February 26, 1998


Mr. Michael Favish, President
Mr. David Forster, EVP/CFO
Fotoball U.S.A., Inc.
3738 Ruffin Road
San Diego, CA 92123

RE: Loan #11620 and Financial Covenant

Gentlemen:

Scripps Bank hereby waives the Fotoball U.S.A., Inc. minimum net worth
covenant of $6,700,000 for December 31, 1997 in regards to the $2,000,000
line of credit.


Sincerely,

/s/ Rick Roe
---------------------------
Rick Poe
First Vice President
Corporate Lending Department

                               CHANGE IN TERMS AGREEMENT

Borrower:  FOTOBALL USA, INC.                LENDER:  SCRIPPS BANK
           3738 Ruffin Road                           Corporate Lending
           San Diego, CA 92123                        San Diego, CA 92123

Principal Amount: $1,500,000.00           Date of Agreement: February 19, 1998

DESCRIPTION OF EXISTING INDEBTEDNESS.
AS EVIDENCED BY:
PROMISSORY NOTE DATED DECEMBER 20, 1995 IN THE AMOUNT OF $1,000,000.00.
PROMISSORY NOTE DATED NOVEMBER 13, 1996 IN THE AMOUNT OF $2,000,000.00.


DESCRIPTION OF COLLATERAL.
AS DESCRIBED IN:
COMMERICAL SECURITY AGREEMENT DATED DECEMBER 20, 1995.

DESCRIPTION OF CHANGE IN TERMS.
NEW LOAN AGREEMENT DATED FEBRUARY 19, 1998 SUPERCEDES ALL PRIOR LOAN
AGREEMENTS.
LINE OF CREDIT IS DECREASED TO $1,500,000.00
INTEREST RATE HAS CHANGED TO WALL STREET JOURNAL PRIME PLUS 1.0%.
EXTEND THE MATURITY DATE TO OCTOBER 15, 1998.


CONTINUING VALIDITY. Except as expressly changed by this Agreement, the
terms of the original obligation or obligations, including all agreements
evidenced or securing the obligation(s), remain unchanged and in full
force and effect. Consent by Lender to this Agreement does not waive
Lender's right to strict performance of the obligation(s) as changed, nor
obligate Lender to make any future change in terms. Nothing in this
Agreement will constitute a satisfaction of the obligation(s). It is the
intention of Lender to retain as liable parties all makers and endorsers
of the original obligation(s), including accommodation parties, unless a
party is expressly released by Lender in writing. Any maker or endorser,
including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign
this Agreement below, then all persons signing below acknowledge that
this Agreement is given conditionally, based on the representation to
Lender that the non-signing party consents to the changes and provisions
of this Agreement or otherwise will not be released by it. This waiver
applies not only to any initial extension, modification or release, but
also to all such subsequent actions.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT.  BORROWER AGREES TO THE TERMS OF THE AGREEMENT
AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.

BORROWER: FOTOBALL U.S.A. INC.

By: /s/ DAVID G. FORSTER
    --------------------------------------------------------
    DAVID G. FORSTER, Vice President/Chief Finanical Officer


                         DISBURSEMENT REQUEST AND AUTHORIZATION

Borrower:     FOTOBALL U.S.A., INC.         Lender:    Scripps Bank
              3738 RUFFIN ROAD                         Corporate Lending
              SAN DIEGO, CA 92123                      9005 Complex Drive
                                                       San Diego, CA 92123



LOAN TYPE. This is a Variable Rate (1.000% over Wall Streel Journal Prime Rate
as published in the Money Rates section. When a range of rate is shown, the
higher rate will be used., making an initial rate of 9.500%), Revolving Line
or Credit Loan to a Corporation for S1,500,000.00 due on October 15, 1998.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

        [ ] Personal, family, or Household Purposes or Personal Investment.
        [X] Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: EXTEND LINE OF CREDIT
AND REDUCE AMOUNT TO $1,500,000.00. INTEREST RATE HAS CHANGED TO WALL STREET
JOURNAL PRIME PLUS 1%.

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 $1,500.000.00 as follows:

        Undisbursed Funds:                       $1,500,000.00
                                                 -------------
        Note Principal:                          $1,500,000.00

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

        Prepaid Finance Charges Paid In Cash:   $2000.00
             $2,000.00 DOCUMENT FEE
                                                 $  20.00
        Other Charges Paid in Cash:
             $20.00 UCC SEARCH                   --------

        Total Charges Paid In Cash:              $2020.00

LOAN ADVANCE AGREEMENT CONDITION. UNDISBURSED FUNDS TO BE DISBURSED PER
REQUEST AGREEMENT.

FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS 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 FEBRUARY 19, 1998.

BORROWER:
FOTOBALL U.S.A., INC.

By: /s/ DAVID G. FORSTER
    --------------------------------------------------------
    DAVID G. FORSTER, Vice President/Chief Finanical Officer


                                LOAN AGREEMENT

Borrower: FOTOBALL U.S.A. INC.           Lender:      Scripps Bank
          3738 RUFFIN ROAD                            Corporate Lending
          SAN DIEGO, CA 92123                         9005 Complex Drive
                                                      San Diego, CA 92123

THIS LOAN AGREEMENT between FOTOBALL U.S.A. INC. ("Borrower") and Scripps
Bank ("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 February 19, 1998, and
shall continue thereafter until all Indebtedness of Borrower to Lender
has 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 U.S.A. INC.. The word
"Borrower" also includes, as applicable, all subsidiaries and
affiliates of Borrower as provided below in the paragraph titled
"Subsidiaries and Affiliates."

Borrowing Base. The words "Borrowing Base" mean BORROWING BASE
CERTIFICATE/COLLATERAL SCHEDULE.

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.

(d) 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.

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

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

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

(h) 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 receiver 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.

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

(j) Accounts which have not been paid in full within 90 DAYS
from the invoice date.

(k) MINUS ALL CONTRA, FOREIGN AND DIRECT FEDERAL GOVERNMENT AGENCY ACCOUNTS.
ALSO LESS ALL ACCOUNTS RECEIVABLE OF ANY ACCOUNT WHEN 20% OR MORE
OF THE ENTIRE BALANCE OWNING IS AGED 90 DAYS OR MORE.

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
limitation 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 Scripps Bank, 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.

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, lease 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
Reauthorization 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 request.

(c) The security interests in the Collateral shall have been
duly 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, Inventory, books,
records, and operations, and Lender shall be 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.

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 or oral 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, 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
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 require, including
without limitation information concerning Eligible Accounts and
Account balances and agings.

Collateral Schedules. Concurrently with the execution and delivery
of this Agreement, and Elibible Accounts, in form and substance
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 the Accounts as Lender may request.

Representations and Warranties Concerning Accounts. With respect to
the Accounts, Borrower represents 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.

Notification Basis. Borrower agrees and understands that this Loan
shall be on a notification basis pursuant to which Lender shall
directly collect and receive all proceeds and payments from the
Accounts in which Lender has a security interest. In order to
facilitate the foregoing, Borrower agrees to deliver to Lender,
upon demand, any and all of Borrower's records, ledger sheets,
payment cards, and other documentation, in the form requested by
Lender, with regard to the Accounts. Borrower further agrees that
Lender shall have the right to notify each Account Debtor, pay such
proceeds and payments directly to Lender, and to do any and all
other things as Lender may deem to be necessary and appropriate,
within its sole discretion, to carry out the terms and intent of
this Agreement. Lender shall have the further right, where
appropriate and within Lender's sole discretion, to file suit,
either in its own name or in the name of Borrower, to collect any
and all such Accounts. Borrower further agrees that Lender may take
such other actions, either in Borrower's name or Lender's name, as
Lender may deem appropriate within its sole judgment, with regard
to collection and payment of the Accounts, without affecting the
liability of Borrower under this Agreement or on the Indebtedness.

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 full 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.

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.

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 occurring prior to
Borrower's ownership or Interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, 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 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 may materially adversely affect Borrower's financial
condition or properties, other than litigation, claims, or other events,
if any, that have been 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 complies 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.

Investment Company Act. Borrower is not an "investment company" or a
company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.

Public Utility Holding Company Act. Borrower is not a "holding company",
or a "subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

Regulations G, T and U. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations G, T and U of the Board of Governors of the Federal Reserve
System).

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 3738 RUFFIN ROAD, SAN DIEGO, CA 92123. 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.

Claims and Defenses. There are no defenses or counterclaims, offsets or
other adverse claims, demands or actions of any kind, personal or
otherwise, that Borrower, Grantor, or any Guarantor could assert with
respect to the Note, Loan, Indebtedness, this Agreement, or the Related
Documents.

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:

Litigation. 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 (40) days after the end of the
month, 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
accetable to Lender.  All financial reports required to be provided under
this Agreement shall be prepared in accordance with generally accepted
accounting prnciples, apllied 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 as Lender may 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 $5,000,000.00.

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

Current Ratio. Maintain a ratio of Current Assets to Current Liabilities
in excess of 1.25 to 1.00. 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 such agreements.

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

Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessment, tax, 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 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 at least annually 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
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.

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:

Indebtedness 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) 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.

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,
dissolve 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 alter 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 surety 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, files 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.

ADDITIONAL PROVISIONS.

1. TOTAL ADVANCES ARE RESTRICTED TO 80% OF ELIGIBLE ACCOUNTS RECEIVABLE,
DEFINED AS THOSE ACCOUNTS RECEIVABLE LESS THAN 90 DAYS AGED MINUS ALL CONTRA,
FOREIGN, BANKRUPT AND DIRECT FERERAL GOVERNMENT AGENCY ACCOUNTS, AND LESS ALL
ACCOUNTS RECEIVABLE OF ANY ACCOUNT WHEN 20% OR MORE OF THE ENTRIE BALANCE
OWING IS AGED 90 DAYS OR MORE.

2. A COLLATERAL SCHEDULE IS REQUIRED FOR EACH ADVANCE.

3.  BORROWER TO PROVIDE MONTHLY COMPANY PREPARED FINANCIAL STATEMENTS
WITHIN 40 DAYS OF EACH MONTH END.

4. BORROWER TO PROVIDE MONTH ACCOUNTS RECEIVABLE AGING REPORT AND ACCOUNTS
PAYABLE AGING REPORT WITHIN 25 DAYS OF EACH MONTH.

5. BORROWER TO PROVIDE BANK ITS 10-Q STATEMENT EVERY QUARTER, AND ITS
10-K STATEMENT, CONCURRENTLY WITH FILING.

6. BORROWER TO PROVIDE FISCAL YEAR CPA AUDITED FINANCIAL STATEMENTS
WITHIN 120 DAYS OF FISCAL YEAR END.

7. BORROWER AGREES TO MAINTAIN THE FOLLOWING FINANICAL COVENANTS AT
ALL TIMES:

A. CURRENT RATIO TO REMAIN ABOVE 1.25 TO 1.0.

B. DEBT TO TANGIBLE NET WORTH TO REMAIN BELOW 1.0 TO 1.0.

C. NET WORTH TO REMAIN ABOVE $5,000,000.00

RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
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.

Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other 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 Statement. 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.

Detective 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. However,
this Event of Default shall not apply if there is a good faith dispute by
Borrower or Grantor, as the case may be, as to the validity or
reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding, and if Borrower or Grantor gives Lender written
notice of the creditor or forfeiture proceeding and furnishes reserves or
a surety bond for the creditor or forfeiture proceeding satisfactory to
Lender.

Events Affecting Guarantor. Any of the preceding 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. Lender, at its option,
may, but shall not be required to, permit the Guarantor's estate to
assume unconditionally the obligations arising under the guaranty in a
manner satisfactory to Lender, and, in doing so, cure the Event of
Default.

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, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired.

Insecurity. Lender, in good faith, deems itself insecure.

Right to Cure. If any default, other than a Default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been
given a notice of a similar default within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
Borrower or Grantor, as the case may be, after receiving written notice
from Lender demanding cure of such default: (a) cures the default within
fifteen (15) days; or (b) if the cure requires more than fifteen (15)
days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

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 San Diego County, the State of California. 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.

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
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.

Borrower Information. Borrower consents to the release of information on
or about Borrower by Lender in accordance with any court order, law or
regulation and in response to credit inquiries concerning Borrower.

Non-Liability of Lender. The relationship between Borrower and Lender is
a debtor and creditor relationship and not fiduciary in nature, nor is
the relationship to be construed as creating any partnership or joint
venture between Lender and Borrower. Borrower is exercising its own
judgment with respect to Borrower's business. All information supplied to
Lender is for Lender's protection only and no other party is entitled to
rely on such information. There is no duty for Lender to review, inspect,
supervise, or inform Borrower of any matter with respect to Borrower's
business. Lender and Borrower intend that Lender may reasonably rely on
all information supplied by Borrower to Lender, together with all
representations and warranties given by Borrower to Lender, without
investigation or confirmation by Lender and that any investigation or
failure to investigate will not diminish Lender's right to so rely.

Notice of Lender's Breach. Borrower must notify Lender in writing of any
breach of this Agreement or the Related Documents by Lender and any other
claim, cause of action or offset against Lender within thirty (30) days
after the occurrence of such breach or after the accrual of such claim
cause of action or offset. Borrower waives any claim, cause of action or
offset for which notice is not given in accordance with this paragraph.
Lender is entitled to rely on any failure to give such notice.

Borrower Indemnification. Borrower shall indemnify and hold Lender
harmless from and against all claims, costs, expenses, losses, damages,
and liabilities of any kind, including but not limited to attorneys' fees
and expenses, arising out of any matter relating directly or indirectly
to the Indebtedness, whether resulting from internal disputes of the
Borrower, disputes between Borrower and any Guarantor, or whether
involving any third parties, or out of any other matter whatsoever
related to this Agreement or the Related Documents, but excluding any
claim or liability which arises as a direct result of Lender's gross
negligence or willful misconduct. This indemnity shall survive full
repayment and satisfaction of the Indebtedness and termination of this
Agreement.

Counterparts. This Agreement may be executed in multiple counterparts,
each of which, when so executed, shall be deemed an original, but all
such counterparts, taken together, shall constitute one and the same
Agreement.

Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation 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 attorneys' fees and Lender's 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 telefacsimilie, 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
all 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 person or
circumstance, such funding 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.

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 "Borrower"
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 been
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 FEBRUARY 19, 1998.

BORROWER: FOTOBALL U.S.A. INC.

By: DAVID G. FORSTER, Vice President

LENDER:
Scripps Bank