CHANGE IN TERMS OF AGREEMENT

Principal Amount: $3,500,000.00
Maturity: 04-15-2000
LOAN NO.: 11620
Collateral: 191
Officer: 125

Borrower:  Fotoball USA, Inc.              Lender: Scripps Bank
           3738 Ruffin Road                        Corporate Lending
           San Diego, CA 92123                     9005 Complex Drive
                                                   San Diego, CA 92123

DESCRIPTION OF EXISTING INDEBTEDNESS.
AS EVIDENCED BY:
PROMISSORY NOTE DATED DECEMBER 20, 1995 IN THE AMOUNT OF $1,000,000.00.
CHANGE IN TERMS AGREEMENT DATED NOVEMBER 13, 1996 IN THE AMOUNT OF 
$2,000,000.00
CHANGE IN TERMS AGREEMENT DATED FEBRUARY 19, 1998 IN THE AMOUNT OF 
$1,500,000.00
CHANGE IN TERMS AGREEMENT DATED AUGUST 20, 1998 INTHE AMOUNT OF 
$2,000,000.00

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

DESCRIPTION OF CHANGE IN TERMS.
LOAN AGREEMENT DATED DECEMBER 28, 1998 SUPERCEDES ALL PRIOR LOAN AGREEMENTS.
LINE OF CREDIT IS INCREASED TO $3,500,000.00 
EXTEND MATURITY DATE TO APRIL 15, 2000.
THE VARIANCE ON THIS NOTE IS CHANGED TO PRIME +.75% OVER THE INDEX

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/CFO<PAGE>
                    DISBURSEMENT REQUEST AND AUTHORIZATION

Borrower:  Fotoball USA, 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 date (0.750% over Wall Street 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 
8.500%), Revolving Line of Credit Loan to a Corporation for 
$3,000,000.00 due on April 15, 2000.

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: INCREASE LINE OF 
CREDIT AND EXTEND MATURIITY DATE. 

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 $3,500,000.00 
as follows:

               Undisbursed Funds:                     $2,800,000.00

               Amount paid on Borrower's account:     $  700,000.00 
               $700,000.00 Payment on 
               Loan # 11620 (RENEW)                   --------------
 
               Note Principal:                        $3,500,000.00

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

               Prepaid Finance Charges Paid In Cash:  $    2,000.00 
                    $2,000.00 DOCUMENT FEE            -------------

                Total Charger Paid In Cash:           $    2,000.00

LOAN ADVANCE AGREEMENT CONDITION. UNDISBURSED FUNDS TO BE DISBURSED PER 
LOAN ADVANCE 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 DECEMBER 28, 1998.

BORROWER: FOTOBALL U.S.A. INC.

By: /s/ DAVID G. FORSTER
    ------------------------------------
    DAVID G. FORSTER, Vice President/CFO<PAGE>



                                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 December 28, 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, as determined by Lender 
from time to time, the lesser of (a) $3,500,000.00; or (b) the sum of 
(i) 80.000% of the aggregate amount of Eligible Accounts, plus (ii) 
25.000% of the aggregate amount of Eligible Inventory.

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 the Account Debtor is not a resident 
of the United States, except to the extent such Accounts w
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 sole 
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 
my 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 falls 
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 90 DAYS from the 
invoice date.

(l) MINUS ALL CONTRA, FOREIGN, BANKRUPT, DIRECT FEDERAL GOVERNMENT 
AGENCY ACCOUNTS.

Eligible Inventory. The words "Eligible Inventory" mean, at any time, 
all of Borrower's Inventory as defined below except:

(a) Inventory which is not owned by Borrower free end clear of all security
interests, liens, encumbrances, and claims of third parties.

(b) Inventory which Lender, in its sole discretion, deems to be obsolete,
unsalable, damaged, defective, or unfit for further processing.

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.

Inventory. The word "Inventory" means all of Borrower's raw every kind 
and description, and goods held for sale or lease or furnished under 
contracts of service in which Borrower now has or hereafter, acquires any
right, whether held by Borrower or others, and all documents of tile,
warehouse receipts, bills of lading, and all other documents
every typo covering all or any part of the foreging. Inventory includes 
inventory temporarily out of Borrower's custody or possession and all
returns on Accounts.

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, and Inventory. 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. With respect to the Inventory, 
Borrower agrees to keep and maintain such records as Lender may 
require, including without limitation information concerning 
Eligible Inventory and records itemizing and describing the kind, 
type, quality, and quantity of Inventory, Borrower's Inventory 
costs and selling prices, and the daily withdrawals and additions 
to Inventory.

Collateral Schedules. Concurrently with the execution and delivery 
of this Agreement, Borrower shall execute and deliver to Lender 
schedules of Accounts and Inventory and Eligible Accounts and 
Eligible Inventory, 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 Eligible Inventory and such 
other matters and information relating to the Accounts and 
Inventory 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.

Representations and Warranties Concerning Inventory. With respect to the 
Inventory, Borrower represents and warrants to Lender: (a) All
Inventory represented by Borrower to be Eligible Inventory for purposes 
of this Agreement conforms to the requirements of the definition of 
Eligible Inventory; (b) All Inventory values listed on schedules 
delivered to Lender will be true and correct, subject to immaterial 
variance; (c) The value of the Inventory will be determined on a 
consistent accounting basis; (d) Except as agreed to the contrary by 
Lender in writing, all Eligible Inventory is now and at all times 
hereafter will be in Borrower's physical possession end shall not be 
held by others on consignment, sale on approval, or sale or return; (e) 
Except as reflected in the Inventory schedules delivered to Lender, all 
Eligible Inventory is now and at all times hereafter will be of good and
merchantable quality, free from defects; (f) Eligible Inventory is not now
and will not at any time hereafter be stored with a bailee, warehouseman, or
similar party without Lender's prior written consent, and, in such event,
Borrower will concurrently at the time of bailment cause
any such bailee, warehouseman, or similar party to issue and deliver to 
Lender in form acceptable to Lender, warehouse receipts in Lender's
name evidencing the storage of Inventory; and (g) Lender, Its assigns, 
or agents shall have the right at any time and at Borrower's expense to 
inspect and examine, the Inventory and to check and 1~1 the same M to 
quality, quantity, value, and condition.

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 California 
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(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 my of the
properties. (b) Borrower her 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 my 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 we,
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 err 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 my 
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,
end (b) agrees to indemnify and hold harmless Lender against any and all 
claims, losses, liabilities, damages, penalties, and expense 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 
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.

Year 2000. All software utilized by Borrower in the conduct of Borrower's
business will record, store, process, and present calendar dates hang
on or after January 1, 2000, and all information pertaining to such 
calendar dates, in the same manner and with the same functionality as 
this software does respecting calendar dates telling on or before 
December 31, 1999. Further, Borrower warrants and represents that the 
software or shall have all appropriate capabilities and compatibility 
for operation and for handling century-aware or year 2000 compliant data.
Borrower also warrants and represents that the data-related user interface 
functions, data-fields, and data-related program instructions and 
functions of the software include the indication of the century.

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 then forty five (45) days
after the end of each month, Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to the 
best knowledge end belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required 
to be provided under the 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 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.

COVENANTS C CONDITIONS.
1. BORROWER TO MAINTAIN TTS PRIMARY BANKING RELATIONSHIP WITH BANK.  
THIS.MEANS THE MAJORITY OF DEPOSIT ACCOUNTS, BALANCES AND LOANS. IF THE 
BORROWER FAILS TO MEET THIS CONDITION, BANK MAY, AT ITS SOLE DISCRETION, 
INCREASE THE RATE CHARGED ON ALL OF THE BORROWER'S INDEBTEDNESS BY UP TO 
5% OR MAY DECLARE ALL INDEBTEDNESS OWED BY BORROWER TO BANK, IMMEDIATELY 
DUE AND PAYABLE.

2. BORROWER WILL PROVIDE BANK WITH A COMPANY PREPARED FINANCIAL 
STATEMENT FOR EACH MONTH END, TO BE RECEIVED NO LATER THAN 45 DAYS AFTER 
MONTH END.

3. BORROWER WILL PROVIDE BANK WITH FISCAL YEAR END CPA AUDITED FINANICAL 
STATEMENT WITHIN 120 DAYS OF FISCAL YEAR END.

4. BORROWER WILL PROVIDE BANK WITH A COPY OF ITS IRS RETURN CONCURRENT 
WITH FILING.

5. TOTAL ADVANCES ARE RESTRICTED TO 80% OF ELIGIBLE ACCOUNTS RECEIVABLE, 
PLUS 25% OF ELIGIBLE INVENTORY TO A MAXIMUM INVENTORY ADVANCE OF 
$1,000,000.00. ELIGIBLE ACCOUNTS RECEIVABLE ARE DEFINED AS THOSE 
ACCOUNTS AGED LESS THAN 90 DAYS AGED MINUS ALL CONTRA, FOREIGN, 
BANKRUPT, DIRECT FEDERAL GOVERNMENT AGENCY ACCOUNTS AND AS FURTHER 
DEFINED ELSEWHERE IN THIS LOAN AGREEMENT. ELIGIBLE INVENTORY IS DEFINED 
AS RAW MATERIALS AND FINISHED GOODS, LESS THE ENTIRE ALLOWANCE FOR 
INVENTORY RESERVE. ADVANCES AGAINST INVENTORY ARE FUTHER SUBJECT TO 
APPROVAL BY BANK. EACH ADVANCE AGAINST INVENTORY MUST BE REOUESTED WITH 
A REASON FOR THE ADVANCE, AND APPROVED BY THE BANK.

6. AN EXECUTED BORROWING BASE CERTIFICATE (COLLATERAL SCHEDULE) IS 
REOUIRED FOR EACH ADVANCE.

7. BORROWER TO PROVIDE BANK WITH A MONTH END AGING OF ACCOUNTS 
RECEIVABLE AND ACCOUNTS PAYABLE ON A MONTHLY BASIS, WITHIN 20 DAYS OF 
EACH MONTH END.

8. BORROWER AUTHORIZES BANK OR TTS AGENT, TO CONDUCT ACCOUNTS RECEIVABLE 
AUDTTS, AND OTHER SUNDRY FINANCIAL AUDITS AT BORROWER'S PLACE OF 
BUSINESS AS BANK DEEMS NECESSARY. BORROWER AGREES TO PAY THE COST OF 
SUCH AUDITS AND AUTHORIZES BANK TO DEBIT BORROWER'S ACCOUNTS TO PAY FOR 
SAID AUDITS.

9. BORROWER TO PROVIDE BANK A COPY OF ITS 10-Q STATEMENTS, AND TTS 10K 
STATEMENTS, CONCURRENTLY WITH FILING.

10. BORROWER TO PROVIDE BANK WITH A LISTING OF ACCOUNTS RECEIVABLES, 
INCLUDING NAME, ADDRESS AND TELEPHONE NUMBER FOR EACH ACCOUNT, WHENEVER 
REOUESTED BY BANK.

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. It 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(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 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 DECEMBER 28, 1998.

BORROWER: FOTOBALL U.S.A. INC.

By: /s/ David G. Forester
    --------------------------
    DAVID G. FORSTER, Vice President

LENDER:
Scripps Bank<PAGE>

                        CORPORATE RESOLUTION TO BORROW

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

I, the undersigned Secretary or Assistant Secretary of FOTOBALL U.S.A. 
INC. (the "Corporation"), HEREBY CERTIFY that the Corporation is 
organized and existing under and by virtue of the laws of the State of 
California as a corporation for profit, with its principal office at 
3738 RUFFIN ROAD, SAN DIEGO, CA 92123, and is duly authorized to transact 
business in the State of California.

I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, 
duly called and held on December 28, 1998 at which a quorum was present 
and voting, or by other duly authorized corporate action in lieu of a 
meeting, the following resolutions were adopted:

BE IT RESOLVED, that any one (1) of the following named officers, 
employees. or agents of this Corporation, whose actual signatures are 
shown below:

NAME POSITION ACTUAL SIGNATURE

/s/ David G. Forester
----------------------------------
DAVID G. FORSTER Vice President/CFO

acting for and on behalf of the Corporation and as its act and deed be, 
and he or she hereby is, authorized and empowered:

Borrow Money. To borrow from time to time from Scripps Bank ("Lender"), 
on such terms as may be agreed upon between the Corporation and Lender, 
such sum or sums of money as in his or her judgment should be borrowed 
however, not exceeding at any one time the amount of Three Million Five 
Hundred Thousand & 00/100 Dollars (S3,500.000.00), in addition to such 
sum or sums of money as may be currently borrowed by the Corporation 
from Lender.

Execute Notes. To execute and deliver to Lender the promissory note or 
notes, or other evidence of credit accommodations and/or revision 
agreement or other evidence of obligation of the Corporation, on 
Lender's forms, at such rates of interest and on such terms as may be agreed
upon, evidencing the sums of money so borrowed or any indebtedness of the 
Corporation to Lender, and also to execute and deliver to Lender one or 
more renewals, extensions, modifications, refinancing, consolidations, 
or substitutions for one or more of the notes, any portion of the notes, or 
any other evidence of credit accommodations.

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or 
otherwise encumber and deliver to Lender, as security for the payment of 
any loans or credit accommodations so obtained, any promissory notes so 
executed (including any amendments to or modifications, renewals and 
extensions of such promissory notes), or any other or further 
indebtedness of the Corporation to Lender at any time owing, however the 
same may be evidenced, any property now or hereafter belonging to the 
Corporation or in which the Corporation now or hereafter may have an 
interest including without limitation all real property and all personal 
property (tangible or intangible) of the Corporation. Such property may 
be mortgaged, pledged, transferred, endorsed, hypothecated, or encumbered 
at the time such loans are obtained or such indebtedness is incurred, or 
at any other time or times, and may be either in addition to or in lieu 
of any property theretofore mortgaged, pledged, transferred, endorsed, 
hypothecated, or encumbered.

Execute Security Documents. To execute and deliver to Lender the forms 
of mortgage, deed of trust, pledge agreement, hypothecation agreement, and 
other security agreements and financing statements which may be required 
by Lender, and which shall evidence the terms and conditions under and 
pursuant to which such liens and encumbrances, or any of them, are given;
and also to execute and deliver to Lender any other written instruments,
any chattel paper, or any other collateral, of any kind or nature, which 
Lender may deem necessary or proper in connection with or pertaining to 
the giving of the liens and encumbrances.

Negotiate Items. To draw, endorse, and discount with Lender all drafts, 
trade acceptances, promissory notes, or other evidences of indebtedness 
payable to or belonging to the Corporation in which the Corporation may 
have an interest, and either to receive cash for the same or to cause 
such proceeds to be credited to the account of the Corporation with 
Lender, or to cause such other disposition of the proceeds derived 
therefrom as they may deem advisable.

Further Acts. In the case of lines of credit, to designate additional or 
alternate individuals as being authorized to request advances thereunder, 
and in all cases, to do and perform such other acts and things, to pay 
any and all fees and costs, and to execute and deliver such other 
documents and agreements as he or she may in his or her discretion deem 
reasonably necessary or proper in order to carry into effect the 
provisions of these Resolutions. The following person or persons 
currently are authorized to request advances and authorize payments under 
the line of credit until Lender receives written notice of revocation of 
their authority: DAVID G. FORSTER, Vice President/CFO.

BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to 
these Resolutions and performed prior to the passage of these Resolutions 
are hereby ratified and approved, that these Resolutions shall remain in 
full force and effect and Lender may rely on these Resolutions until 
written notice of his or her revocation shall have been delivered to and 
received by Lender. Any such notice shall not affect any of the 
Corporation's agreements or commitments in effect at the time notice is 
given.

BE IT FURTHER RESOLVED, that the Corporation will notify Lender in 
writing at Lender's address shown above (or such other addresses as 
Lender may designate from time to time) prior to any (a) change in the 
name of the Corporation, (b) change in the assumed business name(s) of 
the Corporation, (c) change in the management of the Corporation, (d) 
change in the authorized signer(s), (e) conversion of the Corporation to 
a new or different type of business entity, or (f) change in any other 
aspect of the Corporation that directly or indirectly relates to any 
agreements between the Corporation and Lender. No change in the name of 
the Corporation will take effect until after Lender has been notified.

I FURTHER CERTIFY that at a special meeting of the shareholders of the 
Corporation, duly called and held (or by consent of the shareholders in 
accordance with the laws of the State of California), not less than the 
required percentage of shareholders adopted or consented to all the 
Resolutions set forth above.

I FURTHER CERTIFY that the officer, employee, or agent named above is 
duly elected, appointed, or employed by or for the Corporation, as the 
case may be, and occupies the position set opposite the name; that the 
foregoing Resolutions now stand of record on the books of the 
Corporation; and that the Resolutions are in full force and effect and 
have not been modified or revoked in any manner whatsoever. The 
Corporation has no corporate seal, and therefore, no seal is affixed to 
this certificate.

IN TESTIMONY WHEREOF, I have hereunto set my hand on December 28, 1998 
and attest that the signatures set opposite the names listed above are 
their genuine signatures.

CERTIFIED AND ATTESTED BY:

/s/ Karen M, Betro<PAGE>

                        AGREEMENT TO PROVIDE INSURANCE

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

INSURANCE REQUIREMENTS. FOTOBALL U.S.A., INC. ("Grantor) understands 
that insurance coverage is required in connection with the extending of 
a loan or the providing of other financial accommodations to Grantor by 
Lender. These requirements are set forth in the security documents. The 
following minimum insurance coverages must be provided on the following 
described collateral (the Collateral"):

Collateral: All Inventory, Equipment and Fixtures.
            Type. All risks, including fire, then and liability. 
            Amount. Full insurable value. 
            Basis. Replacement value.
            Endorsements. Lender's loss payable clause with stipulation 
            that coverage will not be cancelled or diminished without a
            minimum of ten (10) days' prior written notice to Lender.
            Deductibles. $500.00.


INSURANCE COMPANY. Grantor may obtain insurance from any insurance 
company Grantor may choose that is reasonably acceptable to Lender. 
Grantor understands that credit may not be denied solely because 
insurance was not purchased through Lender.

INSURANCE MAILING ADDRESS. All documents and other materials relating to 
insurance for this loan should be mailed, delivered or directed to the 
following address:

            SCRIPPS BANK - NOTE DEPARTMENT 
            P.O. BOX 420790 
            SAN DIEGO, CA 92142
            (619) 268-3120

FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Lender, ten 
(10) days from the date of this Agreement, evidence of the required 
insurance as provided above, with an effective date of December 28, 
1998, or earlier.

AUTHORITION. For purposes of insurance coverage on the Collateral, 
Grantor authorizes Lender to provide to any person (Including my 
insurance agent or company) all information Lender deems appropriate, 
whether regarding the Collateral, the loan or other financial 
accommodations, or both. 

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO 
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED 
DECEMBER 28, 1998. 

GRANTOR:

FOTOBALL U.S.A., INC.

/S/ David G. Forester
----------------------
DAVID G. FORESTER
President/Chief Financial Officer