
          Security Agreement entitled OBLIGATIONS OF GRANTOR) if and only if:

     (i)
          Lender has provided written notice of such breach to Borrower
          demanding cure of such breach and Borrower has not cured such breach
          within fifteen (15) days (the "Cure Period") after Lender's giving of
          such notice; provided, however, that in the event that such breach is
          not capable of being cured (as determined by Lender in its sole
          discretion) within the Cure Period, then Borrower shall have such
          longer period of time as Borrower reasonably requires to cure such
          breach so long as Borrower commences cure within the Cure Period and
          thereafter diligently pursues cure to completion; and provided,
          further, that such longer period of time shall in no event exceed
          thirty (30) days.

     OR

     (ii) Borrower has been in breach of such term, obligation, covenant or
          condition at another time during the preceding twelve (12) months and
          Lender has within a reasonable period of time following its receiving
          notice of such earlier breach provided written notice of such breach
          to Borrower.

<PAGE>

          BORROWER SHALL NOT BE ELIGIBLE TO RECEIVE ADVANCES FOLLOWING ANY EVENT
          OF DEFAULT OR THE BREACH BY BORROWER OF A TERM, OBLIGATION, COVENANT
          OR CONDITION, OR THE OCCURRENCE OF ANY EVENT, WHICH BREACH OR
          OCCURRENCE WOULD BECOME AN EVENT OF DEFAULT UPON THE GIVING OF NOTICE,
          PASSAGE OF TIME, FAILURE TO CURE, OR ANY OR ALL OF THEM, UNTIL SUCH
          TIME AS SUCH BREACH OR OCCURRENCE IS CURED WITHIN THE TIME PERIODS AND
          OTHERWISE IN ACCORDANCE WITH THE TERMS AND CONDITIONS HEREOF.

          3.2 Security Agreement Insert. The following section is added to the
Security Agreement (on page 4 following the INSECURITY subsection of the EVENTS
OF DEFAULT section) as if fully set forth therein:

          RIGHT TO CURE. Notwithstanding any contrary provision of this
          Agreement or of any agreement or document related hereto, an Event of
          Default shall have occurred under this Agreement as the result of a
          breach by Grantor of the covenants in the subsections of the Loan
          Agreement of even date herewith (the "Loan Agreement") by and between
          Grantor and Lender entitled FINANCIAL STATEMENTS, ADDITIONAL
          INFORMATION, FINANCIAL COVENANTS AND RATIOS, INSURANCE REPORTS AND
          INSPECTION (all of which subsections are within the section of the
          Loan Agreement entitled AFFIRMATIVE COVENANTS), or the covenants in
          the section of the Loan Agreement entitled BORROWER'S SUBMISSION OF
          TAX RETURNS, or the covenants in the subsection of this Agreement
          entitled INSURANCE REPORTS (which subsection is within the section
          entitled OBLIGATIONS OF GRANTOR) if and only if:

          (i)       Lender has provided written notice of such breach to
                    Borrower demanding cure of such breach and Borrower has not
                    cured such breach within fifteen (15) days (the "Cure
                    Period") after Lender's giving of such notice; provided,
                    however, that in the event that such breach is not capable
                    of being cured (as determined by Lender in its sole
                    discretion) within the Cure Period, then Borrower shall have
                    such longer period of time as Borrower reasonably requires
                    to cure such breach so long as Borrower commences cure
                    within the Cure Period and thereafter diligently pursues
                    cure to completion; and provided, further, that such longer
                    period of time shall in no event exceed thirty (30) days.

          OR

          (ii)      Borrower has been in breach of such term, obligation,
                    covenant or condition at another time during the preceding
                    twelve (12) months and Lender has within a reasonable period
                    of time following its receiving notice of such earlier
                    breach provided written notice of such breach to Borrower.

          BORROWER SHALL NOT BE ELIGIBLE TO RECEIVE ADVANCES FOLLOWING ANY EVENT
          OF DEFAULT OR THE BREACH BY BORROWER OF A TERM, OBLIGATION, COVENANT
          OR CONDITION, OR THE OCCURRENCE OF ANY EVENT, WHICH BREACH OR
          OCCURRENCE WOULD BECOME AN EVENT OF DEFAULTUPON THE GIVING OF NOTICE,
          PASSAGE OF TIME, FAILURE TO CURE, OR ANY OR ALL OF THEM, UNTIL SUCH
          TIME AS SUCH BREACH OR OCCURRENCE IS CURED WITHIN THE TIME PERIODS AND
          OTHERWISE IN ACCORDANCE WITH THE TERMS AND CONDITIONS HEREOF.

          3.3 Note Insert. The following section is added to the Note (on page 1
following the DEFAULT section) as if fully set forth therein:

          RIGHT TO CURE. Notwithstanding any contrary provision of this Note or
          of any agreement or document related hereto, Borrower shall be in
          default hereunder as the result of a breach by Borrower of the
          covenants in the subsections of the Loan Agreement of even date
          herewith (the "Loan Agreement") by and between Grantor and Lender
          entitled FINANCIAL STATEMENTS, ADDITIONAL INFORMATION, FINANCIAL
          COVENANTS AND RATIOS, INSURANCE REPORTS AND INSPECTION (all of which
          subsections are within the section of the Loan Agreement entitled
          AFFIRMATIVE COVENANTS), or the covenants in the section of the Loan
          Agreement entitled BORROWER'S SUBMISSION OF TAX RETURNS, or the
          covenants in the subsection of the Security Agreement of even date
          herewith by and between Borrower and Lender (the "Security Agreement')
          entitled INSURANCE REPORTS (which subsection is within the section of
          the Security Agreement entitled OBLIGATIONS OF GRANTOR) if and only
          if:

          (i)       Lender has provided written notice of such breach to
                    Borrower demanding cure of such breach and Borrower has not

<PAGE>

                    cured such breach within fifteen (15) days (the "Cure
                    Period") after Lender's giving of such notice; provided,
                    however, that in the event that such breach is not capable
                    of being cured (as determined by Lender in its sole
                    discretion) within the Cure Period, then Borrower shall have
                    such longer period of time as Borrower reasonably requires
                    to cure such breach so long as Borrower commences cure
                    within the Cure Period and thereafter diligently pursues
                    cure to completion; and provided, further, that such longer
                    period of time shall in no event exceed thirty (30) days.

OR

          (ii)      Borrower has been in breach of such term, obligation,
                    covenant or condition at another time during the preceding

         twelve (12) months and Lender has within a reasonable period of time
         following its receiving notice of such earlier breach provided written
         notice of such breach to Borrower.

          BORROWER SHALL NOT BE ELIGIBLE TO RECEIVE ADVANCES FOLLOWING A DEFAULT
          OR THE BREACH BY BORROWER OF A TERM, OBLIGATION, COVENANT OR
          CONDITION, OR THE OCCURRENCE OF ANY EVENT, WHICH BREACH OR OCCURRENCE
          WOULD BECOME A DEFAULT UPON THE GIVING OF NOTICE, PASSAGE OF TIME,
          FAILURE TO CURE, OR ANY OR ALL OF THEM, UNTIL SUCH TIME AS SUCH BREACH
          OR OCCURRENCE IS CURED WITHIN THE TIME PERIODS AND OTHERWISE IN
          ACCORDANCE WITH THE TERMS AND CONDITIONS HEREOF.

4.        Eligible Accounts. The following language is inserted into the Loan
Agreement at the end of clause (I) (on page 2) of the subsection entitled
ELIGIBLE ACCOUNTS in the section entitled DEFINITIONS as if fully set forth
therein:

          or quick service restaurant chain. Notwithstanding the provisions of
          this clause (I), Lender will review and consider, in its reasonable
          discretion, including in Eligible Accounts that portion of an Account
          that exceeds 10% of all Borrower's Accounts in cases where an
          advertising agency is the Account Debtor of such Account and the
          products and services provided by Borrower are being passed through
          such advertising agency to one or more of such advertising agency's
          clients, provided that the portions of such Account attributable to
          such clients of such advertising agency do not exceed the levels that
          would apply hereunder to such clients if such clients were themselves
          the Account Debtor.

THIS RIDER HAS BEEN EXECUTED BY BORROWER AND LENDER AS OF THE 15TH DAY OF JULY,
2001.

BORROWER:

FOTOBALL USA INC.

BY:  /s/ Michael Favish
     -------------------------------------------
     MICHAEL FAVISH, CHAIRMAN AND
     CHIEF EXECUTIVE OFFICER

LENDER:

U.S. BANK NATIONAL ASSOCIATION

BY:  /s/ Darla Clark
     -------------------------------------------
     DARLA CLARK, SR. VICE PRESIDENT
     AND MANAGER