Exhibit
        4.48

       

      EXECUTION
        VERSION

       

      
        

        

      

      LOAN
        AND SECURITY AGREEMENT

       

      between

       

      INTERNATIONAL
        PLAYTHINGS, INC.,

       

      as
        Borrower,

       

      and

       

      CITICAPITAL
        COMMERCIAL CORPORATION,

       

      as
        Lender

       

      Dated
        as of December 21, 2006

       

      
        

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
        OF CONTENTS

      

        
          	 	 	 	
                  Page

                
	
                  ARTICLE
                    I DEFINITIONS

                	 	
                  1

                
	
                  SECTION
                    1.1

                	
                  General
                    Definitions

                	 	
                  1

                
	
                  SECTION
                    1.2

                	
                  Accounting
                    Terms and Determinations

                	 	
                  17

                
	
                  SECTION
                    1.3

                	
                  Other
                    Terms; Headings

                	 	
                  17

                
	
                  ARTICLE
                    II THE CREDIT FACILITIES

                	 	
                  18

                
	
                  SECTION
                    2.1

                	
                  The
                    Loans

                	 	
                  18

                
	
                  SECTION
                    2.2

                	
                  
                    
                      Procedure
                        for Borrowing; Notices of Borrowing; Notices of Continuation;
                        Notices of
                        Conversion

                    

                  

                	 	
                  18

                
	
                  SECTION
                    2.3

                	
                  Application
                    of Proceeds

                	 	
                  21

                
	
                  SECTION
                    2.4

                	
                  
                    
                      Maximum
                        Amount of the Facility; Mandatory Prepayments; Optional
                        Prepayments

                    

                  

                	 	
                  21

                
	
                  SECTION
                    2.5

                	
                  Maintenance
                    of Loan Account; Statements of Account

                	 	
                  22

                
	
                  SECTION
                    2.6

                	
                  Collection
                    of Receivables

                	 	
                  22

                
	
                  SECTION
                    2.7

                	
                  Term

                	 	
                  23

                
	
                  SECTION
                    2.8

                	
                  Payment
                    Procedures

                	 	
                  24

                
	
                  SECTION
                    2.9

                	
                  Letters
                    of Credit

                	 	
                  24

                
	
                  ARTICLE
                    III SECURITY

                	 	
                  26

                
	
                  SECTION
                    3.1

                	
                  General

                	 	
                  26

                
	
                  SECTION
                    3.2

                	
                  Further
                    Security; Lender Affiliates

                	 	
                  26

                
	
                  SECTION
                    3.3

                	
                  Recourse
                    to Security

                	 	
                  27

                
	
                  SECTION
                    3.4

                	
                  Special
                    Provisions Relating to Inventory

                	 	
                  27

                
	
                  SECTION
                    3.5

                	
                  Special
                    Provisions Relating to Receivables

                	 	
                  28

                
	
                  SECTION
                    3.6

                	
                  Special
                    Provisions Relating to Equipment

                	 	
                  29

                
	
                  SECTION
                    3.7

                	
                  Continuation
                    of Liens, Etc

                	 	
                  30

                
	
                  SECTION
                    3.8

                	
                  Real
                    Property

                	 	
                  30

                
	
                  SECTION
                    3.9

                	
                  Power
                    of Attorney

                	 	
                  31

                
	
                  ARTICLE
                    IV INTEREST, FEES AND EXPENSES

                	 	
                  31

                
	
                  SECTION
                    4.1

                	
                  Interest

                	 	
                  31

                
	
                  SECTION
                    4.2

                	
                  Interest
                    and Letter of Credit Fees After Event of Default

                	 	
                  32

                
	
                  SECTION
                    4.3

                	
                  Closing
                    Fee

                	 	
                  32

                
	
                  SECTION
                    4.4

                	
                  Unused
                    Line Fee; Letter of Credit Fees

                	 	
                  32

                
	
                  SECTION
                    4.5

                	
                  Early
                    Termination Fee

                	 	
                  32

                
	
                  SECTION
                    4.6

                	
                  Calculations

                	 	
                  33

                
	
                  SECTION
                    4.7

                	
                  Indemnification
                    in Certain Events

                	 	
                  33

                
	
                  SECTION
                    4.8

                	
                  Taxes

                	 	
                  33

                


        

         

        
          
            
            

          

          
            -i-

            
              

            

          

           

        

        


        
          	
                  ARTICLE
                    V CONDITIONS OF LENDING

                	 	
                  34

                
	
                  SECTION
                    5.1

                	
                  Conditions
                    to Initial Loan or Letter of Credit

                	 	
                  34

                
	
                  SECTION
                    5.2

                	
                  Conditions
                    Precedent to Each Loan and Each Letter of Credit

                	 	
                  38

                
	
                  ARTICLE
                    VI REPRESENTATIONS AND WARRANTIES

                	 	
                  38

                
	
                  SECTION
                    6.1

                	
                  
                    
                      Representations
                        and Warranties of the Borrower; Reliance by the
                        Lender

                    

                  

                	 	
                  38

                
	
                  ARTICLE
                    VII COVENANTS OF THE BORROWER

                	 	
                  46

                
	
                  SECTION
                    7.1

                	
                  Affirmative
                    Covenants

                	 	
                  46

                
	
                  SECTION
                    7.2

                	
                  Negative
                    Covenants

                	 	
                  56

                
	
                  ARTICLE
                    VIII FINANCIAL COVENANTS

                	 	
                  61

                
	
                  SECTION
                    8.1

                	
                  Tangible
                    Net Worth

                	 	
                  62

                
	
                  SECTION
                    8.2

                	
                  Fixed
                    Charge Coverage Ratio

                	 	
                  62

                
	
                  SECTION
                    8.3

                	
                  Capital
                    Expenditures

                	 	
                  62

                
	
                  SECTION
                    8.4

                	
                  Business
                    Plan

                	 	
                  62

                
	
                  ARTICLE
                    IX EVENTS OF DEFAULT

                	 	
                  62

                
	
                  SECTION
                    9.1

                	
                  Events
                    of Default

                	 	
                  62

                
	
                  SECTION
                    9.2

                	
                  Acceleration,
                    Termination and Cash Collateralization

                	 	
                  64

                
	
                  SECTION
                    9.3

                	
                  Other
                    Remedies

                	 	
                  65

                
	
                  SECTION
                    9.4

                	
                  License
                    for Use of Software and Other Intellectual Property

                	 	
                  66

                
	
                  SECTION
                    9.5

                	
                  No
                    Marshalling; Deficiencies; Remedies Cumulative

                	 	
                  66

                
	
                  SECTION
                    9.6

                	
                  Waivers

                	 	
                  66

                
	
                  SECTION
                    9.7

                	
                  Further
                    Rights of the Lender

                	 	
                  67

                
	
                  SECTION
                    9.8

                	
                  Interest
                    and Letter of Credit Fees After Event of Default

                	 	
                  67

                
	
                  ARTICLE
                    X ASSIGNMENTS AND PARTICIPATIONS

                	 	
                  68

                
	
                  SECTION
                    10.1

                	
                  Assignments

                	 	
                  68

                
	
                  SECTION
                    10.2

                	
                  Participations

                	 	
                  68

                
	
                  SECTION
                    10.3

                	
                  Disclosure

                	 	
                  68

                
	
                  ARTICLE
                    XI GENERAL PROVISIONS

                	 	
                  68

                
	
                  SECTION
                    11.1

                	
                  Notices

                	 	
                  68

                
	
                  SECTION
                    11.2

                	
                  Delays;
                    Partial Exercise of Remedies

                	 	
                  68

                
	
                  SECTION
                    11.3

                	
                  Right
                    of Setoff

                	 	
                  68

                
	
                  SECTION
                    11.4

                	
                  Indemnification;
                    Reimbursement of Expenses of Collection

                	 	
                  69

                
	
                  SECTION
                    11.5

                	
                  Amendments
                    and Waivers

                	 	
                  70

                
	
                  SECTION
                    11.6

                	
                  Counterparts;
                    Telecopied Signatures

                	 	
                  70

                
	
                  SECTION
                    11.7

                	
                  Severability

                	 	
                  70

                


        

         

        
          
            
            

          

          
            -ii-

            
              

            

          

           

        

        


        
          	
                  SECTION
                    11.8

                	
                  Maximum
                    Rate

                	 	
                  70

                
	
                  SECTION
                    11.9

                	
                  Entire
                    Agreement; Successors and Assigns; Interpretation

                	 	
                  71

                
	
                  SECTION
                    11.10

                	
                  LIMITATION
                    OF LIABILITY

                	 	
                  71

                
	
                  SECTION
                    11.11

                	
                  GOVERNING
                    LAW

                	 	
                  72

                
	
                  SECTION
                    11.12

                	
                  SUBMISSION
                    TO JURISDICTION

                	 	
                  72

                
	
                  SECTION
                    11.13

                	
                  SERVICE
                    OF PROCESS

                	 	
                  72

                
	
                  SECTION
                    11.14

                	
                  JURY
                    TRIAL

                	 	
                  73

                
	
                  SECTION
                    11.15

                	
                  Publicity

                	 	
                  73

                


        

         

      

      SCHEDULES

       

      
        	
                Schedule
                  6.1(a)

              	
                -

              	
                Foreign
                  Jurisdictions

              
	
                Schedule
                  6.1(b)

              	
                -

              	
                Locations
                  of Collateral and Real Property

              
	
                Schedule
                  6.1(f)

              	
                -

              	
                Consents
                  and Authorizations

              
	
                Schedule
                  6.1(g)

              	
                -

              	
                Ownership;
                  Subsidiaries

              
	
                Schedule
                  6.1(i)

              	
                -

              	
                Financial
                  Data

              
	
                Schedule
                  6.1(k)

              	
                -

              	
                Joint
                  Ventures and Partnerships

              
	
                Schedule
                  6.1(r)

              	
                -

              	
                Judgments;
                  Litigation

              
	
                Schedule
                  6.1(x)

              	
                -

              	
                ERISA
                  Plans

              
	
                Schedule
                  6.1(y)

              	
                -

              	
                Intellectual
                  Property

              
	
                Schedule
                  6.1(z)

              	
                -

              	
                Labor
                  Contracts

              
	
                Schedule
                  6.1(dd)

              	
                -

              	
                Material
                  Contracts

              
	
                Schedule
                  6.1(gg)

              	
                -

              	
                Affiliate
                  Transactions

              
	
                Schedule
                  7.1(q)

              	
                -

              	
                Billing
                  Practices

              
	
                Schedule
                  7.2(o)

              	
                -

              	
                Executive
                  Compensation

              
	
                Schedule
                  7.2(t)

              	
                -

              	
                Bank
                  Accounts

              


      

       

      EXHIBITS

       

      
        	
                Exhibit
                  A

              	
                -

              	
                Note

              
	
                Exhibit
                  B

              	
                -

              	
                Guaranty

              
	
                Exhibit
                  C

              	
                -

              	
                Compliance
                  Certificate

              
	
                Exhibit
                  D

              	
                -

              	
                Notice
                  of Borrowing

              
	
                Exhibit
                  E

              	
                -

              	
                Notice
                  of Continuation

              
	
                Exhibit
                  F

              	
                -

              	
                Notice
                  of Conversion

              
	
                Exhibit
                  G

              	
                -

              	
                Letter
                  of Credit Request

              
	
                Exhibit
                  H

              	
                -

              	
                Borrowing
                  Base Certificate

              
	
                Exhibit
                  I

              	
                -

              	
                Perfection
                  Certificate

              
	
                Exhibit
                  J

              	
                -

              	
                Landlord
                  Estoppel and Agreement

              


      

       

      
        
          
          

        

        
          -iii-

          
            

          

        

         

      


      LOAN
        AND SECURITY AGREEMENT

       

      LOAN
        AND SECURITY AGREEMENT,
        dated as
        of December 21, 2006, between INTERNATIONAL PLAYTHINGS, INC., a Delaware
        corporation (the “Borrower”), and CITICAPITAL COMMERCIAL CORPORATION, a Delaware
        corporation (the “Lender”).

       

      WITNESSETH
        :

       

      WHEREAS,
        the
        Borrower wishes to obtain a revolving credit facility; and

       

      WHEREAS,
        upon
        the terms and subject to the conditions set forth herein, the Lender is willing
        to make loans and other extensions of credit to the Borrower in an aggregate
        amount not to exceed $13,000,000;

       

      NOW,
        THEREFORE,
        the
        Borrower and the Lender hereby agree as follows:

       

      ARTICLE
        I

      DEFINITIONS

      

        SECTION
          1.1 General
          Definitions.
          As used
          herein, the following terms shall have the meanings herein specified (to
          be
          equally applicable to both the singular and plural forms of the terms
          defined):

         

        “Advance”
means
          a
          Base Rate Advance or a LIBOR Rate Advance.

         

        “Affiliate”
means,
          as to any Person, any other Person who directly or indirectly controls,
          is under
          common control with, is controlled by or is a director, officer, manager
          or
          general partner of such Person. As used in this definition, “control” (including
          its correlative meanings, “controlled by” and “under common control with”) means
          possession, directly or indirectly, of the power to direct or cause the
          direction of management or policies (whether through ownership of voting
          securities or partnership or other ownership interests, by contract or
          otherwise), provided
          that, in
          any event, any Person who owns directly or indirectly ten percent (10%)
          or more
          of the securities having ordinary voting power for the election of the
          members
          of the board of directors or other governing body of a corporation or ten
          percent (10%) or more of the partnership or other ownership interests of
          any
          other Person (other than as a limited partner of such other Person) will
          be
          deemed to control such corporation, partnership or other Person.

         

        “Agreement”
means
          this Loan and Security Agreement, as amended, supplemented or otherwise
          modified
          from time to time.

         

        “Auditors”
means
          Berenson LLP, Deloitte Touch Tomatsu and any other nationally recognized
          firm of
          independent public accountants selected by the Borrower and reasonably
          satisfactory to the Lender.

         

        “Bankruptcy
          Code”
means
          Title 11 of the United States Code entitled “Bankruptcy,”
as
          that
          title may be amended from time to time, or any successor statute.

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

           

        

        “Base
          Rate”
means
          the rate of interest publicly announced from time to time by Citibank,
          N.A. as
          its base rate.

         

        “Base
          Rate Advance”
means
          an Advance that bears interest as provided in Section 4.1(a).

         

        “Borrowing”
has
          the
          meaning specified in Section 2.2(a).

         

        “Borrowing
          Base”
has
          the
          meaning specified in Section 2.1(a).

         

        “Borrowing
          Base Certificate”
has
          the
          meaning specified in Section 7.1(k)(iv).

         

        “Business
          Day”
means
          any day other than a Saturday, a Sunday or any other day on which commercial
          banks in New York, New York are required or permitted by law to close.
          When used
          in connection with any LIBOR Rate Advance, a Business Day shall also exclude
          any
          day on which commercial banks are not open for dealings in Dollar deposits
          in
          the London interbank market.

         

        “Business
          Plan”
means
          a
          business plan of the Borrower and its Subsidiaries, consisting of projected
          balance sheets, related cash flow statements and related profit and loss
          statements, and availability forecasts, excess availability forecasts and
          covenant compliance forecasts, together with appropriate supporting details
          and
          a statement of the underlying assumptions, which covers a one-year period
          and
          which is prepared on a monthly basis.

         

        “Canadian
          Receivables Account”
means
          the Borrower’s deposit account number 2501-5200245 held with Toronto Dominion
          Canada Trust.

         

        “Capital
          Expenditures”
means
          expenditures for any fixed assets or improvements, replacements, substitutions
          or additions thereto or therefor which have a useful life of more than
          one year,
          and shall include all commitments, payments in respect of Capitalized Lease
          Obligations and leasehold improvements.

         

        “Capitalized
          Lease Obligations”
means
          any rental obligation which, under GAAP, is or will be required to be
          capitalized on the books of the lessee, taken at the amount thereof accounted
          for as Indebtedness (net of Interest Expense) in accordance with
          GAAP.

         

        “Cash
          Equivalents”
means
          (i) securities issued, guaranteed or insured by the United States or any of
          its agencies with maturities of not more than one year from the date acquired;
          (ii) certificates of deposit with maturities of not more than one year from
          the date acquired, issued by (A) the Lender or its Affiliates; (B) any
          U.S. federal or state chartered commercial bank of recognized standing
          which has
          capital and unimpaired surplus in excess of $500,000,000; or (C) any bank
          or its holding company that has a short-term commercial paper rating of
          at least
          A-1 or the equivalent by Standard & Poor’s Ratings Services or at least P-1
          or the equivalent by Moody’s Investors Service, Inc.; (iii) repurchase
          agreements and reverse repurchase agreements with terms of not more than
          seven
          days from the date acquired, for securities of the type described in
          clause (i) above and entered into only with commercial banks having the
          qualifications described in clause (ii) above or such other financial
          institutions with a short-term commercial paper rating of at least A-1
          or the
          equivalent by Standard & Poor’s Ratings Services or at least P-1 or the
          equivalent by Moody’s Investors Service, Inc.; (iv) commercial paper, other
          than commercial paper issued by the Guarantor or any of its Affiliates,
          issued
          by any Person incorporated under the laws of the United States or any state
          thereof and rated at least A-1 or the equivalent thereof by Standard &
Poor’s Ratings Services or at least P-1 or the equivalent thereof by Moody’s
          Investors Service, Inc., in each case with maturities of not more than
          one year
          from the date acquired; and (v) investments in money market funds
          registered under the Investment Company Act of 1940, which have net assets
          of at
          least $500,000,000 and at least eighty-five percent (85%) of whose assets
          consist of securities and other obligations of the type described in
          clauses (i) through (iv) above.

         

        
          
            
            

          

          
            -2-

            
              

            

          

          
            
            

          

           

        

        “Closing
          Date”
means
          the date of execution and delivery of this Agreement.

         

        “Code”
has
          the
          meaning specified in Section 1.3.

         

        “Collateral”
means
          all Receivables, Equipment, General Intangibles, Inventory, Investment
          Property
          and all other personal property of the Borrower and all other collateral
          specified in this Agreement and in the Security Documents.

         

        “Collateralization”
and
          “Collateralize”
each
          means, with respect to any Letter of Credit, the deposit by the Borrower
          in a
          cash collateral account established and controlled by or on behalf of the
          Lender
          of an amount equal to 105% of the undrawn amount of such Letter of
          Credit.

         

        “Collections”
means
          all cash, funds, checks, notes, instruments, any other form of remittance
          tendered by account debtors in respect of payment of Receivables of the Borrower
          and any other payments received by the Borrower with respect to any
          Collateral.

         

        “Compliance
          Certificate”
has
          the
          meaning specified in Section 7.1(k)(iii).

         

        “Contingent
          Obligation”
means
          any direct, indirect, contingent or non-contingent guaranty or obligation
          for
          the Indebtedness of another Person, except endorsements in the ordinary
          course
          of business.

         

        “Continuation”
has
          the
          meaning specified in Section 2.2(b).

         

        “Control
          Agreement”
means
          a
          control agreement, in form and substance satisfactory to the Lender, among
          the
          Borrower or one of its Subsidiaries, the Lender and the applicable securities
          intermediary or depository bank with respect to the applicable Securities
          Account and related Investment Property or deposit account, as the case
          may
          be.

         

        “Convert,”
          “Conversion”
and
          “Converted”
each
          refers to conversion of Advances of one Type into Advances of another Type
          pursuant to Section 2.2(c).

         

        “Default”
means
          any of the events specified in Section 9.1, whether or not any of the
          requirements for the giving of notice, the lapse of time, or both, or any
          other
          condition, has been satisfied.

         

        
          
            
            

          

          
            -3-

            
              

            

          

          
            
            

          

           

        

        “Dollars”
and
          the
          sign “$”
means
          freely transferable lawful currency of the United States of
          America.

         

        “EBEB
          Receivable”
means
          any Receivable that is on the payment terms specified under the heading
“EBEB
          Receivable” on Schedule 7.1(q).

         

        “EBITDA”
means,
          for any period, with respect to the Borrower and its Subsidiaries on a
          consolidated basis (i) net income (as that term is determined in accordance
          with GAAP) for such period, plus (ii) the amount of depreciation and
          amortization of fixed and intangible assets deducted in determining such
          net
          income for such period, plus (iii) all Interest Expense and all fees for
          the use of money or the availability of money, including commitment, facility
          and like fees and charges upon Indebtedness (including Indebtedness to
          the
          Lender) paid or payable during such period, without duplication, plus
          (iv) all tax liabilities paid or accrued during such period, without
          duplication, plus (v) all corporate overhead expenses, less (vi) the
          amount of all gains (or plus the amount of all losses) realized during
          such
          period upon the sale or other disposition of property or assets that are
          sold or
          otherwise disposed of outside the ordinary course of business that is included
          in the calculation of net income for such period.

         

        “Eligible
          Inventory”
means
          only such Inventory of the Borrower located in or in transit to the United
          States consisting of finished goods, which is free from any claim of title
          or
          Lien in favor of any Person (other than Liens in favor of the Lender) and
          with
          respect to which no event has occurred and no condition exists which could
          reasonably be expected to impair substantially the Borrower’s ability to use or
          sell such Inventory in the ordinary course of its business and which the
          Lender,
          in its sole discretion, shall deem eligible to serve as collateral for
          Advances
          or Letters of Credit, based on such considerations as the Lender may deem
          appropriate from time to time. No Inventory of the Borrower shall be Eligible
          Inventory unless the Lender has a perfected first priority Lien thereon.
          The
          value of Eligible Inventory shall be computed at the lower of cost or market
          value. Any Inventory of the Borrower that is not in the control or possession
          of
          the Borrower and is covered by a warehouse receipt, a bill of lading or
          other
          document of title (other than electronic bills of lading held with TradeCard,
          Inc.) shall in no event be Eligible Inventory unless such warehouse receipt,
          bill of lading or document of title is in the name of or held by the Lender,
          provided
          that no
          Inventory will be Eligible Inventory if such Inventory is shipped to the
          Borrower or any of its customers “free-on-board,” direct shipped or drop
          shipped, except for Inventory shipped to the Borrower that is in the Borrower’s
          possession. No Inventory of the Borrower shall be Eligible Inventory unless
          (i) it is located on property owned by the Borrower; or (ii) it is
          located on property leased by the Borrower or in a contract warehouse which
          is
          subject to a Landlord Estoppel and Agreement executed by the mortgagee,
          lessor
          or contract warehouseman, as the case may be, and segregated or otherwise
          separately identifiable from goods of others, if any, stored on the premises
          other than Inventory located at the Lackawanna Warehouse. No Inventory
          of the
          Borrower shall be Eligible Inventory if it is (i) in transit, unless such
          Inventory is in transit to the Borrower’s warehouse and is fully insured on
          terms satisfactory to the Lender in its sole discretion, with the Lender
          being
          named as lender loss payee on the policy evidencing such insurance, or
          (ii) consigned to or from the Borrower. In addition, and without limitation
          of the foregoing, the Lender may treat any Inventory as ineligible
          if:

         

        (a) it
          is not
          owned solely by the Borrower or the Borrower does not have sole and good,
          valid
          and marketable title thereto; or

         

        
          
            
            

          

          
            -4-

            
              

            

          

          
            
            

          

           

        

        (b) it
          is
          packing or shipping materials or maintenance supplies; or

         

        (c) it
          is
          goods returned or rejected by the Borrower’s customers as defective;
          or

         

        (d) it
          (i) is excess (as so reserved by the Borrower from time to time or as
          otherwise determined by the Lender), (ii) is obsolete, defective, damaged,
          slow moving (which shall include any Inventory that the Borrower has had
          on hand
          for at least (A) two years or (B) one year if such Inventory is not
          advertised in the Borrower’s current catalog or is not the subject of recent
          sales) or unmerchantable, (iii) is samples or inventory on hand which is
          used for promotional and other sales activities, (iv) does not otherwise
          conform to the representations and warranties contained in the Loan Documents
          or
          (v) is Store Inventory; or

         

        (e) it
          is
          repossessed, attached, seized, made subject to a writ or distress warrant,
          levied upon or brought within the possession of any receiver, trustee,
          custodian
          or assignee for the benefit of creditors; or

         

        (f) it
          is
          goods acquired by the Borrower in or as part of a “bulk” transfer or sale of
          assets and such acquisition is not consummated in the ordinary course of
          business unless the Borrower has complied with all applicable bulk sales
          or bulk
          transfer laws in connection with such acquisition; or

         

        (g) it
          is the
          subject of voluntary recall by the Borrower or a recall by or in cooperation
          with the United States Consumer Products Safety Commission or any other
          Governmental Authority.

         

        “Eligible
          Receivables”
means
          and includes only those unpaid Receivables of the Borrower, without duplication,
          which (i) arise out of a bona fide sale of goods or rendition of services
          of the kind ordinarily sold or rendered by the Borrower in the ordinary
          course
          of its business, (ii) are made to a Person competent to contract therefor
          who is not an Affiliate or an employee of the Borrower and is not controlled
          by
          an Affiliate of the Borrower, (iii) are not subject to renegotiation or
          redating, (iv) are free and clear of any Lien in favor of any Person other
          than Liens in favor of the Lender and Liens permitted under Section 7.2(i),
          (v) mature as stated in the invoice or other supporting data covering such
          sale or services, (vi) conform to the Borrower’s customary historical
          practices and (vii) are denominated in Dollars or Canadian dollars. If any
          Receivable is denominated in Canadian dollars, such Receivable shall be
          valued
          in Dollars using the prevailing currency conversion rate on the applicable
          date
          for the purposes hereof. No Receivable of the Borrower shall be an Eligible
          Receivable (i) unless the Lender has a perfected first priority Lien
          thereon, (ii) if it is more than sixty days past its due date in the case
          of a Standard Receivable, (iii) it is more than thirty days past its due
          date in the case of an EBEB Receivable or (iv) unless the delivery of the
          goods or the rendition of the services giving rise to such Receivable has
          been
          completed. The Lender may treat any Receivable as ineligible if:

         

        (a) any
          warranty contained in this Agreement or in any other Loan Document with
          respect
          to such Receivable or in any assignment or statement of warranties or
          representations relating to such Receivable delivered by the Borrower to
          the
          Lender has been breached or is untrue in any material respect or the Borrower
          is
          not in compliance with all applicable laws with respect to such Receivable;
          or

         

        
          
            
            

          

          
            -5-

            
              

            

          

          
            
            

          

           

        

        (b) the
          account debtor or any Affiliate of the account debtor has disputed liability,
          has or has asserted a right of setoff or has made any claim with respect
          to any
          other Receivable due from such account debtor or Affiliate to the Borrower,
          to
          the extent of the amount of such dispute or claim, or the amount of such
          actual
          or asserted right of setoff, as the case may be; or

         

        (c) the
          account debtor or any of its assets or any Affiliate of the account debtor
          or
          any of its assets is the subject of an Insolvency Event or, in the sole
          discretion of the Lender, is likely to become the subject of an Insolvency
          Event, unless such account debtor or Affiliate has been provided with a
          debtor
          in possession credit facility pursuant to Section 364 of the Bankruptcy
          Code or a similar arrangement reasonably acceptable to the Lender;
          or

         

        (d) the
          account debtor or any Affiliate of the account debtor has called a meeting
          of
          its creditors to obtain any general financial accommodation; or

         

        (e) the
          account debtor is also a supplier to or creditor of the Borrower, to the
          extent
          of the aggregate amount owed by the Borrower to the account debtor;
          or

         

        (f) the
          sale
          or rendition of services is to an account debtor outside the United States
          of
          America or Canada, unless it is on letter of credit, banker’s acceptance or
          other terms acceptable to the Lender; or

         

        (g) fifty
          percent (50%) or more of the aggregate balance of the accounts of any account
          debtor and its Affiliates to the Borrower are unpaid more than sixty days
          past
          their due dates, in the case of Standard Receivables, or thirty days past
          their
          due dates, in the case of EBEB Receivables; or

         

        (h) the
          account debtor is the United States of America or any department, agency
          or
          instrumentality thereof, unless the Borrower assigns its right to payment
          under
          such Receivable to the Lender as collateral hereunder in full compliance
          with
          (including, without limitation, the filing of a written notice of the assignment
          and a copy of the assignment with, and receipt of acknowledgment thereof
          by, the
          appropriate contracting and disbursing offices pursuant to) the Assignment
          of
          Claims Act of 1940, as amended (31 U.S.C. § 3727; 41 U.S.C. § 15);
          or

         

        (i) the
          Lender believes, in its sole discretion, that collection of such Receivable
          is
          insecure or that such Receivable may not be paid by reason of the account
          debtor’s inability or unwillingness to pay.

         

        
          
            
            

          

          
            -6-

            
              

            

          

          
            
            

          

           

        

        “Environmental
          Laws”
means
          all federal, state and local statutes, laws (including common or case law),
          rulings, regulations or governmental, administrative or judicial policies,
          directives, orders or interpretations applicable to the business or property
          of
          a Person relating to pollution or protection of human health or the environment
          (including, without limitation, ambient air, surface water, ground water,
          land
          surface or subsurface strata) including, without limitation, laws and
          regulations relating to emissions, discharges, releases or threatened releases
          of Hazardous Materials, or otherwise relating to the manufacture, processing,
          distribution, use, treatment, storage, disposal, transport or handling
          of any
          Hazardous Materials.

         

        “Equipment”
means
          all machinery, equipment, furniture, fixtures, leasehold improvements,
          conveyors, tools, materials, storage and handling equipment, hydraulic
          presses,
          cutting equipment, computer equipment and hardware, including central processing
          units, terminals, drives, memory units, embedded computer programs and
          supporting information, printers, keyboards, screens, peripherals and input
          or
          output devices, molds, dies, stamps, and other equipment of every kind
          and
          nature and wherever situated now or hereafter owned by a Person or in which
          a
          Person may have any interest as lessee or otherwise (to the extent of such
          interest), together with all additions and accessions thereto, all replacements
          and all accessories and parts therefor, all manuals, blueprints, know-how,
          warranties and records in connection therewith and all rights against suppliers,
          warrantors, manufacturers, and sellers or others in connection therewith,
          together with all substitutes for any of the foregoing.

         

        “ERISA”
means
          the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000
          et seq., amendments thereto, successor statutes, and regulations or guidelines
          promulgated thereunder.

         

        “ERISA
          Affiliate”
means
          any entity required to be aggregated with the Borrower under
          Section 414(b), (c), (m) or (o) of the Internal Revenue Code.

         

        “Event
          of Default”
means
          the occurrence of any of the events specified in Section 9.1.

         

        “Excess
          Availability”
means
          the difference between (i) the lesser of (A) the Borrowing Base and
          (B) the Maximum Amount of the Facility and (ii) the sum of
          (A) the aggregate outstanding amount of the Loans and (B) the
          aggregate undrawn amount available under the Letters of Credit.

         

        “Existing
          Lender”
means
          Citibank, N.A., as successor-by-merger to Citibank, F.S.B.

         

        “Expiration
          Date”
means
          the earlier of (i) December 21, 2008 and (ii) the date of
          termination of the Lender’s obligations to make Loans pursuant to the terms
          hereof.

         

        “Federal
          Reserve Board”
means
          the Board of Governors of the Federal Reserve System or any Person succeeding
          to
          the functions thereof.

         

        “Financial
          Covenants”
means
          the covenants set forth in Article VIII.

         

        
          
            
            

          

          
            -7-

            
              

            

          

          
            
            

          

           

        

        “Financial
          Statements”
means,
          with respect to a Loan Party or the Parent, the balance sheets, profit
          and loss
          statements, statements of cash flow, and statements of changes in intercompany
          accounts, if any, of such Loan Party or the Parent for the period specified,
          prepared in accordance with GAAP and consistent with prior practices and,
          except
          in the case of annual audited Financial Statements, a comparison in reasonable
          detail to (i) the projected balance sheets, profit and loss statements,
          statements of cash flow and statements of changes in intercompany accounts
          set
          forth in the Business Plan for the same year-to-date and month-to-date
          periods
          and (ii) the balance sheets, profit and loss statements, statements of cash
          flow, and statements of changes in intercompany accounts for the same
          year-to-date and month-to-date periods of the immediately preceding
          year.

         

        “Fixed
          Charge Coverage Ratio”
means
          (without duplication), for any period, with respect to the Borrower and
          its
          Subsidiaries on a consolidated basis (except in the case of clause (Y)(iv)
          hereof), as of the date of determination thereof, the ratio of (X) EBITDA
          for such period to (Y) (i) all principal amounts of Indebtedness (including
          Indebtedness to the Lender to the extent such amounts may not be reborrowed
          as
          provided by this Agreement) paid or payable during such period, plus
          (ii) all Interest Expense and all fees for the use of money or the
          availability of money, including commitment, facility and like fees and
          charges
          upon Indebtedness (including Indebtedness to the Lender) paid or payable
          during
          such period, without duplication, plus (iii) without limitation of the
          restrictions specified in Section 7.2(h), all loans and Investments made or
          required to be made with respect to any Person during such period (including,
          without limitation, intercompany loans and Investments), plus (iv) without
          limitation of the restrictions specified in Section 7.2(h) and (j), all
          cash dividends, stock repurchases or other distributions paid or payable
          in
          cash, all cash withdrawals made, and all Affiliate’s employees’ salaries,
          management fees, and cash corporate overhead expenses paid or payable in
          cash,
          in each case during such period, plus (v) all Capital Expenditures paid or
          payable during such period other than Capital Expenditures financed with
          the
          proceeds of Indebtedness (other than proceeds of Loans), plus (vi) all tax
          liabilities paid or accrued during such period, without
          duplication.

         

        “GAAP”
means
          generally accepted accounting principles set forth in the opinions and
          pronouncements of the Accounting Principles Board of the American Institute
          of
          Certified Public Accountants and statements and pronouncements of the Financial
          Accounting Standards Board that are applicable to the circumstances as
          of the
          date of determination.

         

        “General
          Intangibles”
means
          all present and future general intangibles as defined in the Code including,
          without limitation, documents, certificates, patents, patent applications,
          copyrights (registered and unregistered), licenses, permits, franchise
          rights,
          authorizations, customer and supplier lists, rights of indemnification,
          contribution and subrogation, leases, computer tapes, programs, discs and
          software, trade secrets, computer service contracts, trademarks, trade
          names,
          service marks, service names, domain names, logos, goodwill, deposits,
          causes of
          action (including, without limitation, commercial tort claims), choses
          in
          action, judgments, designs, blueprints, plans, know-how, drafts, acceptances,
          letters of credit, book accounts, deposit and other accounts and all money,
          balances, credits, deposits or other financial assets therein or represented
          thereby, credits and reserves and all forms of obligations whatsoever owing,
          instruments, documents of title, leasehold rights in any goods, and books,
          ledgers, files and records with respect to any collateral or
          security.

         

        
          
            
            

          

          
            -8-

            
              

            

          

          
            
            

          

           

        

        “Governing
          Documents”
means,
          with respect to any Person, the certificate of incorporation and bylaws
          or
          similar organizational documents of such Person.

         

        “Governmental
          Authority”
means
          any nation or government, any state or other political subdivision thereof
          or
          any entity exercising executive, legislative, judicial, regulatory or
          administrative functions thereof or pertaining thereto.

         

        “Guarantor”
means
          Grand Toys International, Inc., a Nevada corporation.

         

        “Guaranty”
means
          the guaranty by the Guarantor in favor of the Lender, substantially in
          the form
          of Exhibit B, as amended, supplemented or otherwise modified from time to
          time.

         

        “Hazardous
          Materials”
means
          any and all pollutants, contaminants and toxic, caustic, radioactive and
          hazardous materials, substances and wastes including, without limitation,
          petroleum or petroleum distillates, asbestos or urea formaldehyde foam
          insulation or asbestos-containing materials, whether or not friable,
          polychlorinated biphenyls, radon gas, infectious or medical wastes and
          all other
          substances or wastes of any nature that are regulated under any Environmental
          Laws.

         

        “Hedging
          Agreement”
means
          any interest rate protection agreement, foreign currency exchange agreement,
          commodity price protection agreement or other interest or currency exchange
          rate
          or commodity price hedging agreement.

         

        “Indebtedness”
means,
          with respect to any Person, as of the date of determination thereof (without
          duplication of the same obligation under any other clause hereof), (i) all
          obligations of such Person for borrowed money of any kind or nature, including
          funded and unfunded debt, (ii) all obligations of such Person under Hedging
          Agreements (including, without limitation, all payments such Person would
          have
          to make in the event of an early termination of a Hedging Agreement calculated
          as of the date Indebtedness of such Person is being determined hereunder)
          or
          arrangements therefor, regardless of whether the same is evidenced by any
          note,
          debenture, bond or other instrument, (iii) all obligations of such Person
          to pay the deferred purchase price of property or services (other than
          current
          trade accounts payable under normal trade terms and accrued expenses and
          which
          are incurred in the ordinary course of business that are not overdue for
          a
          period greater than six months or that are contested in good faith by
          appropriate proceedings), (iv) all obligations of such Person to acquire or
          for the acquisition or use of any fixed asset, including Capitalized Lease
          Obligations (other than, in any such case, any portion thereof representing
          interest or deemed interest or payments in respect of taxes, insurance,
          maintenance or service), or improvements which are payable over a period
          longer
          than one year, regardless of the term thereof or the Person or Persons
          to whom
          the same are payable, (v) the then outstanding amount of withdrawal or
          termination liability incurred under ERISA, (vi) all Indebtedness of others
          secured by (or for which the holder of such Indebtedness has an existing
          right
          to be secured) a Lien on any asset of such Person whether or not the
          Indebtedness is assumed by such Person, (vii) all Indebtedness of others to
          the extent guaranteed by such Person, (viii) all obligations of such Person
          created or arising under any conditional sale or other title retention
          agreement
          with respect to property acquired by such Person (even though the rights
          and
          remedies of the seller or lender under such agreements in the event of
          default
          are limited to repossession or sale of such property), (ix) all obligations
          or such Person to purchase, redeem, retire, defease or otherwise acquire
          for
          value any Interests of such Person, valued, in the case of redeemable preferred
          stock, at the greater of its voluntary or involuntary liquidation preference
          plus accrued and unpaid dividends and (x) all reimbursement or other
          obligations of such Person in respect of letters of credit, bankers acceptances,
          surety bonds, performance bonds or similar instruments issued or accepted
          by
          banks or other financial institutions for the account of such Person, whether
          or
          not matured.

         

        
          
            
            

          

          
            -9-

            
              

            

          

          
            
            

          

           

        

        “Insolvency
          Event”
means,
          with respect to any Person, the occurrence of any of the following:
          (i) such Person shall be adjudicated insolvent or bankrupt or institutes
          proceedings to be adjudicated insolvent or bankrupt, or shall generally
          fail to
          pay or admit in writing its inability to pay its debts as they become due,
          (ii) such Person shall seek dissolution or reorganization or the
          appointment of a receiver, trustee, custodian or liquidator for it or a
          substantial portion of its property, assets or business or to effect a
          plan or
          other arrangement with its creditors, (iii) such Person shall make a
          general assignment for the benefit of its creditors, or consent to or acquiesce
          in the appointment of a receiver, trustee, custodian or liquidator for
          a
          substantial portion of its property, assets or business, (iv) such Person
          shall file a voluntary petition under any bankruptcy, insolvency or similar
          law,
          (v) such Person shall take any corporate or similar act in furtherance of
          any of the foregoing, or (vi) such Person, or a substantial portion of its
          property, assets or business, shall become the subject of an involuntary
          proceeding or petition for (A) its dissolution or reorganization or
          (B) the appointment of a receiver, trustee, custodian or liquidator, and
          (I) such proceeding shall not be dismissed or stayed within sixty days or
          (II) such receiver, trustee, custodian or liquidator shall be appointed;
provided,
          however,
          that the
          Lender shall have no obligation to make any Advance or cause to be issued
          any
          Letter of Credit during the pendency of any sixty-day period described
          in
          clause (I).

         

        “Interest
          Expense”
means,
          for any period, all interest with respect to Indebtedness (including, without
          limitation, the interest component of Capitalized Lease Obligations) accrued
          or
          capitalized during such period (whether or not actually paid during such
          period)
          determined in accordance with GAAP.

         

        “Interest
          Period”
means
          the period commencing on the date of a LIBOR Rate Advance and ending one,
          two or
          three months thereafter; provided,
          however,
          that
          (i) the Borrower may not select any Interest Period that ends after the
          Expiration Date; (ii) whenever the last day of an Interest Period would
          otherwise occur on a day other than a Business Day, the last day of such
          Interest Period shall be extended to occur on the next succeeding Business
          Day,
          except that, if such extension would cause the last day of such Interest
          Period
          to occur in the next following calendar month, then the last day of such
          Interest Period shall occur on the next preceding Business Day; and
          (iii) if there is no corresponding date of the month that is one, two or
          three months, as the case may be, after the first day of an Interest Period,
          such Interest Period shall end on the last Business Day of such first,
          second or
          third month, as the case may be.

         

        “Interests”
has
          the
          meaning specified in Section 7.2(j).

         

        “Internal
          Revenue Code”
means
          the Internal Revenue Code of 1986, any amendments thereto, any successor
          statute
          and any regulations and guidelines promulgated thereunder.

         

        
          
            
            

          

          
            -10-

            
              

            

          

          
            
            

          

           

        

        “Internal
          Revenue Service”
or
          “IRS”
means
          the United States Internal Revenue Service and any successor
          agency.

         

        “Inventory”
means
          all present and future goods intended for sale, lease or other disposition
          including, without limitation, all raw materials, work in process, finished
          goods and other retail inventory, goods in the possession of outside processors
          or other third parties, consigned goods (to the extent of the consignee’s
          interest therein), materials and supplies of any kind, nature or description
          which are or might be used in connection with the manufacture, packing,
          shipping, advertising, selling or finishing of any such goods, all documents
          of
          title or documents representing the same and all records, files and writings
          with respect thereto.

         

        “Investment”
in
          any
          Person means, as of the date of determination thereof, (i) any payment or
          contribution, or commitment to make a payment or contribution, by a Person
          including, without limitation, property contributed or committed to be
          contributed by such Person for or in connection with its acquisition of
          any
          stock, bonds, notes, debentures, partnership or other ownership interest
          or any
          other security of the Person in whom such Investment is made or (ii) any
          loan, advance or other extension of credit or guaranty of or other surety
          obligation for any Indebtedness of such Person in whom the Investment is
          made.
          In determining the aggregate amount of Investments outstanding at any particular
          time, (i) a guaranty (or other surety obligation) shall be valued at not
          less than the principal outstanding amount of the primary obligation;
          (ii) returns of capital (but only by repurchase, redemption, retirement,
          repayment, liquidating dividend or liquidating distribution) shall be deducted;
          (iii) earnings, whether as dividends, interest or otherwise, shall not be
          deducted; and (iv) decreases in the market value shall not be deducted
          unless such decreases are computed in accordance with GAAP.

         

        “Investment
          Property”
means
          all present and future investment property, including without limitation,
          all
          (i) securities, whether certificated or uncertificated, and including
          stocks, bonds, debentures, notes, bills, certificates, warrants, options,
          rights
          and shares, (ii) security entitlements, (iii) securities accounts,
          (iv) commodity contracts, (v) commodity accounts and
          (vi) dividends and other distributions in respect of any of the
          foregoing.

         

        “Items
          of Payment”
means
          checks, drafts and other documents and instruments evidencing remittances
          in
          payment by account debtors to the Borrower.

         

        “Lackawanna
          Warehouse”
means
          the Borrower’s Property located at 75D Lackawanna Avenue, Parsippany, New Jersey
          07054.

         

        “Landlord
          Estoppel and Agreement”
means
          a
          landlord waiver, mortgagee waiver, bailee letter or similar acknowledgment
          of
          any lessor, warehouseman or processor in possession of any Collateral or
          on
          whose property any Collateral is located, substantially in the form of
          Exhibit J.

         

        “Letter
          of Credit Agreement”
means
          the collective reference to any and all agreements from time to time entered
          into by the Lender and Citibank, N.A. or another bank acceptable to the
          Lender
          (each, an “issuing
          bank”)
          pursuant to which an issuing bank issues Letters of Credit for the account
          of
          the Borrower in accordance with the terms of this Agreement.

         

        
          
            
            

          

          
            -11-

            
              

            

          

          
            
            

          

           

        

        “Letters
          of Credit”
means
          all letters of credit issued for the account of the Borrower under
          Section 2.9, and all amendments, renewals, extensions or replacements
          thereof.

         

        “Liabilities”
of
          a
          Person as of the date of determination thereof means the liabilities of
          such
          Person on such date as determined in accordance with GAAP. Liabilities
          to
          Affiliates of such Person shall be treated as Liabilities except where
          eliminated by consolidation in financial statements prepared in accordance
          with
          GAAP or as otherwise provided herein.

         

        “LIBOR
          Rate”
means,
          with respect to each Interest Period, the reserve adjusted rate per
          annum equal
          to
          the one, two or three-month London Interbank Offered Rate, as applicable,
          that
          appears in the “Money Rates” section of The Wall Street Journal on the first day
          of such Interest Period; provided,
          however,
          that if
          The Wall Street Journal no longer publishes such one, two or three-month
          London
          Interbank Offered Rate, reference shall be made to the Dow Jones Market
          Service
          (formerly Telerate) page 3750 for such London Interbank Offered
          Rate.

         

        “LIBOR
          Rate Advance”
means
          an Advance that bears interest as provided in Section 4.1(b).

         

        “Lien”
means
          any lien, claim, charge, pledge, security interest, assignment, hypothecation,
          deed of trust, mortgage, lease, conditional sale, retention of title or
          other
          preferential arrangement having substantially the same economic effect
          as any of
          the foregoing, whether voluntary or imposed by law.

         

        “Loan
          Account”
has
          the
          meaning specified in Section 2.5.

         

        “Loan
          Documents”
means
          this Agreement and all documents and instruments to be delivered by the
          Borrower
          or the Guarantor under or in connection with this Agreement, as each of
          the same
          may be amended, supplemented or otherwise modified from time to time, including,
          without limitation, the Note, the Guaranty, the Lockbox Agreement, the
          Letter of
          Credit Agreement and any Control Agreement.

         

        “Loan
          Party”
means
          the Borrower or the Guarantor.

         

        “Loans”
has
          the
          meaning specified in Section 2.1(a).

         

        “Lockbox”
has
          the
          meaning specified in Section 2.6(a).

         

        “Lockbox
          Agreement”
means
          a
          lockbox agreement among the Borrower, the Lender and the Lockbox Bank,
          in form
          and substance satisfactory to the Lender, as amended, supplemented or otherwise
          modified from time to time.

         

        “Lockbox
          Bank”
means
          Citibank, N.A. or any successor or any other bank acceptable to the Lender
          to
          provide lockbox services under a Lockbox Agreement.

         

        “Lockbox
          Effective Date”
means
          the date that is sixty days after the Closing Date.

         

        
          
            
            

          

          
            -12-

            
              

            

          

          
            
            

          

           

        

        “Material
          Adverse Effect”
means
          (i) a material adverse effect on the business, prospects, operations,
          results of operations, assets, liabilities or condition (financial or otherwise)
          of a Loan Party, (ii) the impairment of (A) a Loan Party’s ability to
          perform its obligations under the Loan Documents to which it is a party
          or
          (B) the ability of the Lender to enforce the Obligations or realize upon
          the Collateral or (iii) a material adverse effect on the value of the
          Collateral or the amount that the Lender would be likely to receive (after
          giving consideration to delays in payment and costs of enforcement) in
          the
          liquidation of the Collateral.

         

        “Material
          Contract”
means
          any contract or other arrangement to which the Borrower is a party (other
          than
          the Loan Documents) for which breach, nonperformance, cancellation or failure
          to
          renew could reasonably be expected to have a Material Adverse Effect. The
          Borrower’s distribution agreement with Epoch Company and any other distribution
          agreement that comprised more than 10% of the Borrower’s sale revenues in the
          previous fiscal year shall be deemed a Material Contract.

         

        “Material
          Indebtedness”
means
          Indebtedness (other than the Loans), or obligations in respect of one or
          more
          Hedging Agreements, of either Loan Party in an aggregate principal amount
          exceeding $250,000. For purposes of this definition, the “principal amount” of
          the obligations of either Loan Party in respect of any Hedging Agreement
          at any
          time shall be the maximum aggregate amount (giving effect to any netting
          agreements) that such Loan Party would be required to pay if such Hedging
          Agreement were terminated at such time.

         

        “Maximum
          Amount of the Facility”
means
          Thirteen Million Dollars ($13,000,000).

         

        “Multiemployer
          Plan”
means
          a
          multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which the
          Borrower or any ERISA Affiliate has contributed within the past six years
          or
          with respect to which the Borrower or any ERISA Affiliate may incur any
          liability.

         

        “Note”
has
          the
          meaning specified in Section 2.1(c).

         

        “Notice
          of Borrowing”
has
          the
          meaning specified in Section 2.2(a).

         

        “Notice
          of Continuation”
has
          the
          meaning specified in Section 2.2(b).

         

        “Notice
          of Conversion”
has
          the
          meaning specified in Section 2.2(c).

         

        “Obligations”
means
          and includes all loans (including the Loans), advances (including the Advances),
          debts, liabilities, obligations, covenants and duties owing by the Loan
          Parties
          to (i) the Lender of any kind or nature, present or future, whether or not
          evidenced by any note, guaranty or other instrument, which may arise under,
          out
          of, or in connection with, this Agreement, the Note, the other Loan Documents
          or
          any other agreement executed in connection herewith or therewith or
          (ii) the Existing Lender or any of its Affiliates of any kind or nature,
          present or future, whether or not evidenced by any note, guaranty, lease
          agreement or other instrument or agreement, whether or not for the payment
          of
          money, whether arising by reason of an extension of credit, opening,
          guaranteeing or confirming of a letter of credit (including, without limitation,
          the Letters of Credit) or payment of any draft drawn or other payment
          thereunder, loan, guaranty, indemnification, transaction under any Hedging
          Agreement, any agreement for cash management services or in any other manner,
          whether direct or indirect (including those acquired by assignment, purchase,
          discount or otherwise), whether absolute or contingent, due or to become
          due,
          now existing or hereafter arising and however acquired. The term includes,
          without limitation, all interest (including interest accruing on or after
          an
          Insolvency Event, whether or not such interest constitutes an allowed claim),
          charges, expenses, commitment, facility, closing and collateral management
          fees,
          letter of credit fees, cash management and other fees, interest, charges,
          expenses, fees, attorneys’ fees and disbursements, and any other sum chargeable
          to either of the Loan Parties under this Agreement, the Note, the Guaranty,
          the
          other Loan Documents, any Hedging Agreement, any agreement for cash management
          services, any lease agreement or any other agreement executed in connection
          herewith or therewith.

         

        
          
            
            

          

          
            -13-

            
              

            

          

          
            
            

          

           

        

        “Operating
          Account”
means
          the Borrower’s account number 29034642 held with Citibank, N.A.

         

        “Parent”
means
          Grand Toys International Limited, a Hong Kong company.

         

        “PBGC”
means
          the Pension Benefit Guaranty Corporation and any Person succeeding to the
          functions thereof.

         

        “Pension
          Plan”
means
          a
          pension plan (as defined in Section 3(2) of ERISA) subject to Title IV
          of ERISA (other than a Multiemployer Plan) which the Borrower or any ERISA
          Affiliate sponsors or maintains, or to which it makes, is making, or is
          obligated to make contributions, or, in the case of a multiple employer
          plan (as
          described in Section 4064(a) of ERISA), has made contributions at any time
          during the immediately preceding five plan years.

         

        “Permitted
          Liens”
means
          such of the following as to which no enforcement, collection, execution,
          levy or
          foreclosure proceeding shall have been commenced and be continuing (unless
          such
          enforcement, collection, levy or foreclosure is being contested by the
          applicable Loan Party in good faith by appropriate proceedings diligently
          conducted and for which adequate reserves are being maintained in accordance
          with GAAP): (i) Liens for taxes, assessments and other governmental charges
          or levies or the claims or demands of landlords, carriers, warehousemen,
          mechanics, laborers, materialmen and other like Persons arising by operation
          of
          law in the ordinary course of business for sums which are not yet due and
          payable, (ii) deposits or pledges (other than Liens on Receivables of the
          Borrower) to secure the payment of worker’s compensation, unemployment insurance
          or other social security benefits or obligations, public or statutory
          obligations, surety or appeal bonds, bid or performance bonds, or other
          obligations of a like nature incurred in the ordinary course of business,
          (iii) zoning restrictions, easements, encroachments, licenses, restrictions
          or covenants on the use of any Property which do not materially impair
          either
          the use of such Property in the operation of the business of the applicable
          Loan
          Party or the value of such Property, (iv) inchoate Liens arising under
          ERISA to secure current service pension liabilities as they are incurred
          under
          the provisions of employee benefit plans from time to time in effect, and
          (v) rights of general application reserved to or vested in any Governmental
          Authority to control or regulate any Property, or to use any Property in
          a
          manner which does not materially impair the use of such Property for the
          purposes for which it is held by the applicable Loan Party, provided
          that the
          foregoing Liens under clauses (i) through (v) hereof do not secure
          liabilities in excess of $200,000 in the aggregate at any time, and provided,
          further,
          that
          Permitted Liens shall not include any Lien securing Indebtedness.

         

        
          
            
            

          

          
            -14-

            
              

            

          

          
            
            

          

           

        

        “Person”
means
          any individual, sole proprietorship, partnership, limited liability company,
          joint venture, trust, unincorporated organization, joint stock company,
          association, corporation, institution, entity, party or government (including
          any division, agency or department thereof) or any other legal entity,
          whether
          acting in an individual, fiduciary or other capacity, and, as applicable,
          the
          successors, heirs and assigns of each.

         

        “Plan”
means
          any employee benefit plan, as defined in Section 3(3) of ERISA, maintained
          or contributed to by the Borrower or any ERISA Affiliate or with respect
          to
          which any of them may incur liability even if such plan is not covered
          by ERISA
          pursuant to Section 4(b)(4) thereof.

         

        “Prohibited
          Transaction”
has
          the
          meaning specified in Section 6.1(x)(v).

         

        “Property”
means
          any real property owned, leased or controlled by the Borrower or any Subsidiary
          of the Borrower.

         

        “Qualification”
or
          “Qualified”
means,
          with respect to any report of independent public accountants covering Financial
          Statements, a material qualification to such report (i) resulting from a
          limitation on the scope of examination of such Financial Statements or
          the
          underlying data with respect to the Borrower or the Guarantor, (ii) as to
          the capability of the Borrower or the Guarantor to continue operations
          as a
          going concern or (iii) which could be eliminated by changes in Financial
          Statements or notes thereto with respect to the Borrower or the Guarantor
          covered by such report (such as by the creation of or increase in a reserve
          or a
          decrease in the carrying value of assets) and which if so eliminated by
          the
          making of any such change and after giving effect thereto would result
          in a
          Default or an Event of Default.

         

        “Receivables”
means
          all present and future accounts, contracts, contract rights, promissory
          notes,
          chattel paper, tax refunds, rights to receive tax refunds, rights to receive
          payments under bonds and insurance policies (including, without limitation,
          claims under health care insurance policies), insurance proceeds, royalties,
          claims against third parties of every kind or nature, and rights to receive
          payments under letters of credit, together with all supporting obligations
          and
          all right, title, security and guaranties with respect to any of the foregoing,
          including any right of stoppage in transit.

         

        “Reportable
          Event”
means
          any of the events described in Section 4043 of ERISA and the regulations
          thereunder, other than a reportable event for which the thirty-day notice
          requirement to the PBGC has been waived.

         

        “Requirement
          of Law”
means
          (i) the Governing Documents, (ii) any law, treaty, rule, regulation,
          order or determination of an arbitrator, court or other Governmental Authority
          or (iii) any franchise, license, lease, permit, certificate, authorization,
          qualification, easement, right of way, or other right or approval binding
          on a
          Loan Party or any of its property.

         

        
          
            
            

          

          
            -15-

            
              

            

          

          
            
            

          

           

        

        “Responsible
          Officer”
means
          the President, the Chief Executive Officer, the chief financial officer
          or the
          Chief Operating Officer of a Loan Party.

         

        “Securities
          Account”
has
          the
          meaning specified in Section 8-501 of the Code.

         

        “Security
          Documents”
means
          this Agreement, the Lockbox Agreement, any Control Agreement and any other
          agreement delivered in connection herewith which purports to grant a Lien
          in
          favor of the Lender to secure all or any of the Obligations.

         

        “Solvent”
means,
          when used with respect to any Person, that as of the date as to which such
          Person’s solvency is to be measured:

         

        
          	 	
                  (i)

                	
                  the
                    fair saleable value of its assets is in excess of (A) the total
                    amount of its liabilities (including contingent, subordinated,
                    absolute,
                    fixed, matured, unmatured, liquidated and unliquidated liabilities)
                    and
                    (B) the amount that will be required to pay the probable liability
                    of
                    such Person on its debts as such debts become absolute and
                    matured;

                


        

         

        
          	 	
                  (ii)

                	
                  it
                    has sufficient capital to conduct its business;
                    and

                


        

         

        
          	 	
                  (iii)

                	
                  it
                    is able to meet its debts as they
                    mature.

                


        

         

        “Standard
          Receivable”
means
          any Receivable that is on the payment terms specified under the heading
          “Standard Receivable” on Schedule 7.1(q).

         

        “Store
          Inventory”
means
          damaged or defective Inventory in the possession of the Borrower.

         

        “Subsidiary”
means,
          as to any Person, a corporation or other entity in which that Person directly
          or
          indirectly owns or controls the shares of stock or other ownership interests
          having ordinary voting power to elect a majority of the board of directors
          or
          other governing body, or to appoint the majority of the managers of, such
          corporation or other entity.

         

        “Tangible
          Net Worth”
means,
          as to the Borrower and its Subsidiaries on a combined basis, the amount
          by which
          the sum of the total assets (other than goodwill, customer lists, organizational
          expenses, covenants not to compete, patents, copyrights, trademarks, research
          and development costs, training costs, treasury stock, deferred tax assets,
          unamortized debt discount and deferred charges, Indebtedness or Receivables
          owed
          to the Borrower or its Subsidiaries by Affiliates and all other intangible
          assets) of the Borrower and its Subsidiaries exceeds the total Liabilities
          of
          the Borrower and its Subsidiaries.

         

        “Termination
          Event”
means
          (i) a Reportable Event with respect to any Pension Plan or Multiemployer
          Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate from a
          Pension Plan during a plan year in which it was a “substantial employer” (as
          defined in Section 4001(a)(2) of ERISA); (iii) the providing of notice
          of intent to terminate a Pension Plan in a distress termination (as described
          in
          Section 4041(c) of ERISA); (iv) the institution by the PBGC of
          proceedings to terminate a Pension Plan or Multiemployer Plan; (v) any
          event or condition that is reasonably likely (A) to constitute grounds
          under Section 4042 of ERISA for the termination of, or the appointment of a
          trustee to administer, any Pension Plan or Multiemployer Plan, or (B) to
          result in termination of a Multiemployer Plan pursuant to Section 4041A of
          ERISA; or (vi) the partial or complete withdrawal, within the meaning of
          Sections 4203 and 4205 of ERISA, of the Borrower or any ERISA Affiliate
          from a Multiemployer Plan.

         

        
          
            
            

          

          
            -16-

            
              

            

          

          
            
            

          

           

        

        “Type”
means
          a
          Base Rate Advance or a LIBOR Rate Advance.

         

        SECTION
          1.2 Accounting
          Terms and Determinations.
          Unless
          otherwise defined or specified herein, all accounting terms used in this
          Agreement shall be construed in accordance with GAAP, applied on a basis
          consistent in all material respects with the Financial Statements delivered
          to
          the Lender on or before the Closing Date. All accounting determinations
          for
          purposes of determining compliance with Article VIII shall be made in
          accordance with GAAP as in effect on the Closing Date and applied on a
          basis
          consistent in all material respects with the audited Financial Statements
          delivered to the Lender on or before the Closing Date. The Financial Statements
          required to be delivered hereunder from and after the Closing Date, and
          all
          financial records, shall be maintained in accordance with GAAP. If GAAP
          shall
          change from the basis used in preparing the audited Financial Statements
          delivered to the Lender on or before the Closing Date, the Compliance
          Certificates required to be delivered pursuant to Section 7.1 shall include
          calculations setting forth the adjustments necessary to demonstrate how
          the
          Borrower is in compliance with the Financial Covenants based upon GAAP
          as in
          effect on the Closing Date.

         

        SECTION
          1.3 Other
          Terms; Headings.
          Unless
          otherwise defined herein, terms used herein that are defined in the Uniform
          Commercial Code, from time to time in effect in the State of New York (the
          “Code”), shall have the meanings given in the Code. An Event of Default shall
          “continue” or be “continuing” unless and until such Event of Default has been
          waived or cured within any grace period specified therefor under
          Section 9.1. The headings and the Table of Contents are for convenience
          only and shall not affect the meaning or construction of any provision
          of this
          Agreement. Whenever the context may require, any pronoun shall include
          the
          corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
          limitation”. The word “will” shall be construed to have the same meaning and
          effect as the word “shall”. Unless the context requires otherwise (i) any
          definition of or reference to any agreement, instrument or other document
          herein
          or in any other Loan Document shall be construed as referring to such agreement,
          instrument or other document as from time to time amended, supplemented
          or
          otherwise modified (subject to any restrictions on such amendments, supplements
          or modifications set forth herein or in any other Loan Document), (ii) any
          reference herein to any Person shall be construed to include such Person’s
          successors and assigns, (iii) the words “herein”, “hereof” and “hereunder”,
          and words of similar import, shall be construed to refer to this Agreement
          in
          its entirety and not to any particular provision hereof, (iv) all
          references herein to Articles, Sections, Exhibits and Schedules shall be
          construed to refer to Articles and Sections of, and Exhibits and Schedules
          to,
          this Agreement and (v) the words “asset” and “property” shall be construed
          to have the same meaning and effect and to refer to any and all tangible
          and
          intangible assets and properties, including cash, securities, accounts
          and
          contract rights.

         

        
          
            
            

          

          
            -17-

            
              

            

          

          
            
            

          

           

        

        ARTICLE
          II

        THE
          CREDIT FACILITIES

         

        SECTION
          2.1 The
          Loans.

         

        (a) The
          Lender agrees, subject to Section 2.4 and the other terms and conditions of
          this Agreement, to make revolving credit loans (the “Loans”) to the Borrower,
          from time to time from the Closing Date to but excluding the Expiration
          Date, at
          the Borrower’s request to the Lender, in an aggregate principal amount at any
          one time outstanding which, when combined with the aggregate undrawn amount
          of
          all unexpired Letters of Credit, does not exceed (i) 85% of Eligible
          Receivables plus (ii) 50% of Eligible Inventory located in the United
          States plus (iii) 40% of Eligible Inventory in transit to the United States
          (the “Borrowing Base”), provided that, unless the Borrower has delivered an
          executed Landlord Estoppel and Agreement to the Lender with respect to
          the
          Lackawanna Warehouse, there shall be a reserve against the Borrowing Base
          in an
          amount equal to three months’ of the Borrower’s lease or rent payments with
          respect to such warehouse; and provided, however, that, in addition and
          after
          giving effect to the advance rates and other limitations contained herein,
          in no
          event shall the aggregate amount of the Loans and the Letters of Credit
          outstanding at any time (x) in respect of Eligible Inventory exceed
          $4,500,000, (y) in respect of Eligible Receivables under which account
          debtors are located in Canada exceed $2,000,000 USD or (z) exceed the
          Maximum Amount of the Facility.

         

        (b) The
          Lender, at any time in the exercise of its sole discretion, may
          (i) establish and increase or decrease reserves against Eligible
          Receivables and Eligible Inventory, (ii) reduce the advance rates against
          Eligible Receivables and Eligible Inventory, or thereafter increase such
          advance
          rates to any level equal to or below the advance rates in effect on the
          Closing
          Date and (iii) impose additional restrictions (or eliminate the same) to
          the standards of eligibility set forth in the definitions of “Eligible
          Receivables” and “Eligible Inventory.”

         

        (c) The
          Loans
          shall be evidenced by a promissory note payable to the order of the Lender,
          substantially in the form of Exhibit A (as amended, supplemented or
          otherwise modified from time to time, the “Note”), executed by the Borrower and
          delivered to the Lender on the Closing Date. The Note shall be in a stated
          maximum principal amount equal to the Maximum Amount of the
          Facility.

         

        (d) The
          Loans
          shall be payable in full, with all interest accrued thereon, on the Expiration
          Date. The Borrower may borrow, repay and reborrow Loans, in whole or in
          part, in
          accordance with the terms hereof.

         

        SECTION
          2.2 Procedure
          for Borrowing; Notices of Borrowing; Notices of Continuation; Notices of
          Conversion.

         

        (a) Except
          as
          specified in Section 2.2(f), each borrowing of a Loan (each, a “Borrowing”)
          shall be made on notice, given not later than 12:00 Noon (New York time)
          on the
          third Business Day prior to the date of the proposed Borrowing in the case
          of a
          LIBOR Rate Advance, and not later than 12:00 Noon (New York time) on the
          date of
          the proposed Borrowing in the case of a Base Rate Advance, by the Borrower
          to
          the Lender. Each such notice of a Borrowing shall be by telephone, confirmed
          immediately in writing (by telecopier or otherwise as permitted hereunder),
          substantially in the form of Exhibit D (a “Notice of Borrowing”),
          specifying therein the requested (i) date of such Borrowing, (ii) Type
          of Advance comprising such Borrowing, (iii) principal amount of such
          Borrowing and (iv) Interest Period, in the case of a LIBOR Rate
          Advance.

         

        
          
            
            

          

          
            -18-

            
              

            

          

          
            
            

          

           

        

        (b) With
          respect to any Borrowing consisting of a LIBOR Rate Advance, the Borrower
          may,
          subject to the provisions of Section 2.2(d) and so long as all the
          conditions set forth in Article V have been fulfilled, elect to maintain
          such Borrowing or any portion thereof as a LIBOR Rate Advance by selecting
          a new
          Interest Period for such Borrowing, which new Interest Period shall commence
          on
          the last day of the Interest Period then ending. Each selection of a new
          Interest Period (a “Continuation”) shall be made by notice given not later than
          12:00 Noon (New York time) on the third Business Day prior to the date
          of any
          such Continuation by the Borrower to the Lender. Such notice by the Borrower
          of
          a Continuation shall be by telephone, confirmed immediately in writing
          (by
          telecopier or otherwise as permitted hereunder), substantially in the form
          of
          Exhibit E (a “Notice of Continuation”), specifying whether the Advance
          subject to the requested Continuation comprises part (or all) of the Loans
          and
          the requested (i) date of such Continuation, (ii) Interest Period and
          (iii) aggregate amount of the Advance subject to such Continuation, which
          shall comply with all limitations on Loans hereunder. Unless, on or before
          12:00
          Noon (New York time) of the third Business Day prior to the expiration
          of an
          Interest Period, the Lender shall have received a Notice of Continuation
          from
          the Borrower for the entire Borrowing consisting of the LIBOR Rate Advance
          outstanding during such Interest Period, any amount of such Advance comprising
          such Borrowing remaining outstanding at the end of such Interest Period
          (or any
          unpaid portion of such Advance not covered by a timely Notice of Continuation)
          shall, upon the expiration of such Interest Period, be Converted to a Base
          Rate
          Advance.

         

        (c) The
          Borrower may on any Business Day upon notice (each such notice, a “Notice
          of Conversion”) given to the Lender, and subject to the provisions of
          Section 2.2(d), Convert the entire amount of or a portion of an Advance of
          one Type into an Advance of another Type; provided,
          however,
          that any
          Conversion of a LIBOR Rate Advance into a Base Rate Advance shall be made
          on,
          and only on, the last day of an Interest Period for such LIBOR Rate Advance.
          Each such Notice of Conversion shall be given not later than 12:00 Noon
          (New
          York time) on the Business Day prior to the date of any proposed Conversion
          into
          a Base Rate Advance and on the third Business Day prior to the date of
          any
          proposed Conversion into a LIBOR Rate Advance. Subject to the restrictions
          specified above, each Notice of Conversion shall be by telephone, confirmed
          immediately in writing (by telecopier or otherwise as permitted hereunder),
          substantially in the form of Exhibit F, specifying (i) the requested
          date of such Conversion, (ii) the Type of Advance to be Converted,
          (iii) the requested Interest Period, in the case of a Conversion into a
          LIBOR Rate Advance, and (iv) the amount of such Advance to be Converted and
          whether such amount comprises part (or all) of the Loans. Each Conversion
          shall
          be in an aggregate amount not less than $500,000 or an integral multiple
          of
          $50,000 in excess thereof.

         

        
          
            
            

          

          
            -19-

            
              

            

          

          
            
            

          

           

        

        (d) Anything
          in subsection (b) or (c) above to the contrary
          notwithstanding,

         

        
          	 	
                  (i)

                	
                  if,
                    at least one Business Day before the date of any requested LIBOR
                    Rate
                    Advance, the introduction of or any change in or in the interpretation
                    of
                    any law or regulation makes it unlawful, or any central bank
                    or other
                    Governmental Authority asserts that it is unlawful, for the Lender
                    or any
                    of its Affiliates to perform its obligations hereunder to make
                    a LIBOR
                    Rate Advance or to fund or maintain a LIBOR Rate Advance hereunder
                    (including in the case of a Continuation or a Conversion), the
                    Lender
                    shall promptly give written notice of such circumstance, and
                    the right of
                    the Borrower to select a LIBOR Rate Advance for such Borrowing
                    or any
                    subsequent Borrowing (including a Continuation or a Conversion)
                    shall be
                    suspended until the circumstances causing such suspension no
                    longer exist,
                    and any Advance comprising such requested Borrowing shall be
                    a Base Rate
                    Advance;

                


        

         

        
          	 	
                  (ii)

                	
                  if,
                    at least one Business Day before the first day of any Interest
                    Period, the
                    Lender is unable to determine the LIBOR Rate for LIBOR Rate Advances
                    comprising any requested Borrowing, Continuation or Conversion,
                    the Lender
                    shall promptly give written notice of such circumstance to the
                    Borrower,
                    and the right of the Borrower to select or maintain LIBOR Rate
                    Advances
                    for such Borrowing or any subsequent Borrowing shall be suspended
                    until
                    the Lender shall notify the Borrower that the circumstances causing
                    such
                    suspension no longer exist, and any Advance comprising such Borrowing
                    shall be a Base Rate Advance;

                


        

         

        
          	 	
                  (iii)

                	
                  if
                    the Lender shall, at least one Business Day before the date of
                    any
                    requested Borrowing or Continuation of, or Conversion into, a
                    LIBOR Rate
                    Advance, notify the Borrower that the LIBOR Rate for Advances
                    comprising
                    such Borrowing, Continuation or Conversion will not adequately
                    reflect the
                    cost to the Lender of making or funding Advances for such Borrowing,
                    the
                    right of the Borrower to select LIBOR Rate Advances shall be
                    suspended
                    until the Lender shall notify the Borrower that the circumstances
                    causing
                    such suspension no longer exist, and any Advance comprising such
                    Borrowing
                    shall be a Base Rate Advance;

                


        

         

        
          	 	
                  (iv)

                	
                  there
                    shall not be outstanding at any time more than five Borrowings
                    which
                    consist of LIBOR Rate Advances;

                


        

        
           

          
            
              
              

            

            
              -20-

              
                

              

            

            
              
              

            

             

          

        

        
          	 	
                  (v)

                	
                  each
                    Borrowing which consists of LIBOR Rate Advances shall be in an
                    amount
                    equal to $500,000 or a whole multiple of $50,000 in excess thereof;
                    and

                


        

         

        
          	 	
                  (vi)

                	
                  if
                    a Default has occurred and is continuing, no LIBOR Rate Advances
                    may be
                    borrowed or continued as such and no Base Rate Advance may be
                    Converted
                    into a LIBOR Rate Advance.

                


        

         

        (e) Each
          Notice of Borrowing, Notice of Continuation and Notice of Conversion shall
          be
          irrevocable and binding on the Borrower. The Borrower agrees to indemnify
          the
          Lender against any loss, cost or expense incurred by the Lender as a result
          of
          (i) default by the Borrower in making a Borrowing of, Conversion into or
          Continuation of a LIBOR Rate Advance after the Borrower has given notice
          requesting the same, (ii) default by the Borrower in payment when due of
          the principal amount of or interest on any LIBOR Rate Advance or (iii) the
          making of a payment or prepayment of a LIBOR Rate Advance on a day which
          is not
          the last day of an Interest Period with respect thereto, including, without
          limitation, any loss (including loss of anticipated profits), cost or expense
          incurred by reason of the liquidation or reemployment of deposits or other
          funds
          acquired by the Lender to fund such Advance.

         

        (f) Anything
          in subsection (a) above notwithstanding, the Lender agrees, commencing on
          the date on which the Borrower has established a controlled disbursement
          account
          with Citibank, N.A. or one of its Affiliates, subject to Section 2.4,
          Article V and the other terms and conditions of this Agreement, to make
          Loans consisting of Base Rate Advances in such amounts and on such dates
          as
          shall be necessary to fund, on any Business Day, payment of all checks,
          drafts,
          documents and instruments presented for payment against such controlled
          disbursement account.

         

        SECTION
          2.3 Application
          of Proceeds.
          The
          proceeds of the Loans shall be used by the Borrower to refinance existing
          Indebtedness, for its general corporate and working capital purposes and
          for
          expenses incurred by the Borrower in connection herewith.

         

        SECTION
          2.4 Maximum
          Amount of the Facility; Mandatory Prepayments; Optional
          Prepayments.

         

        (a) In
          no
          event shall the sum of the aggregate outstanding principal balances of
          the Loans
          and the aggregate undrawn amount of all unexpired Letters of Credit exceed
          the
          lesser of (i) the Borrowing Base and (ii) the Maximum Amount of the
          Facility.

         

        (b) In
          addition to any prepayment required as a result of an Event of Default
          hereunder, the Loans shall be subject to mandatory prepayment as
          follows:

         

        
          	 	
                  (i)

                	
                  immediately
                    upon discovery by or notice to the Borrower that any of the lending
                    limits
                    set forth in Section 2.1(a) or Section 2.4(a) has been exceeded,
                    the Borrower shall pay the Lender an amount sufficient to reduce
                    the
                    outstanding balances of the Loans, Collateralize outstanding
                    Letters of
                    Credit, or any combination thereof, to the applicable maximum
                    allowed
                    amount, and such amount shall become due and payable by the Borrower
                    without the necessity of a demand by the Lender;
                    and

                


        

         

        
          
            
            

          

          
            -21-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (ii)

                	
                  the
                    entire outstanding principal amount of the Loans, together with
                    all
                    accrued and unpaid interest thereon and all fees, costs and expenses
                    payable by the Borrower hereunder, shall become due and payable
                    on the
                    Expiration Date.

                


        

         

        (c) The
          Borrower may, at any time and from time to time, prepay the Loans, in whole
          or
          in part (subject, in the case of the prepayment in full of all the Loans
          and the
          termination of the Lender’s obligation to make Loans and to cause Letters of
          Credit to be issued, to the additional requirements of Section 4.5) upon at
          least two Business Days’ irrevocable notice by the Borrower to the Lender in the
          case of Base Rate Advances, and four Business Days’ irrevocable notice by the
          Borrower to the Lender in the case of LIBOR Rate Advances, specifying the
          date
          and amount of prepayment, provided
          that
          LIBOR Rate Advances may not be optionally prepaid other than on the last
          day of
          any Interest Period with respect thereto. If such notice is given, the
          Borrower
          shall make such prepayment, and the payment amount specified in such notice
          shall be due and payable, on the date specified therein accompanied by
          the
          amount of accrued and unpaid interest thereon.

         

        SECTION
          2.5 Maintenance
          of Loan Account; Statements of Account.
          The
          Lender shall maintain an account on its books in the name of the Borrower
          (the
“Loan Account”) in which the Borrower will be charged with all Loans and
          Advances made by the Lender to the Borrower or for the Borrower’s account,
          including the Loans, interest, fees, expenses and any other Obligations.
          The
          Loan Account will be credited with all amounts received by the Lender from
          the
          Borrower or for the Borrower’s account, including, as set forth below, all
          amounts received from the Lockbox Bank. The Lender shall send the Borrower
          a
          monthly statement reflecting the activity in the Loan Account. Each such
          statement shall be an account stated and shall be final, conclusive and
          binding
          on the Borrower, absent manifest error.

         

        SECTION
          2.6 Collection
          of Receivables.

         

        (a) Commencing
          on the Lockbox Effective Date, the Borrower shall maintain, pursuant to
          (i) the Lockbox Agreement, a lockbox in the Borrower’s name subject to the
          security interest of the Lender (the “Lockbox”) and (ii) a Control
          Agreement, a blocked account in the name of the Borrower subject to the
          security
          interest of the Lender into which Items of Payment shall be deposited.
          Items of
          Payment received from the Lockbox will be processed in accordance with
          the
          Lockbox Agreement. The Borrower shall instruct its account debtors located
          in
          the United States such that, on and subsequent to the Lockbox Effective
          Date,
          such account debtors shall remit all Items of Payment to the
          Lockbox.

         

        (b) Commencing
          on the Lockbox Effective Date and notwithstanding the obligation of the
          Borrower
          to instruct its account debtors located in the United States to remit all
          Items
          of Payment to the Lockbox, if the Borrower receives any Items of Payment
          or any
          other Collections of any kind from any account debtor located in the United
          States, the Borrower shall deposit, within one Business Day of its receipt
          thereof, such Items of Payment and all other Collections and other cash,
          checks
          or other funds from time to time received by the Borrower from any source,
          into
          a deposit account of the Borrower subject to a Control Agreement. The Borrower
          will at all times (i) not commingle any Items of Payment received by it
          with any of its other funds or property, but will segregate them from its
          other
          assets and will hold them in trust and for the account and as the property
          of
          the Lender until depositing them in a deposit account subject to a Control
          Agreement and (ii) endorse any Item of Payment received by it for deposit
          into such a deposit account.

         

        
          
            
            

          

          
            -22-

            
              

            

          

          
            
            

          

           

        

        (c) The
          Borrower shall, by the close of business on each Business Day commencing
          on the
          Lockbox Effective Date, cause each bank party to a Control Agreement (other
          than
          any bank holding a Canadian Receivables Account) to wire transfer to an
          account
          designated by the Lender all amounts on deposit at such time, and the Lender
          shall apply any and all such amounts to the Obligations in any order as
          the
          Lender may elect in its sole and absolute discretion and remit any remainder
          to
          the Operating Account, provided
          that
          such banks may from time to time withdraw from such accounts their customary
          service fees, returned item amounts and other expenses, to the extent permitted
          to be withdrawn under the applicable Control Agreement.

         

        (d) Until
          the
          Lockbox Effective Date, the Borrower shall deposit all Items of Payment
          into the
          Operating Account.

         

        (e) Commencing
          on the Lockbox Effective Date, the Borrower shall instruct all of its account
          debtors located in Canada (each a “Canadian Account Debtor”) to remit all Items
          of Payment to the Canadian Receivables Account. Commencing on the Closing
          Date,
          if the Borrower receives any Items of Payment or any other Collections
          of any
          kind from any Canadian Account Debtor, the Borrower shall deposit, within
          one
          Business Day of its receipt thereof, such Items of Payment and all other
          Collections and other cash, checks or other funds from time to time received
          by
          the Borrower from any Canadian Account Debtor, into the Canadian Receivables
          Account. If the amount on deposit in the Canadian Receivables Account exceeds
          CND$200,000 at any time after the Lockbox Effective Date, the Borrower
          shall
          immediately transfer the amount of such excess (after converting such funds
          into
          Dollars) to a deposit account of the Borrower subject to a Control Agreement
          as
          specified in Section 2.6(b). In addition, if an Event of Default has
          occurred and is continuing at any time after the Lockbox Effective Date,
          the
          Borrower shall transfer any amounts on deposit in the Canadian Receivables
          Account (after converting such funds into Dollars) to a deposit account
          of the
          Borrower subject to a Control Agreement as specified in Section 2.6(b) by
          the close of business on each Business Day.

         

        SECTION
          2.7 Term.
          The
          term of this Agreement shall be for a period from the Closing Date to but
          not
          including December 22, 2008 unless sooner terminated in accordance with the
          terms of this Agreement. Notwithstanding the foregoing, the Borrower shall
          have
          no right to terminate this Agreement at any time that any principal of
          or
          interest on any of the Loans is outstanding, except upon prepayment of
          all
          Obligations and the satisfaction of all other conditions set forth in the
          Loan
          Documents with respect thereto.

         

        
          
             

          

          
            -23-

            
              

            

          

          
             

          

        

         

        SECTION
          2.8 Payment
          Procedures.

         

        (a) The
          Borrower hereby authorizes the Lender to charge the Loan Account with the
          amount
          of all principal, interest, fees, expenses and other payments to be made
          hereunder and under the other Loan Documents. The Lender may, but shall
          not be
          obligated to, discharge the Borrower’s payment obligations hereunder by so
          charging the Loan Account.

         

        (b) All
          payments to be made by the Borrower hereunder and under the Note, whether
          on
          account of principal, interest, fees or otherwise, shall be made without
          setoff,
          deduction or counterclaim and shall be made prior to 2:00 p.m. (New York
          time) on the due date thereof to the Lender.

         

        (c) Whenever
          any payment to be made hereunder shall be stated to be due on a day that
          is not
          a Business Day, the payment may be made on the next succeeding Business
          Day
          (except as specified in clause (ii) of the definition of Interest Period)
          and such extension of time shall be included in the computation of the
          amount of
          interest due hereunder.

         

        SECTION
          2.9 Letters
          of Credit.

         

        (a) The
          Lender, upon the request of the Borrower, shall cause Citibank, N.A. or
          another
          bank acceptable to the Lender to issue for the account of the Borrower
          Letters
          of Credit of a tenor and containing terms acceptable to the Lender and
          the
          issuer of such Letter of Credit, in a maximum aggregate face amount outstanding
          at any time not to exceed Two Million Dollars ($2,000,000), provided
          that
          (i) the Lender shall have no obligation to cause to be issued any Letter of
          Credit with an expiration date after the Expiration Date and (ii) if a
          Letter of Credit is issued with an expiration date after the Expiration
          Date,
          the Borrower shall Collateralize such Letter of Credit in full immediately.
          The
          term of any Letter of Credit shall not exceed three hundred sixty days
          from the
          date of issuance, subject to renewal in accordance with the terms thereof,
          but
          in no event to a date beyond the Expiration Date. All Letters of Credit
          shall be
          subject to the limitations set forth in Section 2.4, and a sum equal to the
          aggregate amount of all outstanding Letters of Credit shall be included
          in
          calculating outstanding amounts for purposes of determining compliance
          with
          Section 2.4. Upon each drawing or payment under a Letter of Credit, the
          amount of such drawing or payment for all purposes under this Agreement
          shall
          become and be deemed to be, without any further action on the part of any
          Person, a Loan made by the Lender on the date of such drawing or payment
          (but
          without any requirement for compliance with the conditions precedent to
          the
          making of Loans contained in this Agreement).

         

        (b) Whenever
          the Borrower desires the issuance of a Letter of Credit, the Borrower shall
          deliver to the Lender a written notice no later than 12:00 Noon (New York
          time)
          at least ten Business Days (or such shorter period as may be agreed to
          by the
          Lender) in advance of the proposed date of issuance of a letter of credit
          request substantially in the form attached as Exhibit G (a “Letter of
          Credit Request”). The transmittal by the Borrower of each Letter of Credit
          Request shall be deemed to be a representation and warranty by the Borrower
          that
          the Letter of Credit may be issued in accordance with and will not violate
          any
          of the requirements of this Section 2.9. Prior to the date of issuance of
          each Letter of Credit, the Borrower shall provide to the Lender a precise
          description of the documents and the text of any certificate to be presented
          by
          the beneficiary of such Letter of Credit which, if presented by such beneficiary
          on or prior to the expiration date of such Letter of Credit, would require
          the
          issuing bank to make payment under such Letter of Credit. The Lender, in
          its
          reasonable judgment, may require changes in any such documents and certificates.
          No Letter of Credit shall require payment against a conforming draft to
          be made
          thereunder prior to the second Business Day after the date on which such
          draft
          is presented.

         

        
          
            
            

          

          
            -24-

            
              

            

          

          
            
            

          

           

        

        (c) Upon
          any
          request for a drawing under any Letter of Credit by the beneficiary thereof,
          (i) the Borrower shall be deemed to have timely given a Notice of Borrowing
          to the Lender for a Loan on the date on which such drawing is honored in
          an
          amount equal to the amount of such drawing and (ii) without regard to
          satisfaction of the applicable conditions specified in Section 5.2 and the
          other terms and conditions of borrowings contained herein, the Lender shall, on
          the date of such drawing, make a Loan comprised of a Base Rate Advance
          in the
          amount of such drawing, the proceeds of which shall be applied directly
          by the
          Lender to reimburse the issuing bank for the amount of such drawing or
          payment.

         

        (d) As
          between the Borrower and the Lender, the Borrower assumes all risks of
          the acts
          and omissions of the Lender and the issuing bank (other than for the gross
          negligence or willful misconduct of the Lender or such issuing bank) or
          misuse
          of the Letters of Credit by the respective beneficiaries of such Letters
          of
          Credit. In furtherance and not in limitation of the foregoing, the Lender
          shall
          not be responsible (i) for the accuracy, genuineness or legal effects of
          any document submitted by any party in connection with the application
          for and
          issuance of or any drawing honored under such Letters of Credit even if
          it
          should in fact prove to be in any or all respects invalid, inaccurate,
          fraudulent or forged, (ii) for the validity or sufficiency of any
          instrument transferring or assigning or purporting to transfer or assign
          any
          such Letter of Credit, or the rights or benefits thereunder or proceeds
          thereof,
          in whole or in part, which may prove to be invalid or ineffective for any
          reason, (iii) for errors, omissions, interruptions or delays in
          transmission or delivery of any messages, by mail, cable, telegraph, telex,
          telecopy or otherwise, whether or not they be in cipher, (iv) for errors in
          interpretation of technical terms, (v) for any loss or delay in the
          transmission or otherwise of any document required to make a drawing under
          any
          such Letter of Credit, or of the proceeds thereof, (vi) for the
          misapplication by the beneficiary of any such Letter of Credit, of the
          proceeds
          of any drawing honored under such Letter of Credit, and (vii) for any
          consequences arising from causes beyond the control of the issuing bank
          or the
          Lender, provided
          that the
          foregoing shall not release the Lender or the issuing bank for any liability
          for
          its gross negligence or willful misconduct. None of the above shall affect,
          impair, or prevent the vesting of any of the Lender’s rights or powers
          hereunder. Any action taken or omitted to be taken by the Lender under
          or in
          connection with any Letter of Credit, if taken or omitted in the absence
          of
          gross negligence or willful misconduct of the Lender, shall not create
          any
          liability of the Lender to the Borrower.

         

        
          
            
            

          

          
            -25-

            
              

            

          

          
            
            

          

           

        

        (e) The
          obligations of the Borrower to reimburse the Lender for drawings honored
          under
          the Letters of Credit shall be unconditional and irrevocable and shall
          be paid
          strictly in accordance with the terms of this Agreement under all circumstances
          including, without limitation, the following circumstances: (i) any lack of
          validity or enforceability of this Agreement, any Letter of Credit, any
          Letter
          of Credit Agreement or any other agreement or instrument relating thereto
          (the
“Letter of Credit Related Documents”); (ii) the existence of any claim,
          setoff, defense or other right which the Borrower or any Affiliate of the
          Borrower may have at any time against a beneficiary or any transferee of
          any
          Letter of Credit (or any Persons or entities for whom any such beneficiary
          or
          transferee may be acting), the Lender or any other Person, whether in connection
          with this Agreement, the other Loan Documents, the transactions contemplated
          herein or therein or any unrelated transaction; (iii) any draft, demand,
          certificate or other documents presented under any Letter of Credit proving
          to
          be forged, fraudulent or invalid in any respect or any statement therein
          being
          untrue or inaccurate in any respect; (iv) the surrender or impairment of
          any security for the performance or observance of any of the terms of any
          of the
          Loan Documents; (v) failure of any drawing under a Letter of Credit or any
          non-application or misapplication by the beneficiary of the proceeds of
          any
          drawing; or (vi) that a Default or Event of Default shall have occurred and
          be continuing.

         

        ARTICLE
          III

        SECURITY

         

        SECTION
          3.1 General.
          To
          secure the prompt and complete payment and performance when due (whether
          at
          stated maturity, by acceleration or otherwise) of all of the Obligations,
          the
          Borrower hereby grants to the Lender a lien on and security interest in
          all of
          its right, title and interest in and to all the Collateral including, without
          limitation, its Receivables, Equipment, General Intangibles, Inventory,
          Investment Property and all other personal property, wherever located,
          whether
          now owned or hereafter acquired, and all additions and accessions thereto
          and
          substitutions and replacements therefor and improvements thereon, and all
          proceeds (whether in the form of cash or other property) and products thereof
          including, without limitation, all proceeds of insurance covering the same
          and
          all tort claims in connection therewith. As further security for the
          Obligations, and to provide other assurances to the Lender, the Lender
          shall
          receive, among other things, the Lockbox Agreement and any Control Agreement.
          This Agreement shall constitute a security agreement for purposes of the
          Code.

         

        SECTION
          3.2 Further
          Security; Lender Affiliates.
          The
          Borrower also grants to the Lender, as further security for all of the
          Obligations, a security interest in all of its right, title and interest
          in and
          to all property of the Borrower in the possession of or deposited with
          or in the
          custody of the Lender or any Affiliate of the Lender or any representative,
          agent or correspondent of the Lender and in all present and future deposit
          accounts as that term is defined in the Code. For purposes of this Agreement,
          any property in which the Lender or any such Affiliate has any security
          or title
          retention interest shall be deemed to be in the custody of the Lender or
          of such
          Affiliate. The security interest granted in Section 3.1 shall be deemed to
          be in favor of the Lender for the benefit of itself and any Affiliate of
          the
          Lender to which the Borrower owes any Obligations.

         

        
          
            
            

          

          
            -26-

            
              

            

          

          
            
            

          

        

         

        SECTION
          3.3 Recourse
          to Security.
          Recourse to security shall not be required for any Obligation hereunder
          and the
          Borrower hereby waives any requirement that the Lender exhaust any right
          or take
          any action against any of the Collateral before proceeding to enforce the
          Obligations against the Borrower.

         

        SECTION
          3.4 Special
          Provisions Relating to Inventory.

         

        (a) All
          Inventory.
          The
          security interest in the Inventory granted to the Lender hereunder shall
          continue through all steps of manufacture and sale and attach without further
          act to raw materials, work in process, finished goods, returned goods,
          documents
          of title and warehouse receipts, and to proceeds resulting from the sale
          or
          other disposition of such Inventory. Until all of the Obligations have
          been
          satisfied, all Letters of Credit have been terminated or Collateralized
          and the
          Lender has no obligation to make Loans or to cause Letters of Credit to
          be
          issued hereunder, the Lender’s security interest in such Inventory and in all
          proceeds thereof shall continue in full force and effect and the Lender
          shall
          have, in its sole and absolute discretion at any time if an Event of Default
          has
          occurred and is continuing or the Lender believes that fraud has occurred,
          the
          right to take physical possession of such Inventory and to maintain it
          on the
          premises of the Borrower, in a public warehouse, or at such other place
          as the
          Lender may deem appropriate. If the Lender exercises such right to take
          possession of such Inventory, the Borrower will, upon demand, and at the
          Borrower’s cost and expense, assemble such Inventory and make it available to
          the Lender at a place or places convenient to the Lender.

         

        (b) Location
          of Inventory; Cash Sales.
          All
          Inventory of the Borrower shall be maintained at the locations therefor
          shown on
          Schedule 6.1(b), except for Inventory moved from such locations solely for
          the purpose of sale in the ordinary course of the Borrower’s business and
          Inventory in transit in the ordinary course of the Borrower’s business. If sales
          are made for cash, the Borrower shall immediately deliver to the Lender
          the
          checks or other forms of payment which it receives, together with any necessary
          endorsements.

         

        (c) Further
          Assurances.
          The
          Borrower will perform any and all steps that the Lender may request to
          perfect
          the Lender’s security interests in the Borrower’s Inventory including, without
          limitation, placing and maintaining signs, executing and filing financing
          or
          continuation statements in form and substance satisfactory to the Lender,
          maintaining stock records and conducting lien searches. In each case, the
          Borrower shall take such action as promptly as possible after requested
          by the
          Lender but in any event within five Business Days after any such request
          is made
          except that the Borrower shall take such action immediately upon the Lender’s
          request following the occurrence of an Event of Default. If any of the
          Borrower’s Inventory is in the possession or control of any Person other than a
          purchaser in the ordinary course of business or a public warehouseman where
          the
          warehouse receipt is in the name of or held by the Lender, the Borrower
          shall
          notify such Person of the Lender’s security interest therein and, upon request,
          instruct such Person to acknowledge in writing its agreement to hold all
          such
          Inventory for the benefit of the Lender and subject to the Lender’s
          instructions. If so requested by the Lender, the Borrower (as promptly
          as
          possible after requested by the Lender but in any event within five Business
          Days after any such request is made) will deliver (i) to the Lender
          warehouse receipts, bills of lading and other documents of title covering
          any of
          the Borrower’s Inventory showing the Lender as the beneficiary thereof and
          (ii) to the warehouseman such agreements relating to the release of
          warehouse Inventory as the Lender may request. A physical verification
          of all of
          the Borrower’s Inventory wherever located will be taken by the Borrower at least
          every twelve months and, in any case, as often as reasonably requested
          by the
          Lender and a copy of such physical verification shall be promptly thereafter
          submitted to the Lender. The Borrower shall also submit to the Lender a
          report
          of the annual physical Inventory of the Borrower as observed and tested
          by its
          public accountants in accordance with generally accepted auditing standards
          and
          GAAP. If so requested by the Lender, the Borrower shall execute and deliver
          to
          the Lender a confirmatory written instrument, in form and substance satisfactory
          to the Lender, listing all its Inventory, but any failure to execute or
          deliver
          the same shall not limit or otherwise affect the Lender’s security interest in
          and to such Inventory. The Borrower will not permit any Person other than
          the
          Lender to be listed as the assignee of or secured party for any of the
          Borrower’s electronic bills of lading or other documents of title.

         

        
          
            
            

          

          
            -27-

            
              

            

          

          
            
            

          

           

        

        (d) Inventory
          Records.
          The
          Borrower shall maintain full, accurate and complete records of its Inventory
          describing the kind, type and quantity of such Inventory and the Borrower’s cost
          therefor, withdrawals therefrom and additions thereto, including a perpetual
          inventory for raw materials, work in process, finished goods and goods
          recalled
          or subject to recall.

         

        SECTION
          3.5 Special
          Provisions Relating to Receivables.

         

        (a) Invoices,
          Etc.
          On the
          Lender’s request therefor, the Borrower shall furnish to the Lender copies of
          invoices to customers and shipping and delivery receipts or warehouse receipts
          thereof. The Borrower shall deliver to the Lender (i) the originals of all
          letters of credit, notes, and instruments in its favor, (ii) such
          endorsements or assignments related thereto as the Lender may reasonably
          request
          and (iii) the written consent of the issuer of any letter of credit to the
          assignment of the proceeds of such letter of credit by the Borrower to
          the
          Lender.

         

        (b) Records,
          Collections, Etc.
          The
          Borrower shall promptly report to the Lender all customer credits and all
          returns, repossessions and recoveries of Inventory that are not in the
          ordinary
          course of its business, providing the Lender with a description of such
          Inventory. The Borrower shall not, without the Lender’s prior written consent,
          settle or adjust any dispute or claim, or grant any discount (except ordinary
          trade discounts), credit or allowance or accept any return of merchandise,
          except in the ordinary course of its business. Upon the occurrence and
          during
          the continuance of an Event of Default or at any time that the Lender believes
          that fraud has occurred, the Lender may (i) settle or adjust disputes or
          claims directly with account debtors for amounts and upon terms which it
          considers advisable and (ii) notify account debtors on the Borrower’s
          Receivables that such Receivables have been assigned to the Lender, and
          that
          payments in respect thereof shall be made directly to the Lender. Where
          the
          Borrower receives collateral of any kind or nature by reason of transactions
          between itself and its customers or account debtors, the Borrower will
          hold the
          same on the Lender’s behalf, subject to the Lender’s instructions, and as
          property forming part of the Borrower’s Receivables. Where the Borrower sells
          goods or services to a customer which also sells goods or services to it
          or
          which may have other claims against it, the Borrower will so advise the
          Lender
          immediately to permit the Lender to establish a reserve therefor. The Borrower
          hereby irrevocably authorizes and appoints the Lender, or any Person the
          Lender
          may designate, as its attorney-in-fact, at the Borrower’s sole cost and expense,
          to exercise, if an Event of Default has occurred and is continuing or the
          Lender
          believes that fraud has occurred, all of the following powers, which being
          coupled with an interest, shall be irrevocable until all of the Obligations
          have
          been indefeasibly paid and satisfied in full in cash: (A) to receive, take,
          endorse, sign, assign and deliver, all in the name of the Lender or the
          Borrower, any and all checks, notes, drafts, and other documents or instruments
          relating to the Collateral; (B) to receive, open and dispose of all mail
          addressed to the Borrower and to notify postal authorities to change the
          address
          for delivery thereof to such address as the Lender may designate; and
          (C) to take or bring, in the name of the Lender or the Borrower, all steps,
          actions, suits or proceedings deemed by the Lender necessary or desirable
          to
          enforce or effect collection of the Borrower’s Receivables or file and sign the
          Borrower’s name on a proof of claim in bankruptcy or similar document against
          any obligor of the Borrower. The Borrower shall maintain a record of its
          electronic chattel paper that identifies the Lender as the assignee thereof
          and
          otherwise in a manner such that the Lender has control over such chattel
          paper
          for purposes of the Code.

         

        
          
            
            

          

          
            -28-

            
              

            

          

          
            
            

          

           

        

        SECTION
          3.6 Special
          Provisions Relating to Equipment.

         

        (a) Location.
          Each
          item of Equipment of the Borrower, now owned or hereafter acquired, will
          be kept
          at the location shown on Schedule 6.1(b) and may not be moved without the
          prior written consent of the Lender. The Borrower shall at all times hereafter
          keep correct and accurate records itemizing and describing the location,
          kind,
          type, age and condition of its Equipment, the Borrower’s cost therefor and
          accumulated depreciation thereof, and retirements, sales, or other dispositions
          thereof, all of which records shall be available during the Borrower’s usual
          business hours on demand to any of the officers, employees or agents of
          the
          Lender.

         

        (b) Repair.
          The
          Borrower shall keep all of its Equipment in a satisfactory state of repair
          and
          satisfactory operating condition in accordance with industry standards,
          ordinary
          wear and tear excepted, and will, consistent with the exercise of its reasonable
          business judgment, make all repairs and replacements when and where necessary
          and practical, will not waste or destroy it or any part thereof, and will
          not be
          negligent in the care or use thereof. The Borrower shall repair and maintain
          all
          of its Equipment in accordance with industry practices in a manner sufficient
          to
          continue the operation of its business as heretofore conducted. The Borrower
          will use or cause its Equipment to be used in accordance with law and the
          manufacturer’s instructions. The Borrower shall keep its Equipment separate
          from, and will not annex or affix any of its Equipment to, any part of
          any
          Property or any other realty.

         

        
          
            
            

          

          
            -29-

            
              

            

          

          
            
            

          

           

        

        (c) Disposal.
          Where
          the Borrower is permitted to dispose of any of its Equipment under this
          Agreement or by any consent thereto hereafter given by the Lender, the
          Borrower
          shall do so at arm’s length, in good faith and by obtaining the maximum amount
          of recovery practicable therefor and without impairing the operating integrity
          or value of its remaining Equipment.

         

        SECTION
          3.7 Continuation
          of Liens, Etc.
          The
          Borrower shall defend the Collateral against all claims and demands of
          all
          Persons at any time claiming any interest therein, other than claims relating
          to
          Liens permitted by the Loan Documents. The Borrower agrees to comply with
          the
          requirements of all state and federal laws to grant to the Lender valid
          and
          perfected first priority security interests in the Collateral and shall
          obtain a
          Control Agreement from any securities intermediary or depository bank (other
          than the Lockbox Bank) in possession of any of the Borrower’s Investment
          Property or deposit accounts. The Lender is hereby authorized by the Borrower
          to
          sign the Borrower’s name on any document or instrument as may be necessary or
          desirable to establish and maintain the Liens covering the Collateral and
          the
          priority and continued perfection thereof or file any financing or continuation
          statements or similar documents or instruments covering the Collateral
          whether
          or not the Borrower’s signature appears thereon. The Borrower agrees, from time
          to time, at the Lender’s request, to file notices of Liens, financing
          statements, similar documents or instruments, and amendments, renewals
          and
          continuations thereof, and cooperate with the Lender’s representatives, in
          connection with the continued perfection (and the priority status thereof)
          and
          protection of the Collateral and the Lender’s Liens thereon. The Borrower agrees
          that the Lender may file a carbon, photographic or other reproduction of
          this
          Agreement (or any financing statement related hereto) as a financing
          statement.

         

        SECTION
          3.8 Real
          Property.
          If the
          Borrower acquires any Property after the date hereof, the Borrower shall,
          at the
          expense of the Borrower, take all steps necessary or desirable to grant
          the
          Lender a perfected first priority Lien thereon. Concurrently with any such
          granting, the Borrower shall deliver to the Lender:

         

        (a) a
          mortgagee’s title policy (i) dated the date of any mortgage or deed of
          trust in favor of the Lender with respect to such Property (a “Mortgage”) and in
          an amount satisfactory to the Lender, (ii) insuring that such Mortgage
          creates a valid first Lien on such Property free and clear of all Liens
          except
          the Lien in favor of the Lender and other Liens that are satisfactory to
          the
          Lender, (iii) naming the Lender as the insured thereunder, (iv) in the
          form of ALTA Loan Policy-1992, and (v) containing revolving endorsements
          and such other endorsements and effective coverage as the Lender may request,
          together with evidence that all premiums in respect of such policy have
          been
          paid by or on behalf of the Borrower;

         

        (b) a
          survey
          of any such Property, satisfactory in form and substance to the Lender
          and
          certified within a reasonable period before the date of any such Mortgage
          by an
          independent public surveyor satisfactory to the Lender, meeting the minimum
          standard detail requirements for ALTA/ACSM surveys, and showing (i) the
          exact location and dimensions of such Property and the improvements thereon,
          (ii) the exact location of all lot and street lines, required height and
          setback lines, all means of access to and all easements relating to such
          Property, (iii) the names of all streets and alleys abutting such Property
          and (iv) the absence of any encroachments, rights-of-way or easements on
          such Property or any encroachments by the improvements thereon on adjoining
          property, or any other defects except Liens permitted hereunder, together
          with a
          surveyor’s certificate satisfactory to the Lender;

         

        
          
            
            

          

          
            -30-

            
              

            

          

          
            
            

          

           

        

        (c) an
          opinion of the Borrower’s legal counsel with respect to such Mortgage and any
          other matters related thereto, which opinion shall be in form and substance
          reasonably satisfactory to the Lender; and

         

        (d) evidence
          reasonably satisfactory to the Lender that all recording taxes and other
          fees
          and expenses related to the transactions described in this Section 3.8 have
          been paid in full by the Borrower.

         

        SECTION
          3.9 Power
          of Attorney.
          In
          addition to all of the powers granted to the Lender in this Article III,
          the Borrower hereby appoints and constitutes the Lender as the Borrower’s
          attorney-in-fact to sign the Borrower’s name on any of the documents,
          instruments and other items described in Section 3.7, to make any filings
          under the Uniform Commercial Code covering any of the Collateral, to request
          at
          any time from customers indebted on its Receivables verification of information
          concerning such Receivables and the amount owing thereon (provided
          that any
          verification shall only occur if an Event of Default has occurred and is
          continuing), and, upon the occurrence and during the continuance of an
          Event of
          Default, (i) to convey any item of Collateral to any purchaser thereof and
          (ii) to make any payment or take any act necessary or desirable to protect
          or preserve any Collateral. The Lender’s authority hereunder shall include,
          without limitation, the authority to execute and give receipt for any
          certificate of ownership or any document, to transfer title to any item
          of
          Collateral and to take any other actions arising from or incident to the
          powers
          granted to the Lender under this Agreement. This power of attorney is coupled
          with an interest and is irrevocable.

         

        ARTICLE
          IV

        INTEREST,
          FEES AND EXPENSES

         

        SECTION
          4.1 Interest.
          The
          Borrower shall pay to the Lender interest on the Advances, payable monthly
          in
          arrears on the first day of each month, commencing with the month immediately
          following the Closing Date, and on the Expiration Date, at the following
          rates
per
          annum:

         

        (a) Base
          Rate Advances.
          If such
          Advance is a Base Rate Advance, at a fluctuating rate which is equal to
          the Base
          Rate then in effect, each change in such fluctuating rate to take effect
          simultaneously with the corresponding change in the Base Rate.

         

        (b) LIBOR
          Rate Advances.
          If such
          Advance is a LIBOR Rate Advance, at a rate which is equal at all times
          during
          the Interest Period for such LIBOR Rate Advance to (i) the LIBOR Rate plus
          (ii) one and three-quarters percent (1.75%).

         

        
          
            
            

          

          
            -31-

            
              

            

          

          
            
            

          

           

        

        SECTION
          4.2 Interest
          and Letter of Credit Fees After Event of Default.
          From
          the date of occurrence of any Event of Default until the earlier of the
          date
          upon which (i) all Obligations shall have been paid and satisfied in full
          and all Letters of Credit have expired or been terminated or (ii) such
          Event of Default shall have been waived, interest on the Loans shall be
          payable
          on demand at a rate per
          annum
          equal to
          the rate that would be otherwise applicable thereto under Section 4.1 plus
          up to an additional two percent (2%) and the letter of credit fee pursuant
          to
          Section 4.3(b) shall be payable at the rate that would otherwise apply
          under Section 4.3(b) plus up to an additional two percent
          (2%).

         

        SECTION
          4.3 Closing
          Fee.
          On the
          Closing Date, the Borrower shall pay to the Lender a non-refundable closing
          fee
          in the amount of $65,000.

         

        SECTION
          4.4 Unused
          Line Fee; Letter of Credit Fees.

         

        (a) The
          Borrower shall pay to the Lender on the first day of each month, commencing
          with
          the month immediately following the Closing Date, and on the Expiration
          Date, in
          arrears, an unused line fee equal to three-eighths of one percent (.37%)
          per annum
          of the
          difference, if positive, between (i) the Maximum Amount of the Facility and
          (ii) the average daily aggregate outstanding amount of the Loans plus the
          average daily aggregate undrawn amount of all unexpired Letters of Credit
          during
          the immediately preceding month or portion thereof.

         

        (b) The
          Borrower shall promptly pay to the Lender (i) an issuance fee in an amount
          equal to .13% of the face amount of each Letter of Credit issued in connection
          herewith for the Lender’s own account and (ii) all fees charged to the
          Lender by any issuer of a Letter of Credit which relate directly to the
          issuance, amending or drawing under Letters of Credit. In addition, the
          Borrower
          shall pay to the Lender on the first day of each month, commencing with
          the
          month immediately following the Closing Date, and on the Expiration Date,
          in
          arrears, a fee equal to 1.75% per annum
          on the
          daily average of the amount of the Letters of Credit outstanding during
          the
          preceding month or during the interim period ending on the Expiration Date,
          as
          the case may be.

         

        SECTION
          4.5 Early
          Termination Fee.
          The
          Borrower shall have the right to terminate this Agreement at any time on
          ninety
          days’ prior written notice to the Lender, provided
          that, on
          the date of such termination, all Obligations, including all amounts required
          for the Collateralization of Letters of Credit and interest, fees and expenses
          payable to the date of such termination, shall be paid in full. If (a) the
          Borrower gives such notice to terminate or (b)(i) the Loans are paid in
          full or substantially in full and (ii) the Lender’s obligation to make
          Loans or to cause Letters of Credit to be issued is terminated, including
          as a
          result of the Lender terminating, in accordance with Section 9.2(b), such
          obligation, the Borrower shall pay a fee to the Lender in an amount equal
          to
          (A) $150,000 if such termination or payment occurs prior to the first
          anniversary of the Closing Date and (B) $75,000 if such termination or
          payment occurs on or after the first anniversary but prior to the second
          anniversary of the Closing Date, provided
          that no
          such fee shall be due if the Obligations are, or are deemed to have been,
          paid
          or repaid with the proceeds of loans made by the Lender or any of its
          Affiliates.

         

        
          
             

          

          
            -32-

            
              

            

          

          
             

          

        

         

        SECTION
          4.6 Calculations.
          All
          calculations of interest and fees hereunder shall be made by the Lender
          on the
          basis of a year of 360 days for the actual number of days elapsed in the
          period
          for which such interest or fees are payable. Each determination by the
          Lender of
          an interest rate, fee or other payment hereunder shall be conclusive and
          binding
          for all purposes, absent manifest error.

         

        SECTION
          4.7 Indemnification
          in Certain Events.
          If,
          after the Closing Date, (i) any change in or in the interpretation of any
          law or regulation is introduced including, without limitation, with respect
          to
          reserve requirements, applicable to the Lender or any other banking or
          financial
          institution from which the Lender borrows funds or obtains credit, (ii) the
          Lender complies with any future guideline or request from any central bank
          or
          other Governmental Authority or (iii) the Lender determines that the
          adoption of any applicable law, rule or regulation regarding capital adequacy,
          or any change therein, or any change in the interpretation or administration
          thereof by any Governmental Authority, central bank or comparable agency
          charged
          with the interpretation or administration thereof has or would have the
          effect
          described below, or the Lender complies with any request or directive regarding
          capital adequacy (whether or not having the force of law) of any such authority,
          central bank or comparable agency, and in the case of any event set forth
          in
          this clause (iii), such adoption, change or compliance has or would have
          the direct or indirect effect of reducing the rate of return on the Lender’s
          capital as a consequence of its obligations hereunder to a level below
          that
          which the Lender could have achieved but for such adoption, change or compliance
          (taking into consideration the Lender’s policies as the case may be with respect
          to capital adequacy) by an amount deemed by the Lender to be material,
          and any
          of the foregoing events described in clauses (i), (ii) and (iii) increases
          the cost to the Lender of funding or maintaining the Loans, or reduces
          the
          amount receivable in respect thereof by the Lender, then the Borrower shall,
          upon demand, pay to the Lender additional amounts sufficient to indemnify
          the
          Lender against such increase in cost or reduction in amount
          receivable.

         

        SECTION
          4.8 Taxes.

         

        (a) Any
          and
          all payments by the Borrower hereunder or under the Note shall be made
          free and
          clear of and without deduction for any and all present or future taxes,
          levies,
          imposts, deductions, charges or withholdings and penalties, interest and
          all
          other liabilities with respect thereto (“Taxes”), including any Taxes imposed
          under Section 7701(l) of the Internal Revenue Code, excluding in the case
          of the Lender, taxes imposed on its net income (including, without limitation,
          any taxes imposed on branch profits) and franchise taxes imposed on it
          by any
          applicable jurisdiction. If the Borrower shall be required by law to deduct
          any
          Taxes from or in respect of any sum payable hereunder or under any Loan
          to or
          for the benefit of the Lender, (A) the sum payable shall be increased as
          may be necessary so that after making all required deductions of Taxes
          (including deductions of Taxes applicable to additional sums payable under
          this
          Section 4.8) the Lender receives an amount equal to the sum it would have
          received had no such deductions been made, (B) the Borrower shall make such
          deductions and (C) the Borrower shall pay the full amount so deducted to
          the relevant taxation authority or other authority in accordance with applicable
          law.

         

        
          
            
            

          

          
            -33-

            
              

            

          

          
            
            

          

           

        

        (b) In
          addition, the Borrower agrees to pay any present or future stamp, documentary,
          excise, privilege, intangible or similar taxes or levies that arise at
          any time
          or from time to time (i) from any payment made under any and all Loan
          Documents, or (ii) from the execution or delivery by the Borrower of, or
          from the filing or recording or maintenance of, or otherwise with respect
          to the
          exercise by the Lender of its rights under, any and all Loan Documents
          (hereinafter referred to as “Other Taxes”).

         

        (c) The
          Borrower indemnifies the Lender for the full amount of (i) Taxes imposed on
          or with respect to amounts payable hereunder, (ii) Other Taxes and
          (iii) any Taxes (other than Taxes imposed by any jurisdiction on amounts
          payable under this Section 4.8) paid by the Lender and any liability
          (including penalties, interest and expenses) arising solely therefrom or
          with
          respect thereto.

         

        (d) Within
          thirty days after the date of any payment of Taxes or Other Taxes, the
          Borrower
          will, upon request, furnish to the Lender the original or a certified copy
          of a
          receipt evidencing payment thereof.

         

        (e) Without
          prejudice to the survival of any other agreement of the Borrower hereunder,
          the
          agreements and obligations of the Borrower contained in this Section 4.8
          shall survive the indefeasible payment in full of the Obligations.

         

        ARTICLE
          V

        CONDITIONS
          OF LENDING

         

        SECTION
          5.1 Conditions
          to Initial Loan or Letter of Credit.
          The
          obligation of the Lender to make the initial Loan or to cause to be issued
          the
          initial Letter of Credit is subject to the satisfaction of the following
          conditions prior to or concurrent with such initial Loan or Letter of
          Credit:

         

        (a) The
          Lender shall have received the following, each dated the date of the initial
          Loan or as of an earlier date acceptable to the Lender, in form and substance
          satisfactory to the Lender and its counsel:

         

        
          	 	
                  (i)

                	
                  the
                    Note, duly executed by the
                    Borrower;

                


        

         

        
          	 	
                  (ii)

                	
                  the
                    Guaranty, duly executed by the
                    Guarantor;

                


        

         

        
          	 	
                  (iii)

                	
                  completed
                    requests for information, dated on or before the date of the
                    initial Loan
                    or Letter of Credit, listing all effective financing statements
                    filed
                    against the Borrower on file with the Secretary of State of the
                    State of
                    Delaware;

                


        

         

        
          	 	
                  (iv)

                	
                  a
                    completed perfection certificate, substantially in the form of
                    Exhibit I
                    signed by a Responsible Officer of the
                    Borrower;

                


        

         

        
          	 	
                  (v)

                	
                  an
                    initial Borrowing Base Certificate, duly executed by the Borrower’s chief
                    financial officer;

                


        

         

        
          
            
            

          

          
            -34-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (vi)

                	
                  (A) the
                    draft unaudited Financial Statements for the fiscal year ended
                    December 31, 2005, reviewed by the Auditors, and the draft unaudited
                    Financial Statements for the eleven-month period ended November 30,
                    2006, reviewed by the chief operating officer of the Borrower,
                    (B) a
                    certificate executed by the Borrower’s chief financial officer certifying
                    that, since December 31, 2005, (I) there has been no change,
                    occurrence, development or event which has had or could reasonably
                    be
                    expected to have a Material Adverse Effect (except as disclosed
                    therein,
                    which disclosure shall not limit any of the Lender’s rights and remedies
                    with respect thereto), (II) all data, reports and information (other
                    than projections and budgets) heretofore or contemporaneously
                    furnished by
                    or on behalf of the Borrower in writing to the Lender, the Auditors
                    or
                    Durkin Group LLC for purposes of or in connection with this Agreement
                    or
                    any other Loan Document, or any transaction contemplated hereby
                    or
                    thereby, are true and accurate in all material respects as of
                    the date or
                    certification thereof and are not incomplete by omitting to state
                    any
                    material fact necessary to make such data, reports and information
                    not
                    misleading at such time, and (III) all projections and budgets
                    heretofore furnished to the Lender or the Auditors for purposes
                    of or in
                    connection with this Agreement or any other Loan Document, or
                    any
                    transaction contemplated hereby or thereby, have been prepared
                    in good
                    faith based on assumptions believed by the Borrower to be reasonable
                    at
                    the time of preparation, and (C) a Certificate signed by the chief
                    financial officer of the Borrower, certifying the Borrower’s Tangible Net
                    Worth and Fixed Charge Coverage Ratio as of November 30,
                    2006;

                


        

         

        
          	 	
                  (vii)

                	
                  a
                    payoff letter, duly executed by the Existing Lender, containing,
                    among
                    other things, an acknowledgment of the termination of all of
                    the Existing
                    Lender’s liens on and security interests in any assets of the Borrower
                    upon the payment in full of the outstanding amount owed to the
                    Existing
                    Lender specified therein, and an authorization of the Lender
                    to file
                    termination statements under the Code with respect to all financing
                    statements filed by the Existing Lender under the Code naming
                    the Borrower
                    as Debtor and to record a release of any other Lien of the Existing
                    Lender
                    encumbering any property of the
                    Borrower;

                


        

         

        
          	 	
                  (viii)

                	
                  an
                    opinion of counsel for each Loan Party covering such matters
                    incident to
                    the transactions contemplated by this Agreement as the Lender
                    may
                    reasonably require, which such counsel is hereby requested by
                    the Borrower
                    on behalf of the Loan Parties to
                    provide;

                


        

         

        
          
            
            

          

          
            -35-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (ix)

                	
                  certificates
                    of insurance required by this Agreement and the other Loan Documents,
                    together with loss payee endorsements for all such policies naming
                    the
                    Lender as lender loss payee and an additional
                    insured;

                


        

         

        
          	 	
                  (x)

                	
                  a
                    copy of the Business Plan for the period commencing January 1, 2007,
                    accompanied by a certificate executed by the Borrower’s chief financial
                    officer certifying to the Lender that the Business Plan has been
                    prepared
                    in good faith on the basis of assumptions which were believed
                    to be
                    reasonable in the context of the conditions existing on the date
                    hereof,
                    and represents, as of the date hereof, the Borrower’s good faith estimate
                    of its future financial
                    performance;

                


        

         

        
          	 	
                  (xi)

                	
                  copies
                    of the Governing Documents of each Loan Party and a copy of the
                    resolutions of the Board of Directors of each Loan Party authorizing
                    the
                    execution, delivery and performance of this Agreement, the other
                    Loan
                    Documents to which such Loan Party is or is to be a party, and
                    the
                    transactions contemplated hereby and thereby, attached to which
                    is a
                    certificate of the Secretary or an Assistant Secretary of such
                    Loan Party
                    certifying (A) that such copies of the Governing Documents and
                    resolutions relating to such Loan Party are true, complete and
                    accurate
                    copies thereof, have not been amended or modified since the date
                    of such
                    certificate and are in full force and effect, (B) the incumbency,
                    names and true signatures of the officers of such Loan Party
                    authorized to
                    sign the Loan Documents to which it is a party and (C) that attached
                    thereto is a list of all persons authorized to execute and deliver
                    Notices
                    of Borrowing, Notices of Continuation and Notices of Conversion
                    on behalf
                    of the Borrower;

                


        

         

        
          	 	
                  (xii)

                	
                  a
                    certified copy of a certificate of the Secretary of State of
                    the state of
                    incorporation of each Loan Party, dated within ten days of the
                    Closing
                    Date, listing the certificate of incorporation of such Loan Party
                    and each
                    amendment thereto on file in such official’s office and certifying that
                    (A) such amendments are the only amendments to such certificate of
                    incorporation on file in that office, (B) such Loan Party has paid
                    all franchise taxes to the date of such certificate and (C) such Loan
                    Party is in good standing in that
                    jurisdiction;

                


        

         

        
          	 	
                  (xiii)

                	
                  a
                    good standing certificate from the Secretary of State of each
                    state in
                    which each Loan Party is qualified as a foreign corporation,
                    each dated
                    within ten days of the Closing
                    Date;

                


        

         

        
          	 	
                  (xiv)

                	
                  a
                    letter from the Borrower to the Auditors and acknowledged by
                    the Auditors
                    authorizing the Lender to discuss the financial condition of
                    the Loan
                    Parties with the Auditors and their personnel and directing the
                    Auditors
                    to cooperate with the Lender with respect
                    thereto;

                


        

         

        
          
            
            

          

          
            -36-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (xv)

                	
                  a
                    consent to the assignment to the Lender of the proceeds of each
                    letter of
                    credit issued in favor of the Borrower, duly executed by the
                    issuer
                    thereof;

                


        

         

        
          	 	
                  (xvi)

                	
                  evidence
                    that the Borrower maintains a record of its electronic chattel
                    paper that
                    identifies the Lender as the assignee thereof and otherwise in
                    a manner
                    such that the Lender has control over such chattel paper for
                    purposes of
                    the Code; and

                


        

         

        
          	 	
                  (xvii)

                	
                  such
                    other agreements, instruments, documents and evidence as the
                    Lender deems
                    necessary in its sole and absolute discretion in connection with
                    the
                    transactions contemplated hereby.

                


        

         

        (b) There
          shall be no pending or, to the knowledge of the Borrower after due inquiry,
          threatened litigation, proceeding, inquiry or other action (i) seeking an
          injunction or other restraining order, damages or other relief with respect
          to
          the transactions contemplated by this Agreement or the other Loan Documents
          or
          (ii) which affects or could affect the business, prospects, operations,
          assets, liabilities or condition (financial or otherwise) of either Loan
          Party,
          except, in the case of clause (ii), where such litigation, proceeding,
          inquiry or other action could not reasonably be expected to have a Material
          Adverse Effect.

         

        (c) The
          Borrower shall have (i) paid (A) all reasonable fees and expenses of
          the Lender in connection with the negotiation, preparation, execution and
          delivery of the Loan Documents (including, without limitation, all of the
          Lender’s examination, audit, appraisal and travel expenses and the fees and
          expenses of counsel to the Lender) and (B) the closing fee payable under
          Section 4.3 and all other fees referred to in this Agreement that are
          required to be paid on the Closing Date and (ii) delivered at least
          $2,000,000 in cash by wire transfer to the Lender, which cash shall be
          used by
          the Lender to repay a portion of the Borrower’s existing Indebtedness to the
          Existing Lender.

         

        (d) (i) All
          termination statements under the Code necessary to cause the Lender to
          have a
          first priority security interest in the Collateral shall have been filed
          or
          authorized to be filed and (ii) all consents or authorizations specified in
          Schedule 6.1(f) shall have been obtained.

         

        (e) No
          change, occurrence, event or development or event involving a prospective
          change
          that could reasonably be expected to have a Material Adverse Effect shall
          have
          occurred and be continuing.

         

        (f) The
          Lender and its counsel shall have performed (i) a review satisfactory to
          the Lender of all of the Material Contracts and other assets (including,
          without
          limitation, leases of operating facilities) of the Borrower, the financial
          condition of each Loan Party, including all of its tax, litigation,
          environmental and other potential contingent liabilities, the corporate
          and
          capital structure of each Loan Party and the cash management and management
          information systems of the Borrower, (ii) a pre-closing audit and
          collateral review and (iii) reviews and investigations of such other
          matters as the Lender and its counsel deem appropriate, in each case with
          results satisfactory to the Lender.

         

        
          
            
            

          

          
            -37-

            
              

            

          

          
            
            

          

           

        

        (g) The
          Loan
          Parties shall be in compliance with all Requirements of Law and Material
          Contracts, other than such noncompliance that could not reasonably be expected
          to have a Material Adverse Effect.

         

        (h) The
          Liens
          in favor of the Lender shall have been duly perfected and shall constitute
          first
          priority Liens, and the Collateral shall be free and clear of all Liens
          other
          than Liens in favor of the Lender and Permitted Liens.

         

        (i) After
          giving effect to all Loans to be made and all Letters of Credit to be issued
          on
          the Closing Date, Excess Availability shall be no less than
          $2,000,000.

         

        SECTION
          5.2 Conditions
          Precedent to Each Loan and Each Letter of Credit.
          The
          obligation of the Lender to make any Loan or to cause to be issued any
          Letter of
          Credit is subject to the satisfaction of the following conditions
          precedent:

         

        (a) all
          representations and warranties contained in this Agreement and the other
          Loan
          Documents shall be true and correct on and as of the date of such Loan
          or Letter
          of Credit as if then made, other than representations and warranties that
          expressly relate solely to an earlier date, in which case they shall have
          been
          true and correct as of such earlier date;

         

        (b) no
          Default or Event of Default shall have occurred and be continuing or would
          result from the making of the requested Loan or the issuance of the requested
          Letter of Credit as of the date of such request; and

         

        (c) no
          Material Adverse Effect shall have occurred.

         

        ARTICLE
          VI

        REPRESENTATIONS
          AND WARRANTIES

         

        SECTION
          6.1 Representations
          and Warranties of the Borrower; Reliance by the Lender.
          The
          Borrower represents and warrants as follows:

         

        (a) Organization,
          Good Standing and Qualification.
          The
          Borrower (i) is a corporation duly
          organized, validly existing and in good standing under the laws of the
          State of
          Delaware, (ii) has the corporate power and authority to own its properties
          and assets and to transact the businesses in which it presently is, or
          proposes
          to be, engaged and (iii) is duly qualified, authorized to do business and
          in good standing in each jurisdiction where it presently is, or proposes
          to be,
          engaged in business, except to the extent that the failure to so qualify
          or be
          in good standing could not reasonably be expected to have a Material Adverse
          Effect. Schedule 6.1(a) specifies the jurisdiction in which the Borrower is
          organized and all the jurisdictions in which the Borrower is qualified
          to do
          business as a foreign corporation as of the Closing Date.

         

        
          
            
            

          

          
            -38-

            
              

            

          

          
            
            

          

           

        

        (b) Locations
          of Offices, Records and Collateral.
          The
          address of the principal place of business and chief executive office of
          the
          Borrower is, and the books and records of the Borrower and all of its chattel
          paper and records of its Receivables are maintained exclusively in the
          possession of the Borrower at, the address of the Borrower specified in
          Schedule 6.1(b). There is no location at which the Borrower maintains any
          Collateral other than the locations specified in Schedule 6.1(b).
          Schedule 6.1(b) specifies all Property of the Borrower, and indicates
          whether each location specified therein is leased or owned by the
          Borrower.

         

        (c) Authority.
          The
          Borrower has the requisite corporate power
          and
          authority to execute, deliver and perform its obligations under each of
          the Loan
          Documents to which it is a party. All corporate action necessary for the
          execution, delivery and performance by the Borrower of the Loan Documents
          to
          which it is a party (including the consent of shareholders where
          required) has been taken.

         

        (d) Enforceability.
          This
          Agreement is and, when executed and delivered, each other Loan Document
          to which
          the Borrower is a party, will be, the legal, valid and binding obligation
          of the
          Borrower enforceable in accordance with its terms, except as enforceability
          may
          be limited by (i) bankruptcy, insolvency or similar laws affecting
          creditors’ rights generally and (ii) general principles of
          equity.

         

        (e) No
          Conflict.
          The
          execution, delivery and performance by each of the Loan Parties of each
          Loan
          Document to which it is a party do not and will not contravene (i) any of
          the Governing Documents of such Loan Party, (ii) any Requirement of Law or
          (iii) any Material Contract and will not result in the imposition of any
          Liens upon any of its properties except in favor of the Lender.

         

        (f) Consents
          and Filings.
          No
          consent, authorization or approval of, or filing with or other act by,
          any
          shareholders of the Borrower or any Governmental Authority or any other
          Person
          is required in connection with the execution, delivery, performance, validity
          or
          enforceability of this Agreement or any other Loan Document, the consummation
          of
          the transactions contemplated hereby or thereby or the continuing operations
          of
          a Loan Party following such consummation, except (i) those that have been
          obtained or made and are specified in Schedule 6.1(f) and (ii) the
          filing of financing and termination statements under the Code.

         

        (g) Ownership;
          Subsidiaries.
          The
          capital stock of the Guarantor and its Subsidiaries is owned by the Persons
          and
          in the amounts specified in Schedule 6.1(g). Schedule 6.1(g) sets
          forth the exact correct legal name of each of the Guarantor and the Subsidiaries
          of the Guarantor, in each case as specified in the public record of the
          jurisdiction of its organization, and of the Persons that own the capital
          stock therein.

         

        (h) Solvency.
          The
          Borrower is Solvent and will be Solvent upon the completion of all transactions
          contemplated to occur on or before the Closing Date (including, without
          limitation, the Loans to be made and the Letters of Credit to be issued
          on the
          Closing Date).

         

        
          
            
            

          

          
            -39-

            
              

            

          

          
            
            

          

           

        

        (i) Financial
          Data.
          The
          Borrower has provided to the Lender complete and accurate copies of its
          draft
          unaudited Financial Statements for the fiscal year ended December 31, 2005,
          reviewed by the Auditors, and draft unaudited Financial Statements for
          the
          eleven-month period ended November 30, 2006 reviewed by the chief operating
          officer of the Borrower. Such Financial Statements have been prepared in
          accordance with GAAP consistently applied throughout the periods involved
          and
          fairly present the financial position, results of operations and cash flows
          of
          the Borrower and its Subsidiaries for each of the periods covered. Except
          as
          specified in Schedule 6.1(i), the Borrower and its Subsidiaries have no
          Contingent Obligation or liability for taxes, unrealized losses, unusual
          forward
          or long-term commitments or long-term leases, which is not reflected in
          such
          Financial Statements or the footnotes thereto. During the period from
          December 31, 2005 to and including the date hereof, there has been no sale,
          transfer or other disposition by the Borrower or any of its Subsidiaries
          of any
          material part of its business or property and no purchase or other acquisition
          of any business or property (including any capital stock of any other Person)
          material in relation to the financial condition of the Borrower and its
          Subsidiaries at November 30, 2006. Since December 31, 2005 and except
          as provided in Schedule 6.1(i), (i) there has been no change,
          occurrence, development or event which has had or could reasonably be expected
          to have a Material Adverse Effect and (ii) none of the capital stock of
          either Loan Party has been redeemed, retired, purchased or otherwise acquired
          for value by such Loan Party.

         

        (j) Accuracy
          and Completeness of Information.
          All
          data, reports and information heretofore, contemporaneously or hereafter
          furnished by or on behalf of the Borrower to the Lender or its representatives,
          the Auditors or Durkin Group LLC are or will be true and accurate in all
          material respects as of the date or certification of such data, reports
          and
          information and are not and will not be incomplete by omitting to state
          any
          material fact necessary to make such data, reports and information not
          misleading at such time. There are no facts now known to any Responsible
          Officer
          of the Borrower which individually or in the aggregate could reasonably
          be
          expected to have a Material Adverse Effect and which have not been specified
          herein, in the Financial Statements, or any certificate, opinion or other
          written statement previously furnished by the Borrower to the
          Lender.

         

        (k) No
          Joint Ventures or Partnerships.
          Except
          as specified in Schedule 6.1(k), the Borrower is not engaged in any joint
          venture or partnership with any other Person.

         

        (l) Corporate
          and Trade Name.
          During
          the past year, the Borrower has not been known by or used any other corporate,
          trade or fictitious name except for (i) its name as set forth in the
          introductory paragraph and on the signature page of this Agreement, which
          is the
          exact correct legal name of the Borrower and (ii) Cambitoys.

         

        (m) No
          Actual or Pending Material Modification of Business.
          There
          exists no actual or, to the best of the Borrower’s knowledge after due inquiry,
          threatened termination, cancellation or limitation of, or any modification
          or
          change in, the business relationship of the Borrower with any customer
          or group
          of customers which individually or in the aggregate could reasonably be
          expected
          to have a Material Adverse Effect.

         

        
          
            
            

          

          
            -40-

            
              

            

          

          
            
            

          

           

        

        (n) No
          Broker’s or Finder’s Fees.
          No
          broker or finder brought about the obtaining, making or closing of the
          Loans or
          financial accommodations afforded hereunder or in connection herewith by
          the
          Lender or any of its Affiliates. No broker’s or finder’s fees or commissions
          will be payable by the Borrower to any Person in connection with the
          transactions contemplated by this Agreement.

         

        (o) Investment
          Company.
          The
          Borrower is not an “investment company,” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
          terms are defined in the Investment Company Act of 1940, as amended. Neither
          the
          making of any Loans, the issuance of any Letters of Credit or the application
          of
          the proceeds or repayment thereof by the Borrower or the beneficiary of
          any
          Letter of Credit, nor the consummation of the other transactions contemplated
          by
          this Agreement or the other Loan Documents, will violate any provision
          of such
          Act or any rule, regulation or order of the Securities and Exchange Commission
          thereunder.

         

        (p) Margin
          Stock.
          The
          Borrower does not own any “margin stock” as that term is defined in Regulation U
          of the Federal Reserve Board.

         

        (q) Taxes
          and Tax Returns.
          In each
          case except as specified in Schedule 6.1(q),

         

        
          	 	
                  (i)

                	
                  The
                    Borrower has properly completed and timely filed all income tax
                    returns it
                    is required to file. The information filed is complete and accurate
                    in all
                    material respects. All deductions taken in such income tax returns
                    are
                    appropriate and in accordance with applicable laws and regulations,
                    except
                    deductions that may have been disallowed but are being challenged
                    in good
                    faith and for which adequate reserves have been established in
                    accordance
                    with GAAP.

                


        

         

        
          	 	
                  (ii)

                	
                  All
                    taxes, assessments, fees and other governmental charges for periods
                    beginning prior to the date hereof have been timely paid (or,
                    if not yet
                    due, adequate reserves therefor have been established) by it
                    and the
                    Borrower has no liability for taxes in excess of the amounts
                    so paid or
                    reserves so established.

                


        

         

        
          	 	
                  (iii)

                	
                  No
                    deficiencies for taxes have been claimed, proposed or assessed
                    by any
                    taxing or other Governmental Authority against the Borrower and
                    no tax
                    Liens have been filed with respect thereto. There are no pending
                    or
                    threatened audits, investigations or claims for or relating to
                    any
                    liability of the Borrower for taxes and there are no matters
                    under
                    discussion with any Governmental Authority which could result
                    in an
                    additional liability for taxes. The federal income tax returns
                    of the
                    Borrower have never been audited by the Internal Revenue Service.
                    No
                    extension of a statute of limitations relating to taxes, assessments,
                    fees
                    or other governmental charges is in effect with respect to the
                    Borrower.

                


        

         

        
          
            
            

          

          
            -41-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (iv)

                	
                  The
                    Borrower is not a party to, and has no obligations under, any
                    written tax
                    sharing agreement or agreement regarding payments in lieu of
                    taxes.

                


        

         

        (r) No
          Judgments or Litigation.
          Except
          as specified in Schedule 6.1(r), no judgments, orders, writs or decrees are
          outstanding against the Borrower, nor is there now pending or, to the knowledge
          of the Borrower after due inquiry, threatened litigation, contested claim,
          investigation, arbitration, or governmental proceeding by or against the
          Borrower that (i) individually or in the aggregate could reasonably be
          expected to have a Material Adverse Effect or (ii) purports to affect the
          legality, validity or enforceability of this Agreement, the Note, any other
          Loan
          Document or the consummation of the transactions contemplated hereby or
          thereby.

         

        (s) Title
          to Property.
          The
          Borrower has (i) good and marketable fee simple title to or valid leasehold
          interests in all of its Property and (ii) good and marketable title to all
          of its other property, in each case free and clear of Liens other than
          Liens
          permitted by Section 7.2(i).

         

        (t) No
          Other Indebtedness.
          On the
          Closing Date and after giving effect to the transactions contemplated hereby,
          the Borrower has no Indebtedness other than Indebtedness permitted under
          Section 7.2(a).

         

        (u) Investments;
          Contracts.
          The
          Borrower (i) has not committed to make any Investment; (ii) is not a
          party to any indenture, agreement, contract, instrument or lease, or subject
          to
          any charter, bylaw or other corporate or similar restriction or any injunction,
          order, restriction or decree, which could materially and adversely affect
          its
          business, operations, assets or financial condition; (iii) is not a party
          to any “take or pay” contract as to which it is the purchaser; and (iv) has
          no material contingent or long-term liability, including any management
          contracts, which could reasonably be expected to have a Material Adverse
          Effect.

         

        (v) Compliance
          with Laws.
          On the
          Closing Date, after giving effect to the transactions contemplated hereby,
          the
          Borrower is not in default under any term of any Requirement of Law other
          than
          any default which, when taken together with all other similar defaults,
          could
          not reasonably be expected to have a Material Adverse Effect or would not
          require more than $50,000 to remediate.

         

        (w) Rights
          in Collateral; Priority of Liens.
          All of
          the Collateral of the Borrower is owned or leased by it free and clear
          of any
          and all Liens in favor of third parties, other than Liens in favor of the
          Lender
          and Permitted Liens. Upon the proper filing of (i) a financing statement
          with the Secretary of State of the State of Delaware naming the Borrower
          as
          debtor and the Lender as secured party and describing the Collateral and
          (ii) any termination statements necessary to terminate any of the Existing
          Lender’s Liens, the Liens granted by the Borrower pursuant to the Loan Documents
          constitute valid, enforceable and perfected first priority Liens on the
          Collateral.

         

        
          
            
            

          

          
            -42-

            
              

            

          

          
            
            

          

           

        

        (x) ERISA.

         

        
          	 	
                  (i)

                	
                  Neither
                    the Borrower nor any ERISA Affiliate maintains or contributes
                    to any Plan,
                    other than those specified in
                    Schedule 6.1(x).

                


        

         

        
          	 	
                  (ii)

                	
                  The
                    Borrower and each ERISA Affiliate have fulfilled all contribution
                    obligations for each Plan (including obligations related to the
                    minimum
                    funding standards of ERISA and the Internal Revenue Code), and
                    no
                    application for a funding waiver or an extension of any amortization
                    period pursuant to Sections 303 and 304 of ERISA or Section 412
                    of the Internal Revenue Code has been made with respect to any
                    Plan.

                


        

         

        
          	 	
                  (iii)

                	
                  No
                    Termination Event has occurred nor has any other event occurred
                    that is
                    likely to result in a Termination Event. Neither the Borrower
                    or any ERISA
                    Affiliate, nor any fiduciary of any Plan, is subject to any direct
                    or
                    indirect liability with respect to any Plan under any Requirement
                    of Law
                    or agreement, except for ordinary funding obligations which are
                    not past
                    due.

                


        

         

        
          	 	
                  (iv)

                	
                  Neither
                    the Borrower nor any ERISA Affiliate is required to or reasonably
                    expects
                    to be required to provide security to any Plan under Section 307 of
                    ERISA or Section 401(a)(29) of the Internal Revenue
                    Code.

                


        

         

        
          	 	
                  (v)

                	
                  The
                    Borrower and each ERISA Affiliate are in compliance in all material
                    respects with all applicable provisions of ERISA and the Internal
                    Revenue
                    Code with respect to all Plans. There has been no prohibited
                    transaction
                    as defined in Section 406 of ERISA or Section 4975 of the Internal
                    Revenue Code (a “Prohibited Transaction”) with respect to any Plan or any
                    Multiemployer Plan. The Borrower and each ERISA Affiliate have
                    made when
                    due any and all payments required to be made under any agreement
                    relating
                    to a Multiemployer Plan or any Requirement of Law pertaining
                    thereto. With
                    respect to each Plan and Multiemployer Plan, the Borrower and
                    each ERISA
                    Affiliate have not incurred any liability to the PBGC and have
                    not had
                    asserted against them any penalty for failure to fulfill the
                    minimum
                    funding requirements of ERISA other than for payments of premiums
                    in the
                    ordinary course of business.

                


        

         

        
          
            
            

          

          
            -43-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (vi)

                	
                  Each
                    Plan which is intended to qualify under Section 401(a) of the
                    Internal Revenue Code has received a favorable determination
                    letter from
                    the IRS and no event has occurred which would cause the loss
                    of such
                    qualification.

                


        

         

        
          	 	
                  (vii)

                	
                  The
                    aggregate actuarial present value of all benefit liabilities
                    (whether or
                    not vested) under each Pension Plan, determined on a plan termination
                    basis, as disclosed in, and as of the date of, the most recent
                    actuarial
                    report for such Pension Plan, does not exceed the aggregate fair
                    market
                    value of the assets of such Pension Plan as of such
                    date.

                


        

         

        
          	 	
                  (viii)

                	
                  Neither
                    the Borrower nor any ERISA Affiliate has incurred or reasonably
                    expects to
                    incur any liability (and no event has occurred which, with the
                    giving of
                    notice under Section 4219 of ERISA, would result in any such
                    liability) under Section 4201 or 4243 of ERISA with respect to any
                    Multiemployer Plan.

                


        

         

        
          	 	
                  (ix)

                	
                  To
                    the extent that any Plan is funded with insurance, the Borrower
                    and all
                    ERISA Affiliates have paid when due all premiums required to
                    be paid. To
                    the extent that any Plan is funded other than with insurance,
                    the Borrower
                    and all ERISA Affiliates have made when due all contributions
                    required to
                    be paid.

                


        

         

        (y) Intellectual
          Property.
          Set
          forth on Schedule 6.1(y) is a complete and accurate list of all patents,
          trademarks, trade names, service marks and copyrights, and all applications
          therefor and licenses thereof, of the Borrower, showing as of the date
          hereof
          the jurisdiction in which registered, the registration number, the date
          of
          registration and the expiration date. The Borrower owns or licenses all
          patents,
          trademarks, service marks, logos, trade names, trade secrets, know-how,
          copyrights, or licenses and other rights with respect to any of the foregoing,
          which are necessary or advisable for the operation of its business as presently
          conducted or proposed to be conducted. The Borrower has not infringed any
          patent, trademark, service mark, trade name, copyright, license or other
          right
          owned by any other Person by the sale or use of any product, process, method,
          substance, part or other material presently contemplated to be sold or
          used,
          where such sale or use could reasonably be expected to have a Material
          Adverse
          Effect and no claim or litigation is pending, or, to the best of the Borrower’s
          knowledge, threatened against the Borrower that contests its right to sell
          or
          use any such product, process, method, substance, part or other
          material.

         

        (z) Labor
          Matters.
          Schedule 6.1(z) accurately sets forth all labor contracts to which the
          Borrower is a party as of the Closing Date, and their dates of expiration.
          There
          are no existing or threatened strikes, lockouts or other disputes relating
          to
          any collective bargaining or similar agreement to which the Borrower is
          a party
          which, individually or in the aggregate, could reasonably be expected to
          have a
          Material Adverse Effect.

         

        
          
            
            

          

          
            -44-

            
              

            

          

          
            
            

          

           

        

        (aa) Compliance
          with Environmental Laws.
          (i) The Borrower is not the subject of any judicial or administrative
          proceeding or investigation relating to the violation of any Environmental
          Law
          or asserting potential liability arising from the release or disposal by
          any
          Person of any Hazardous Materials, (ii) the Borrower has not filed with or
          received from any Governmental Authority or other Person any notice, order,
          stipulation or directive under any Environmental Law, nor is it aware of
          any
          pending discussions within any Governmental Authority, concerning the treatment,
          storage, disposal, spill or release or threatened release of any Hazardous
          Materials at, on, beneath or adjacent to Property owned or leased by it,
          or the
          release or threatened release at any other location of any Hazardous Material
          generated, used, stored, treated, transported or released by or on behalf
          of the
          Borrower, (iii) the Borrower has disposed of all its waste in accordance
          with all applicable laws and it has not improperly stored or disposed of
          any
          waste at, on, beneath or adjacent to any of its Property and none of its
          Property contains any waste fill, (iv) the Borrower has no knowledge of any
          contingent liability for any release of any Hazardous Materials, and there
          has
          been no spill or release of any Hazardous Materials at any of its Property
          in
          violation of Environmental Laws, (v) to the knowledge of the Borrower, all
          of its Property (including, without limitation, its Equipment) is free,
          and has
          at all times been free, of Hazardous Materials and underground storage
          tanks and
          (vi) to the knowledge of the Borrower, none of its Property has ever been
          used as a waste disposal site, whether registered or unregistered.

         

        (bb) Licenses
          and Permits.
          The
          Borrower has obtained and holds in full force and effect all franchises,
          licenses, leases, permits, certificates, authorizations, qualifications,
          easements, rights of way and other rights and approvals which are necessary
          or
          advisable for the operation of its business as presently conducted and
          as
          proposed to be conducted, except where the failure to possess any of the
          foregoing (individually or in the aggregate) could not reasonably be expected
          to
          have a Material Adverse Effect.

         

        (cc) Government
          Regulation.
          The
          Borrower is not subject to regulation under the Energy Policy Act of 2005,
          Federal Power Act, the Interstate Commerce Act or any other Requirement
          of Law
          that limits its ability to incur Indebtedness or consummate the transactions
          contemplated by this Agreement and the other Loan Documents.

         

        (dd) Material
          Contracts.
          Set
          forth on Schedule 6.1(dd) is a complete and accurate list of all Material
          Contracts of the Borrower, showing as of the date hereof the parties, subject
          matter and term thereof. Each such contract has been duly authorized, executed
          and delivered by the Borrower and each other party thereto. Except as specified
          in Schedule 6.1(dd), each Material Contract of the Borrower is in full
          force and effect and is binding upon and enforceable against all parties
          thereto
          in accordance with its terms, and there exists no default under such contract
          by
          any party thereto.

         

        (ee) Business
          and Properties.
          No
          business of the Borrower is affected by any fire, explosion, accident,
          drought,
          storm, hail, earthquake, embargo, act of God or of the public enemy or
          other
          casualty (whether or not covered by insurance) that could reasonably be
          expected
          to have a Material Adverse Effect.

         

        
          
            
            

          

          
            -45-

            
              

            

          

          
            
            

          

           

        

        (ff) Business
          Plan.
          The
          Business Plan and the Financial Statements delivered to the Lender on the
          Closing Date were prepared in good faith on the basis of assumptions which
          were
          fair in the context of the conditions existing at the time of delivery
          thereof,
          and, with respect to the Business Plan, represented, at the time of delivery,
          the Borrower’s best estimate of its future financial performance.

         

        (gg) Affiliate
          Transactions.
          Except
          as specified in Schedule 6.1(gg), the Borrower is not a party to or bound
          by any agreement or arrangement (whether oral or written) to which any
          Affiliate
          of the Borrower is a party except (i) in the ordinary course of and
          pursuant to the reasonable requirements of the business of the Borrower
          and
          (ii) upon fair and reasonable terms no less favorable to the Borrower than
          it could obtain in a comparable arm’s-length transaction with an unaffiliated
          Person.

         

        (hh) Compliance
          with Anti-Terrorism Laws.
          The
          Borrower is and will remain in full compliance with all laws and regulations
          applicable to it including, without limitation, (i) ensuring that no Person
          who owns a controlling interest in or otherwise controls the Borrower is
          or
          shall be (A) listed on the Specially Designated Nationals and Blocked
          Person List maintained by the Office of Foreign Assets Control ("OFAC"),
          Department of the Treasury, or any other similar list maintained by the
          OFAC
          under any authorizing statute, Executive Order or regulation or (B) a
          Person designated under Section 1(b), (c) or (d) of Executive Order
          No. 13224 (September 23, 2001), any related enabling legislation or
          any similar Executive Order and (ii) compliance with all applicable Bank
          Secrecy Act (“BSA”) laws, regulations and government guidance on BSA compliance
          and on the prevention and detection of money laundering violations. The
          Borrower
          acknowledges that the Lender has notified it that the Lender is required,
          under
          the USA Patriot Act, 31 U.S.C. §5318 (the “Patriot Act”), to obtain, verify and
          record information that identifies the Borrower and the Guarantor including,
          without limitation, the name and address of the Borrower and the Guarantor
          and
          such other information that will allow the Lender to identify the Borrower
          and
          the Guarantor in accordance with the Patriot Act.

         

        All
          representations and warranties made by the Borrower in this Agreement and
          in
          each other Loan Document to which it is a party shall survive the execution
          and
          delivery hereof and thereof and the closing of the transactions contemplated
          hereby and thereby. The Borrower acknowledges and confirms that the Lender
          is
          relying on such representations and warranties without independent inquiry
          in
          entering into this Agreement.

         

        ARTICLE
          VII

        COVENANTS
          OF THE BORROWER

         

        SECTION
          7.1 Affirmative
          Covenants.
          Until
          termination of the Lender’s obligation to make any Loan or to cause to be issued
          any Letter of Credit under this Agreement, payment and satisfaction of
          all
          Obligations in full, and termination, Collateralization or expiration of
          all
          Letters of Credit:

         

        (a) Corporate
          Existence.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, (i) maintain
          its corporate existence, (ii) maintain in full force and effect all
          material licenses, bonds, franchises, leases, trademarks, qualifications
          and
          authorizations to do business, and all material patents, contracts and
          other
          rights necessary or advisable to the profitable conduct of its businesses,
          and
          (iii) continue in the same lines of business as presently conducted by
          it.

         

        
          
            
            

          

          
            -46-

            
              

            

          

          
            
            

          

           

        

        (b) Maintenance
          of Property.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, keep all property
          useful and necessary to its business in good working order and condition
          (ordinary wear and tear excepted) in accordance with its past operating
          practices.

         

        (c) Affiliate
          Transactions.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, conduct
          transactions with any of its Affiliates on an arm’s-length basis or other basis
          no less favorable to the Borrower or such Subsidiary than would apply in
          a
          transaction with a non-Affiliate and which are approved by the board of
          directors (or similar governing body) of the Borrower or such
          Subsidiary.

         

        (d) Taxes.
          Except
          as specified in Schedule 6.1(q), the Borrower shall, and shall cause each
          of its Subsidiaries to, pay, when due, (i) all tax assessments, and other
          governmental charges and levies imposed against it or any of its property
          and
          (ii) all lawful claims that, if unpaid, might by law become a Lien upon its
          property; provided,
          however,
          that,
          unless such tax assessment, charge, levy or claim has become a Lien on
          any of
          the property of the Borrower or such Subsidiary, it need not be paid if
          it is
          being contested in good faith, by appropriate proceedings diligently conducted
          and an adequate reserve or other appropriate provision shall have been
          established therefor as required in accordance with GAAP.

         

        (e) Requirements
          of Law.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, comply with
          all
          Requirements of Law applicable to it, including, without limitation, all
          applicable federal, state, local or foreign laws and regulations, including,
          without limitation, those relating to environmental and employee matters
          (including the collection, payment and deposit of employees’ income,
          unemployment, Social Security and Medicare hospital insurance taxes) and
          with
          respect to pension liabilities, provided
          that the
          Borrower shall not be deemed in violation hereof if the Borrower’s or such
          Subsidiary’s failure to comply with any of the foregoing could not reasonably be
          expected to have a Material Adverse Effect.

         

        (f) Insurance.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, maintain public
          liability insurance, business interruption insurance, third party property
          damage insurance and replacement value insurance on its assets (including
          the
          Collateral) under such policies of insurance, with such insurance companies,
          in
          such amounts and covering such risks as are at all times satisfactory to
          the
          Lender, all of which policies covering the Collateral shall name the Lender
          as
          an additional insured and the lender loss payee in case of loss, and contain
          other provisions as the Lender may require to protect fully the Lender’s
          interest in the Collateral and any payments to be made under such
          policies.

         

        
          
            
            

          

          
            -47-

            
              

            

          

          
            
            

          

           

        

        (g) Books
          and Records; Inspections.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, (i) maintain
          books and records (including computer records and programs) of account
          pertaining to the assets, liabilities and financial transactions of the
          Borrower
          and its Subsidiaries in such detail, form and scope as is consistent with
          good
          business practice, which shall exclude the assets, liabilities and financial
          transactions of all direct and indirect shareholders,
          Subsidiaries and other Affiliates of the Borrower and (ii) provide the
          Lender and its agents access to the premises of the Borrower and its
          Subsidiaries at any time and from time to time, during normal business
          hours and
          upon three Business Days prior notice, and at any time after the occurrence
          and
          during the continuance of a Default or Event of Default, for the purposes
          of
          (A) inspecting and verifying the Collateral, (B) inspecting and
          copying (at the Borrower’s expense) any and all records pertaining thereto, and
          (C) discussing the affairs, finances and business of the Borrower and its
          Subsidiaries with any officer, employee or director thereof or with the
          Auditors, all of whom are hereby authorized to disclose to the Lender all
          financial statements, work papers, and other information relating to such
          affairs, finances or business. The Borrower shall reimburse the Lender
          for the
          reasonable travel and related expenses of the Lender’s employees or, at the
          Lender’s option, of such outside accountants or examiners as may be retained by
          the Lender to verify or inspect Collateral, records or documents of the
          Borrower
          and its Subsidiaries on a regular basis or for a special inspection if
          the
          Lender deems the same appropriate, except that, so long as no Event of
          Default
          has occurred and is continuing, the Borrower shall not be required to reimburse
          the Lender for more than three inspections in any calendar year. If the
          Lender’s
          own employees are used, the Borrower shall also pay such reasonable per
          diem
          allowance as the Lender may from time to time establish, or, if outside
          examiners or accountants are used, the Borrower shall also pay the Lender
          such
          sum as the Lender may be obligated to pay as fees therefor. All such Obligations
          may be charged to the Loan Account or any other account of the Borrower
          with the
          Lender or any of its affiliates. The Borrower hereby authorizes the Lender
          to
          communicate directly with the Auditors to disclose to the Lender any and
          all
          financial information regarding either of the Loan Parties including, without
          limitation, matters relating to any audit and copies of any letters, memoranda
          or other correspondence related to the business, financial condition or
          other
          affairs of either of the Loan Parties. In addition, the Borrower shall
          permit
          the Lender and its agents access to the Borrower’s premises to conduct
          appraisals of its Inventory on the terms and conditions with respect to
          the
          inspections set forth above, and the Borrower shall be required to reimburse
          the
          Lender for the reasonable travel and related expenses of the Lender’s employees
          or, at the Lender’s option, of such outside appraisers as may be retained by the
          Lender to appraise the Borrower’s Inventory, except that, so long as no Event of
          Default has occurred and is continuing, the Borrower shall not be required
          to
          reimburse the Lender for more than one such appraisal from the Closing
          Date
          through the Expiration Date. Notwithstanding anything to the contrary contained
          herein, if an Event of Default has occurred and is continuing, the Borrower
          shall reimburse the Lender for all reasonable travel and related expenses
          of the
          Lender’s employees or, at the Lender’s option, of any outside accountants or
          examiners retained by the Lender, in connection with field exams and appraisals
          of the Collateral, which exams and appraisals shall be done at frequencies
          determined by the Lender in its sole discretion.

         

        
          
            
            

          

          
            -48-

            
              

            

          

          
            
            

          

           

        

        (h) Notification
          Requirements.
          The
          Borrower shall timely give the Lender the following notices and other
          documents:

         

        
          	 	
                  (i)

                	
                  Notice
                    of Defaults.
                    Promptly, and in any event within two Business Days after becoming aware
                    of the occurrence of a Default or Event of Default, a certificate
                    of a
                    Responsible Officer specifying the nature thereof and the Borrower’s
                    proposed response thereto, each in reasonable
                    detail.

                


        

         

        
          	 	
                  (ii)

                	
                  Proceedings
                    or Changes.
                    Promptly, and in any event within five Business Days after the
                    Borrower
                    becomes aware of (A) any proceeding including, without limitation,
                    any proceeding the subject of which is based in whole or in part
                    on a
                    commercial tort claim being instituted or threatened to be instituted
                    by
                    or against a Loan Party or any of its Subsidiaries in any federal,
                    state,
                    local or foreign court or before any commission or other regulatory
                    body
                    (federal, state, local or foreign) involving a sum, together
                    with the sum
                    involved in all other similar proceedings, in excess of $100,000
                    in the
                    aggregate, (B) any order, judgment or decree involving a sum,
                    together with the sum of all other orders, judgments or decrees,
                    in excess
                    of $100,000 in the aggregate being entered against a Loan Party
                    or any of
                    its Subsidiaries or any of their respective property or assets,
                    (C) any notice or correspondence issued to either Loan Party or
                    Subsidiary thereof by a Governmental Authority warning, threatening
                    or
                    advising of the commencement of any investigation involving such
                    Loan
                    Party or Subsidiary or any of its property or assets, (D) any actual
                    or prospective change, development or event which has had or
                    could
                    reasonably be expected to have a Material Adverse Effect, (E) the
                    cessation of the business relationship of the Borrower with any
                    customer
                    of the Borrower whose purchases have accounted for more than
                    10% in the
                    aggregate of the sales of the Borrower in any year since the
                    fiscal year
                    ended December 31, 2004, or the receipt by the Borrower of any notice
                    of an intention to terminate any such relationship, (F) the cessation
                    of the business relationship of the Borrower with any vendor
                    or supplier
                    of the Borrower that have accounted for more than 10% in the
                    aggregate (in
                    volume of business) for the goods and services sold to the Borrower
                    in any
                    year since the fiscal year ended December 31, 2004, or the receipt by
                    the Borrower of any notice of an intention to terminate any such
                    relationship, (G) a change in the location of any Collateral from the
                    locations specified in Schedule 6.1(b), (H) a proposed or actual
                    change of the name, identity, corporate structure or jurisdiction
                    of
                    organization of either Loan Party or Subsidiary thereof, or (I) any
                    Collateral is subject to voluntary recall or a recall by or in
                    cooperation
                    with the United States Consumer Products Safety Commission or
                    any other
                    Governmental Authority for any reason, a written statement describing
                    such
                    proceeding, order, judgment, decree, change, recall, development
                    or event
                    and any action being taken by such Loan Party or any of its Subsidiaries
                    with respect thereto.

                


        

         

        
          
            
            

          

          
            -49-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (iii)

                	
                  ERISA
                    Notices.

                


        

         

        
          	 	
                  (A)

                	
                  Promptly,
                    and in any event within ten Business Days after a Termination
                    Event has
                    occurred, a written statement of a Responsible Officer describing
                    such
                    Termination Event and any action that is being taken with respect
                    thereto
                    by the Borrower or any ERISA Affiliate, and any action taken
                    or threatened
                    by the Internal Revenue Service, the Department of Labor or the
                    PBGC;

                


        

         

        
          	 	
                  (B)

                	
                  promptly,
                    and in any event within three Business Days after the filing
                    thereof with
                    the Internal Revenue Service, a copy of each funding waiver request
                    filed
                    with respect to any Plan subject to the funding requirements
                    of
                    Section 412 of the Internal Revenue Code and all communications
                    received by the Borrower or any ERISA Affiliate with respect
                    to such
                    request;

                


        

         

        
          	 	
                  (C)

                	
                  promptly,
                    and in any event within three Business Days after receipt by
                    the Borrower
                    or any ERISA Affiliate of the PBGC’s intention to terminate a Pension Plan
                    or to have a trustee appointed to administer a Pension Plan,
                    a copy of
                    each such notice;

                


        

         

        
          	 	
                  (D)

                	
                  promptly,
                    and in any event within three Business Days after the occurrence
                    thereof,
                    notice (including the nature of the event and, when known, any
                    action
                    taken or threatened by the Internal Revenue Service or the PBGC
                    with
                    respect thereto) of:

                


        

         

        
          	 	
                  (1)

                	
                  any
                    Prohibited Transaction which could subject the Borrower or any
                    ERISA
                    Affiliate to a civil penalty assessed pursuant to Section 502(i) of
                    ERISA or a tax imposed by Section 4975 of the Internal Revenue Code
                    in connection with any Plan, or any trust created
                    thereunder,

                


        

         

        
          	 	
                  (2)

                	
                  any
                    cessation of operations (by the Borrower or any ERISA Affiliate)
                    at a
                    facility in the circumstances described in Section 4062(e) of
                    ERISA,

                


        

         

        
          
            
            

          

          
            -50-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (3)

                	
                  a
                    failure by the Borrower or any ERISA Affiliate to make a payment
                    to a Plan
                    required to avoid imposition of a Lien under Section 302(f) of ERISA
                    or Section 412(n) of the Internal Revenue
                    Code,

                


        

         

        
          	 	
                  (4)

                	
                  the
                    adoption of an amendment to a Plan requiring the provision of
                    security to
                    such Plan pursuant to Section 307 of ERISA or Section 401(a)(29)
                    of the Internal Revenue Code, or

                


        

         

        
          	 	
                  (5)

                	
                  any
                    change in the actuarial assumptions or funding methods used for
                    any Plan
                    where the effect of such change is to increase materially or
                    reduce
                    materially the unfunded benefit liability or obligation to make
                    periodic
                    contributions;

                


        

         

        
          	 	
                  (E)

                	
                  promptly
                    upon the request of the Lender, each annual report (IRS Form 5500
                    series) and all accompanying schedules, the most recent actuarial
                    reports,
                    the most recent financial information concerning the financial
                    status of
                    each Plan administered or maintained by the Borrower or any ERISA
                    Affiliate, and schedules showing the amounts contributed to each
                    Pension
                    Plan by or on behalf of the Borrower or any ERISA Affiliate in
                    which any
                    of its personnel participate or from which such personnel may
                    derive a
                    benefit, and each Schedule B (Actuarial Information) to the annual
                    report filed by the Borrower or any ERISA Affiliate with the
                    Internal
                    Revenue Service with respect to each such
                    Plan;

                


        

         

        
          	 	
                  (F)

                	
                  promptly
                    upon the filing thereof, copies of any Form 5310, or any successor or
                    equivalent form to Form 5310, filed with the Internal Revenue Service
                    in connection with the termination of any Plan, and copies of
                    any standard
                    termination notice or distress termination notice filed with
                    the PBGC in
                    connection with the termination of any Pension
                    Plan;

                


        

         

        
          	 	
                  (G)

                	
                  promptly,
                    and in any event within three Business Days after receipt thereof
                    by the
                    Borrower or any ERISA Affiliate, notice and demand for payment
                    of
                    withdrawal liability under Section 4201 of ERISA with respect to a
                    Multiemployer Plan;

                


        

         

        
          	 	
                  (H)

                	
                  promptly,
                    and in any event within three Business Days after receipt thereof
                    by the
                    Borrower or any ERISA Affiliate, notice by the Department of
                    Labor of any
                    penalty, audit or investigation or purported violation of ERISA
                    with
                    respect to a Plan;

                


        

         

        
          
            
            

          

          
            -51-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (I)

                	
                  promptly,
                    and in any event within three Business Days after receipt thereof
                    by the
                    Borrower or any ERISA Affiliate, notice by the Internal Revenue
                    Service or
                    the Treasury Department of any income tax deficiency or delinquency,
                    excise tax penalty, audit or investigation with respect to a
                    Plan;
                    and

                


        

         

        
          	 	
                  (J)

                	
                  promptly,
                    and in any event within three Business Days after receipt thereof
                    by the
                    Borrower or any ERISA Affiliate, notice of any administrative
                    or judicial
                    complaint, or the entry of a judgment, award or settlement agreement,
                    in
                    either case with respect to a Plan that could reasonably be expected
                    to
                    have a Material Adverse Effect.

                


        

         

        
          	 	
                  (iv)

                	
                  Material
                    Contracts.
                    Promptly, and in any event within ten Business Days after any
                    Material
                    Contract is terminated or amended in any material respect, or
                    any new
                    Material Contract is entered into, a written statement describing
                    such
                    event, with copies of amendments or new contracts, and an explanation
                    of
                    any actions being taken with respect
                    thereto.

                


        

         

        
          	 	
                  (v)

                	
                  Environmental
                    Matters.
                    Promptly, and in any event within ten days after receipt by a
                    Loan Party
                    thereof, copies of each (A) written notice that any violation of any
                    Environmental Law may have been committed or is about to be committed
                    by a
                    Loan Party which violation could reasonably be expected to result
                    in
                    liability or involve remediation costs in excess of $50,000,
                    (B) written notice that any administrative or judicial complaint
                    or
                    order has been filed or is about to be filed against a Loan Party
                    alleging
                    violations of any Environmental Law or requiring a Loan Party
                    to take any
                    action in connection with the release of toxic or Hazardous Materials
                    into
                    the environment which violation or action could reasonably be
                    expected to
                    result in liability or involve remediation costs in excess of
                    $50,000,
                    (C) written notice from a Governmental Authority or other Person
                    alleging that a Loan Party may be liable or responsible for costs
                    associated with a response to or cleanup of a release of a Hazardous
                    Material into the environment or any damages caused thereby which
                    costs
                    could reasonably be expected to exceed $50,000 or (D) Environmental
                    Law adopted, enacted or issued after the date hereof of which
                    the Borrower
                    becomes aware which could reasonably be expected to have a Material
                    Adverse Effect.

                


        

         

        
          
            
            

          

          
            -52-

            
              

            

          

          
            
            

          

           

        

        (i) Casualty
          Loss.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, (i) provide
          written notice to the Lender, within ten Business Days, of any material
          damage
          to, the destruction of or any other material loss to any asset or property
          owned
          or used by the Borrower or any of its Subsidiaries other than any such
          asset or
          property with a net book value (individually or in the aggregate) less
          than
          $50,000 or any condemnation, confiscation or other taking, in whole or
          in part,
          or any event that otherwise diminishes so as to render impracticable or
          unreasonable the use of such asset or property owned or used by the Borrower
          or
          any of its Subsidiaries together with a statement of the amount of the
          damage,
          destruction, loss or diminution in value (a “Casualty Loss”) and
          (ii) diligently file and prosecute its claim for any award or payment in
          connection with a Casualty Loss.

         

        (j) Qualify
          to Transact Business.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, qualify to
          transact
          business as a foreign corporation, limited partnership or limited liability
          company, as the case may be, in each jurisdiction where the nature or extent
          of
          its business or the ownership of its property requires it to be so qualified
          or
          authorized and where failure to qualify or be authorized could reasonably
          be
          expected to have a Material Adverse Effect.

         

        (k) Financial
          Reporting.
          The
          Borrower shall deliver to the Lender the following:

         

        
          	 	
                  (i)

                	
                  Annual
                    Financial Statements.
                    As soon as available, but not later than 120 days after the fiscal
                    year ending December 31, 2006 and ninety days after the end of each
                    fiscal year thereafter, (A) the Parent’s annual audited and certified
                    consolidated and consolidating Financial Statements for or as
                    of the end
                    of the prior fiscal year; (B) the Borrower’s annual reviewed
                    consolidated and consolidating Financial Statements for or as
                    of the end
                    of the prior fiscal year; (C) a comparison in reasonable detail to
                    the prior year’s audited Financial Statements; (D) the Auditors’
                    opinion of the Parent’s Financial Statements without Qualification; and
                    (E) a narrative discussion of each Loan Party’s financial condition
                    and results of operations and the liquidity and capital resources
                    for such
                    fiscal year, prepared by the Guarantor’s chief financial officer,
                    provided
                    that, if the Financial Statements specified in clause (A) hereof are
                    not available or the Parent’s consolidating Financial Statements specified
                    in clause (A) hereof are not satisfactory to the Lender for any
                    reason or if the Auditors’ opinion of the Parent’s Financial Statements
                    contains a Qualification, then the Borrower shall have an Auditor
                    prepare
                    and deliver the Borrower’s separate audited Financial Statements for the
                    applicable fiscal year and each fiscal year thereafter, together
                    with the
                    other items specified in clauses (C), (D) and (E) hereof, but with
                    respect to the Borrower on a separate
                    basis.

                


        

         

        
          
            
            

          

          
            -53-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (ii)

                	
                  Projections.
                    Not later than twenty days before the end of each fiscal year
                    of the
                    Borrower, the Business Plan of the Borrower certified by the
                    Borrower’s
                    chief financial officer for the one-year period commencing with
                    the
                    following fiscal year.

                


        

         

        
          	 	
                  (iii)

                	
                  Monthly
                    Financial Statements.
                    As soon as available, but not later than twenty days after the
                    end of each
                    month, commencing with the month in which the Closing Date occurs,
                    (A) the Borrower’s interim Financial Statements as at the end of such
                    month and for the fiscal year to date, along with comparisons
                    of such
                    Financial Statements to (x) the same periods in the prior fiscal year
                    and (y) the projections for such periods in the Business Plan,
                    (B) a certification by the Borrower’s chief financial officer that
                    such Financial Statements have been prepared in accordance with
                    GAAP and
                    are fairly stated in all material respects (subject to normal
                    year-end
                    audit adjustments) and (C) a compliance certificate, substantially in
                    the form of Exhibit C (a “Compliance Certificate”), signed by the
                    Borrower’s chief financial officer, with an attached schedule of
                    calculations demonstrating compliance with the Financial Covenants
                    as of
                    the end of such month.

                


        

         

        
          	 	
                  (iv)

                	
                  Borrowing
                    Base Certificate.
                    (A) Daily, not later than 11:00 a.m. (New York time) on each
                    Business Day, a borrowing base certificate, substantially in
                    the form of
                    Exhibit H detailing the Eligible Receivables and the Eligible
                    Inventory containing a calculation of availability and reflecting
                    all
                    sales, collections, and debit and credit adjustments, as of the
                    previous
                    Business Day, which shall be prepared by or under the supervision
                    of the
                    chief financial officer of the Borrower and certified by such
                    officer or
                    any other officer of the Borrower acceptable to the Lender (or,
                    if
                    expressly requested by the Lender on any Business Day, the Borrower’s
                    chief financial officer) (a “Borrowing Base Certificate”) and
                    (B) monthly, not later than the twentieth day of each month, a
                    Borrowing Base Certificate detailing the Eligible Receivables
                    and Eligible
                    Inventory (provided
                    that the calculation of actual ineligible Receivables and actual
                    ineligible Inventory will be reported on a monthly basis in such
                    certificate as of the last day of the preceding month), containing
                    a
                    calculation of availability and reflecting all sales, collections,
                    and
                    debit and credit adjustments, as of the last day of the preceding
                    month
                    (or as of a more recent date as the Lender may from time to time
                    request),
                    which shall be prepared by or under the supervision of the chief
                    financial
                    officer of the Borrower and certified by such
                    officer.

                


        

         

        
          	 	
                  (v)

                	
                  Agings.
                    Monthly, not later than the twentieth day of each month, agings
                    of the
                    Borrower’s Receivables and accounts payable, in scope and detail
                    satisfactory to the Lender, as of the last day of the preceding
                    month.

                


        

         

        
          
            
            

          

          
            -54-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (vi)

                	
                  Inventory.
                    Monthly, not later than the twentieth day of each month, a report
                    of the
                    Borrower’s Inventory, based upon a perpetual inventory, which shall
                    describe such Inventory by category, item (in reasonable detail),
                    location
                    and whether or not such Inventory constitutes Eligible Inventory,
                    as of
                    the last day of the preceding
                    month.

                


        

         

        
          	 	
                  (vii)

                	
                  Shareholder
                    and SEC Reports.
                    As soon as available, but not later than five days after the
                    same are sent
                    or filed, as the case may be, copies of all financial statements
                    and
                    reports that either Loan Party sends to any of its shareholders
                    or either
                    Loan Party or the Parent files with the Securities and Exchange
                    Commission
                    or any other Governmental
                    Authority.

                


        

         

        
          	 	
                  (viii)

                	
                  Other
                    Financial Information.
                    Promptly after the request by the Lender therefor, such additional
                    financial statements and other related data and information as
                    to the
                    business, prospects, operations, results of operations, assets,
                    liabilities or condition (financial or otherwise) of the Borrower
                    or the
                    Guarantor as the Lender may from time to time reasonably
                    request.

                


        

         

        (l) Payment
          of Liabilities.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, pay and discharge,
          in the ordinary course of business, all obligations and liabilities (including,
          without limitation, tax liabilities and other governmental charges), except
          where the same may be contested in good faith by appropriate proceedings
          and for
          which adequate reserves with respect thereto have been established in accordance
          with GAAP.

         

        (m) ERISA.
          The
          Borrower shall, and shall cause each of its ERISA Affiliates to,
          (i) maintain each Plan intended to qualify under Section 401(a) of the
          Internal Revenue Code so as to satisfy the qualification requirements thereof,
          (ii) contribute, or require that contributions be made, in a timely manner
          (A) to each Plan in amounts sufficient (I) to satisfy the minimum
          funding requirements of Section 302 of ERISA or Section 412 of the
          Internal Revenue Code, if applicable, (II) to satisfy any other
          Requirements of Law and (III) to satisfy the terms and conditions of each
          such Plan, and (B) to each Foreign Plan in amounts sufficient to satisfy
          the minimum funding requirements of any applicable law or regulation, without
          any application for a waiver from any such funding requirements,
          (iii) cause each Plan or Foreign Plan to comply in all material respects
          with applicable law (including all applicable statutes, orders, rules and
          regulations) and (iv) pay in a timely manner, in all material respects, all
          required premiums to the PBGC.

         

        
          
            
            

          

          
            -55-

            
              

            

          

          
            
            

          

           

        

        As
          used
          in this Section 7.1(m), “Foreign Plan” means a plan that provides
          retirement or health benefits and that is maintained, or otherwise contributed
          to, by the Borrower for the benefit of employees outside the United
          States.

         

        (n) Environmental
          Matters.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, conduct its
          business so as to comply in all material respects with all applicable
          Environmental Laws including, without limitation, compliance in all material
          respects with the terms and conditions of all permits and governmental
          authorizations.

         

        (o) Trademarks.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, do and cause
          to be
          done all things necessary to preserve and keep in full force and effect
          all of
          its material registrations of trademarks, service marks and other marks,
          trade
          names and other trade rights.

         

        (p) Solvency.
          The
          Borrower shall, and shall cause each of its Subsidiaries to, be and remain
          Solvent at all times.

         

        (q) Billing
          Practices.
          The
          Borrower shall notify the Lender of any Receivable of the Borrower generated
          pursuant to the sale of goods or the rendition of services on any basis
          other
          than on the terms specified in Schedule 7.1(q).

         

        (r) Subsidiary
          Dividends.
          The
          Borrower shall cause each of its Subsidiaries to declare and pay dividends
          on
          account of its capital stock or other equity interests as frequently as,
          and to
          the fullest extent, permitted by applicable law.

         

        (s) Post
          Closing Deliveries.
          Not
          later than February 21, 2007, the Borrower shall deliver to the Lender
          (i) the Lockbox Agreement, duly executed by the Borrower and the Lockbox
          Bank party thereto, (ii) a Control Agreement, duly executed by the Borrower
          and any bank or financial institution with which the Borrower has a deposit
          account other than the Borrower’s payroll account with PNC Bank and the
          Operating Account and (iii) a Manual Internal Funds Transfer Agreement, in
          form and substance satisfactory to the Lender, duly executed by the Borrower
          and
          the Lender. In addition, the Borrower shall also deliver to the Lender
          the
          Borrower’s reviewed Financial Statements with respect to the December 31,
          2005 fiscal year, no later than ten days after such Financial Statements
          are
          released by the Auditors.

         

        SECTION
          7.2 Negative
          Covenants.
          Until
          termination of the Lender’s obligation to make any Loan or to cause to be issued
          any Letter of Credit under this Agreement, payment and satisfaction of
          all
          Obligations in full, and termination, Collateralization or expiration of
          all
          Letters of Credit:

         

        (a) Indebtedness.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, at any time create, incur, assume or suffer to exist any
          Indebtedness other than:

         

        
          	 	
                  (i)

                	
                  Indebtedness
                    under the Loan Documents;

                


        

         

        
          
            
            

          

          
            -56-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (ii)

                	
                  endorsement
                    of negotiable instruments for deposit or collection in the ordinary
                    course
                    of business; or

                


        

         

        
          	 	
                  (iii)

                	
                  Indebtedness
                    (including Capitalized Lease Obligations) incurred solely to
                    finance the
                    acquisition of fixed or capital assets in an aggregate principal
                    amount
                    not to exceed, as to the Borrower and its Subsidiaries taken
                    together,
                    $200,000 at any time outstanding.

                


        

         

        (b) Contingent
          Obligations.
          Except
          as specified in Schedule 6.1(i), the Borrower will not, directly or
          indirectly, incur, assume, or suffer to exist any Contingent Obligation,
          excluding indemnities given in connection with this Agreement or the other
          Loan
          Documents in favor of the Lender.

         

        (c) Corporate
          Changes, Etc.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, merge or consolidate with any Person or amend, alter or modify
          its
          Governing Documents or its legal name, mailing address, chief executive
          office
          or principal places of business, structure, status or existence, or liquidate
          or
          dissolve itself (or suffer any liquidation or dissolution) or issue any
          capital
          stock or other equity interests.

         

        (d) Change
          in Nature of Business.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          make any material change in the nature of its business as carried on at
          the date
          hereof or enter into any new line of business.

         

        (e) Sales,
          Etc. of Assets.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, in any fiscal year, sell, transfer or otherwise dispose of
          any of
          its assets (other than sales of Inventory in the ordinary course of business),
          or grant any option or other right to purchase or otherwise acquire any
          of its
          assets, in each case, with an aggregate value, as to the Borrower and its
          Subsidiaries taken together, in excess of $50,000.

         

        (f) Use
          of
          Proceeds.
          The
          Borrower will not (i) use any portion of the proceeds of any Loan in
          violation of Section 2.3 or for the purpose of purchasing or carrying any
“margin stock” (as defined in Regulation U of the Federal Reserve Board) in
          any manner which violates the provisions of Regulation T, U or X of the
          Federal Reserve Board or for any other purpose in violation of any applicable
          statute or regulation, or of the terms and conditions of this Agreement
          or
          (ii) take, or permit any Person acting on its behalf to take, any action
          which could reasonably be expected to cause this Agreement or any other
          Loan
          Document to violate any regulation of the Federal Reserve Board.

         

        (g) Cancellation
          of Debt.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, cancel
          any
          liability or debt owed to it, except for consideration in the ordinary
          course of
          business.

         

        (h) Loans
          to Other Persons.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          make cash loans or advance any credit to any Affiliate or other Person,
          except
          that the Borrower may make a loan to its shareholder or an Affiliate after
          the
          first anniversary of the Closing Date so long as (i) no Default or Event of
          Default has occurred and is continuing, (ii) the Lender shall have received
          the most recent monthly and year to date Financial Statements of the Borrower
          required to be delivered under Section 7.1(k)(iii) immediately preceding
          the making of such loan and the Compliance Certificate required to be delivered
          in connection therewith which shall demonstrate, among other things, that
          the
          Fixed Charge Coverage Ratio, calculated on a twelve-month trailing basis,
          is not
          less than 1.50 to 1.00 immediately prior to and after giving effect to
          such loan
          and shall set forth the recipient of and purpose for any such loan, and
          (iii) after giving effect to the making of such loan and all amounts
          required to be paid to bring current all accounts payable and all accrued
          expenses of the Borrower on a pro forma basis, Excess Availability shall
          at all
          times be, for the period beginning sixty days before, through the period
          ending
          sixty days after, the making of such loan, not less than $2,000,000, it
          being
          understood that the Borrower shall have the right, within ten days after
          the
          occurrence of any deficiency in such Excess Availability after the making
          of
          such loan, to cure such deficiency to the Lender’s satisfaction, in its sole and
          absolute discretion. Nothing contained herein shall limit the Borrower’s ability
          to permit interest to accrue and be capitalized on intercompany Indebtedness
          it
          is owed by its Affiliates.

         

        
          
            
            

          

          
            -57-

            
              

            

          

          
            
            

          

           

        

        (i) Liens,
          Etc.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, at any time create, incur, assume or suffer to exist any Lien
          on or
          with respect to any assets, other than:

         

        
          	 	
                  (i)

                	
                  Liens
                    created hereunder and by the Security
                    Documents;

                


        

         

        
          	 	
                  (ii)

                	
                  Liens
                    securing Indebtedness permitted by Section 7.2(a)(iii) incurred to
                    finance the acquisition of fixed or capital assets, provided
                    that (A) such Liens shall be created substantially simultaneously
                    with the acquisition of such assets, (B) such Liens do not at any
                    time encumber any assets other than the assets financed by such
                    Indebtedness, (C) such Liens are not modified to secure other
                    Indebtedness and the amount of Indebtedness secured thereby is
                    not
                    increased and (D) the principal amount of Indebtedness secured by any
                    such Lien shall at no time exceed the original purchase price
                    of such
                    assets; and

                


        

         

        
          	 	
                  (iii)

                	
                  Permitted
                    Liens.

                


        

         

        (j) Dividends,
          Stock Redemptions, Distributions, Etc.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, pay any dividends or distributions on, purchase, redeem or
          retire
          any shares of any class of its capital stock or other equity interests
          or any
          warrants, options or rights to purchase any such capital stock or other
          equity
          interests, whether now or hereafter outstanding (“Interests”), make any payment
          on account of or set apart assets for a sinking or other analogous fund
          for, the
          purchase, redemption, defeasance, retirement or other acquisition of its
          Interests, or make any other distribution in respect thereof, either directly
          or
          indirectly, whether in cash or property or in obligations of the Borrower
          or any
          of its Subsidiaries, except that (i) a Subsidiary may pay dividends to the
          Borrower or to another Subsidiary of the Borrower and (ii) commencing on
          the first anniversary of the Closing Date, the Borrower may pay a dividend
          to
          its shareholder so long as (A) no Default or Event of Default has occurred
          and is continuing, (B) the Lender shall have received the most recent
          monthly and year to date Financial Statements of the Borrower required
          to be
          delivered under Section 7.1(k)(iii) immediately preceding the payment of
          such dividend and the Compliance Certificate required to be delivered in
          connection therewith which shall demonstrate, among other things, that
          the Fixed
          Charge Coverage Ratio, calculated on a twelve-month trailing basis, is
          not less
          than 1.50 to 1.00, immediately prior to and after giving effect to such
          dividend
          and set forth the recipient of and purpose for any such dividend, and
          (C) after giving affect to the payment of such dividend and all amounts
          required to be paid to bring current all accounts payable and all accrued
          expenses of the Borrower on a pro forma basis, Excess Availability shall
          at all
          times be, for the period beginning sixty days before, through the period
          ending
          sixty days after the payment of such dividend, not less than $2,000,000,
          it
          being understood that the Borrower shall have the right, within ten days
          after
          the occurrence of any deficiency in such Excess Availability after the
          payment
          of such dividend, to cure such deficiency to the Lender’s satisfaction in its
          sole and absolute discretion.

         

        
          
            
            

          

          
            -58-

            
              

            

          

          
            
            

          

           

        

        (k) Investments.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, directly
          or
          indirectly, at any time make or hold any Investment in any Person (whether
          in
          cash, securities or other property of any kind) other than Investments
          in Cash
          Equivalents so long as the Lender has a perfected, first priority Lien
          on such
          Cash Equivalents.

         

        (l) Partnerships;
          Subsidiaries; Joint Ventures; Management Contracts.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          create any direct or indirect Subsidiary, enter into any joint venture
          or
          similar arrangement or become a partner in any general or limited partnership
          or
          enter into any management contract permitting third party management rights
          with
          respect to the business of the Borrower or any of its Subsidiaries.

         

        (m) Fiscal
          Year.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, change
          its
          fiscal year from a year ending December 31.

         

        (n) Accounting
          Changes.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          make or permit any change in accounting policies or reporting practices,
          except
          as required by GAAP.

         

        (o) Executive
          Compensation.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, pay
          any
          salary, management, director or other fee or other direct or indirect
          remuneration or compensation or cash corporate overhead expense to its
          Affiliates, employees of its Affiliates, officers, directors or stockholders
          in
          excess of the amounts specified in Schedule 7.2(o).

         

        (p) No
          Prohibited Transactions Under ERISA.
          The
          Borrower will not, and will not permit any of its ERISA Affiliates to,
          directly
          or indirectly:

         

        
          	 	
                  (i)

                	
                  Engage
                    in any Prohibited Transaction which could reasonably be expected
                    to result
                    in a civil penalty or excise tax described in Section 406 of ERISA or
                    Section 4975 of the Internal Revenue Code for which a statutory or
                    class exemption is not available or a private exemption has not
                    been
                    previously obtained from the Department of
                    Labor;

                


        

         

        
          
            
            

          

          
            -59-

            
              

            

          

          
            
            

          

        

         

        
          	 	
                  (ii)

                	
                  permit
                    to exist with respect to any Pension Plan any accumulated funding
                    deficiency (as defined in Section 302 of ERISA and Section 412
                    of the Internal Revenue Code), whether or not
                    waived;

                


        

         

        
          	 	
                  (iii)

                	
                  terminate
                    any Pension Plan where such event would result in any liability
                    of the
                    Borrower or any ERISA Affiliate under Title IV of
                    ERISA;

                


        

         

        
          	 	
                  (iv)

                	
                  fail
                    to make any required contribution or payment to any Multiemployer
                    Plan;

                


        

         

        
          	 	
                  (v)

                	
                  fail
                    to pay any required installment or any other payment required
                    under
                    Section 412 of the Internal Revenue Code on or before the due date
                    for such installment or other
                    payment;

                


        

         

        
          	 	
                  (vi)

                	
                  amend
                    a Pension Plan resulting in an increase in current liability
                    for the plan
                    year such that the Borrower or any ERISA Affiliate is required
                    to provide
                    security to such Plan under Section 307 of ERISA or
                    Section 401(a)(29) of the Internal Revenue
                    Code;

                


        

         

        
          	 	
                  (vii)

                	
                  withdraw
                    from any Multiemployer Plan where such withdrawal is reasonably
                    likely to
                    result in any liability of any such entity under Title IV of ERISA;
                    or

                


        

         

        
          	 	
                  (viii)

                	
                  take
                    any action that would cause the imposition of an excise tax under
                    Section 4978 or Section 4979A of the Internal Revenue
                    Code.

                


        

         

        (q) Unusual
          Terms of Sale.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, sell
          goods or
          products or render services on extended or consignment terms or on a progress
          billing or bill and hold basis, or on any other unusual terms.

         

        (r) Prepayments
          and Amendments of Material Contracts.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          (i) make any prepayment of any Indebtedness, other than the prepayment of
          the Loans in accordance with the terms of this Agreement, or (ii) amend,
          modify, cancel or terminate, or permit the amendment, modification, cancellation
          or termination of, any Material Contract, except where such amendment or
          modification could not reasonably be expected to have a Material Adverse
          Effect.

         

        
          
            
            

          

          
            -60-

            
              

            

          

          
            
            

          

           

        

        (s) Lease
          Obligations.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, at any
          time
          create, incur or assume any obligations as lessee for the rental or hire
          of real
          or personal property in connection with any sale and leaseback
          transaction.

         

        (t) Bank
          Accounts.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, open,
          maintain or otherwise have any checking, savings or other accounts at any
          bank
          or other financial institution, or any other account where money is or
          may be
          deposited or maintained with any other Person, other than (i) payroll
          accounts and (ii) accounts specified in Schedule 7.2(t).

         

        (u) Acquisition
          of Stock or Assets.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, acquire
          or
          commit or agree to acquire any stock, securities or assets of any other
          Person
          other than Equipment and Inventory acquired in the ordinary course of
          business.

         

        (v) Securities
          and Deposit Accounts.
          The
          Borrower will not, and will not permit any of its Subsidiaries to,
          (i) establish or maintain any Securities Account or deposit account unless
          the Lender shall have received a Control Agreement, duly executed by the
          Borrower and the securities intermediary or depository bank parties thereto
          and
          in full force and effect, in respect of such Securities Account or
          (ii) transfer any financial assets from any Securities Account or deposit
          account; provided,
          however,
          that, in
          the case of Securities Accounts, so long as no Event of Default has occurred
          and
          is continuing or would result therefrom, the Borrower and its Subsidiaries
          may
          (A) use such assets to the extent permitted by this Agreement, or
          (B) sell or trade such assets in the ordinary course of business so long as
          the proceeds of such sales or trades are deposited in a deposit account
          or a
          Securities Account in respect of which the Lender has received a Control
          Agreement duly executed by the Borrower and the applicable depository bank
          or
          securities intermediary and that otherwise is in full force and
          effect.

         

        (w) Accounts
          Receivable Terms.
          Without
          the Lender’s written consent, the Borrower will not, and will not permit any of
          its Subsidiaries to, make any of its current account receivable practices
          less
          restrictive than the terms on the date hereof as set forth on
          Schedule 7.1(q), including, without limitation, adjusting order size (in
          either gross dollar amount or number of units shipped).

         

        (x) Negative
          Pledge.
          The
          Borrower will not, and will not permit any of its Subsidiaries to, enter
          into or
          suffer to exist any agreement (other than in favor of the Lender) prohibiting
          or
          conditioning the creation or assumption of any Lien upon any of its
          assets.

         

        ARTICLE
          VIII

        FINANCIAL
          COVENANTS

         

        Until
          termination of the Lender’s obligations to make any Loan or to cause to be
          issued any Letters of Credit under this Agreement, payment and satisfaction
          of
          all Obligations in full, and termination, Collateralization or expiration
          of all
          Letters of Credit:

         

        
          
            
            

          

          
            -61-

            
              

            

          

          
            
            

          

           

        

        SECTION
          8.1 Tangible
          Net Worth.
          The
          Tangible Net Worth of the Borrower, as of the end of each month during
          each
          period set forth below, shall not be less than the amount set forth below
          opposite such period:

         

        
          	
                  Period

                	 	
                  Minimum
                    Tangible Net Worth

                	 
	
                  The
                    Closing Date through March 31, 2007

                	 	
                  $

                	
                  3,000,000

                	 
	
                  April 30,
                    2007 through June 30, 2007

                	 	
                  $

                	
                  3,500,000

                	 
	
                  July 31,
                    2007 and each month-end thereafter

                	 	
                  $

                	
                  4,000,000

                	 


        

        


        SECTION
          8.2 Fixed
          Charge Coverage Ratio.
          The
          Fixed Charge Coverage Ratio for the last day of each month ending during
          each
          period set forth below, calculated on a twelve-month trailing basis as
          of each
          such last day, shall not be less than the ratio set forth below opposite
          such
          period:

         

        
          	
                  Period

                	 	
                  Minimum
                    Fixed Charge Coverage Ratio

                	 
	
                  The
                    Closing Date through February 28, 2007

                	 	 	
                  0.50
                    to 1.00

                	 
	
                  March 1,
                    2007 through April 30, 2007

                	 	 	
                  0.75
                    to 1.00

                	 
	
                  May 1,
                    2007 through June 30, 2007

                	 	 	
                  1.00
                    to 1.00

                	 
	
                  Each
                    consecutive twelve-month period ending
                    thereafter

                	 	 	
                  1.10
                    to 1.00

                	 


        

        


        SECTION
          8.3 Capital
          Expenditures.
          The
          aggregate amount of the Borrower’s and its Subsidiaries’ consolidated Capital
          Expenditures made or committed to be made in any fiscal year commencing
          with the
          fiscal year ending December 31, 2007 shall not exceed
          $250,000.

         

        SECTION
          8.4 Business
          Plan.
          The
          Lender and the Borrower acknowledge that the foregoing financial covenants
          were
          established by the Lender and the Borrower on the basis of the Business
          Plan
          delivered to the Lender on the Closing Date, after leaving a margin in
          favor of
          the Borrower which the Lender and the Borrower have agreed is fair. Accordingly,
          the Lender and the Borrower have agreed that any failure by the Borrower
          to
          comply with the terms of any Financial Covenant shall be deemed material
          for
          purposes of this Agreement.

         

        ARTICLE
          IX

        EVENTS
          OF DEFAULT

         

        SECTION
          9.1 Events
          of Default.
          The
          occurrence of any of the following events shall constitute an “Event of
          Default”:

         

        (a) the
          Borrower shall fail to pay any principal, interest, fees, expenses or other
          Obligations when payable, whether at stated maturity, by acceleration,
          or
          otherwise; or

         

        (b) either
          Loan Party shall (i) default in the performance or observance of any
          agreement, covenant, condition, provision or term contained in Section 2.3,
          2.4, 7.1(a)(i), 7.1(c), 7.1(g)(ii), 7.1(h), 7.1(i), 7.1(j), 7.1(k), 7.1(q),
          7.2
          (other than 7.2(w)), 8.1, 8.2, 8.3, or 10.1 hereof, Section 6 of the
          Guaranty; or (ii) default in the performance or observance of any
          agreement, covenant, condition, provision or term contained in this Agreement
          or
          any other Loan Document (other than those referred to in Sections 9.1(a)
          and (b)(i)) and such default continues for a period of ten days; or

         

        
          
            
            

          

          
            -62-

            
              

            

          

          
            
            

          

           

        

        (c) either
          Loan Party shall dissolve, wind up or otherwise cease to conduct its business;
          or

         

        (d) either
          Loan Party shall become the subject of an Insolvency Event; or

         

        (e) (i) either
          Loan Party shall fail to make any payment (whether of principal, interest
          or
          otherwise and regardless of amount) in respect of any Material Indebtedness
          when
          due (whether at scheduled maturity or by required prepayment, acceleration,
          demand or otherwise), or (ii) any event or condition occurs that results in
          any Material Indebtedness becoming due prior to its scheduled maturity
          or that
          enables or permits the holder or holders (or a trustee or agent on behalf
          of
          such holder or holders) to declare any Material Indebtedness to be due,
          or to
          require the prepayment, repurchase, redemption or defeasance thereof, prior
          to
          its scheduled maturity; or

         

        (f) any
          representation or warranty made by either Loan Party under or in connection
          with
          any Loan Document or amendment or waiver thereof, or in any Financial Statement,
          report, document or certificate delivered in connection therewith, shall
          prove
          to have been incorrect in any material respect when made or deemed made;
          or

         

        (g) any
          judgment or order for the payment of money which, when taken together with
          all
          other judgments and orders rendered against the Loan Parties taken together,
          exceeds $250,000 in the aggregate shall be rendered against the Loan Parties
          and
          shall not be stayed, vacated, bonded or discharged within thirty days;
          or

         

        (h) (i) less
          than 50.1% in the aggregate of the shares of the voting stock or other
          voting
          equity interests of the Borrower shall be directly or indirectly owned
          or
          controlled by the Guarantor, or more than 49.9% in the aggregate of such
          shares
          or equity interests shall become subject to any contractual, judicial or
          statutory Lien other than a contractual Lien in favor of the Lender or
          (ii) Michael Varda, or a successor satisfactory to the Lender, shall cease
          to be the Chief Operating Officer and Chief Financial Officer of the Borrower
          and such Person has not been replaced by a successor satisfactory to the
          Lender
          in its sole discretion within ten days; or

         

        (i) (i) the
          Borrower has failed to notify the Bank in writing within thirty days of
          a change
          in the majority of the members of the board of directors of the Guarantor
          or the
          Borrower from the Persons who were members of such board of directors on
          the
          Closing Date or (ii) the occurrence of any change in control or similar
          event with respect to the Guarantor or the Borrower as defined or described
          under any indenture or agreement in respect of Indebtedness to which the
          Guarantor or the Borrower is a party and such change or event permits such
          Indebtedness to be accelerated; or

         

        
          
            
            

          

          
            -63-

            
              

            

          

          
            
            

          

           

        

        (j) any
          covenant, agreement or obligation of a Loan Party contained in or evidenced
          by
          any of the Loan Documents shall cease to be enforceable, or shall be determined
          to be unenforceable, in accordance with its terms; the Borrower or the
          Guarantor
          shall deny or disaffirm its obligations under any of the Loan Documents
          or any
          Liens granted in connection therewith or shall otherwise challenge any
          of its
          obligations under any of the Loan Documents; or any Liens granted on any
          of the
          Collateral shall be determined to be void, voidable or invalid, are subordinated
          or are not given the priority contemplated by this Agreement or any other
          Loan
          Document; or

         

        (k) a
          Security Document shall for any reason cease to create a valid and perfected
          first priority Lien on the Collateral purported to be covered thereby;
          or

         

        (l) if
          the
          Borrower has separate audited Financial Statements, the independent public
          accountants for the Borrower shall deliver a Qualified opinion on any Financial
          Statement; or

         

        (m) more
          than
          10% in the aggregate of the Borrower’s vendors or suppliers (in volume of
          business) shall have ceased, or have given notice that they intend to cease,
          supplying goods or rendering services in substantially the same amount
          to the
          Borrower and the Borrower shall not have obtained replacement goods or
          services
          from other sources on terms at least as favorable to the Borrower within
          thirty
          days of such cessation or notice; or

         

        (n) the
          occurrence of any event or condition that, in the Lender’s judgment, could be
          expected to have a Material Adverse Effect, provided
          that, if
          such event or condition is the termination or nonrenewal of a Material
          Contract,
          the Borrower shall have thirty days to obtain one or more additional contracts
          that eliminate any such Material Adverse Effect to the Lender’s reasonable
          satisfaction.

         

        SECTION
          9.2 Acceleration,
          Termination and Cash Collateralization.
          Upon
          the occurrence and during the continuance of an Event of Default, the Lender
          may
          take any or all of the following actions, without prejudice to the rights
          of the
          Lender to enforce its claims against the Borrower:

         

        (a) Acceleration.
          To
          declare all Obligations immediately due and payable (except with respect
          to any
          Event of Default with respect to a Loan Party specified in Section 9.1(d),
          in which case all Obligations shall automatically become immediately due
          and
          payable) without presentment, demand, protest or any other action or obligation
          of the Lender.

         

        (b) Termination
          of Commitment.
          To
          declare the Lender’s obligation to make Advances and to cause the issuance of
          Letters of Credit hereunder immediately terminated (except with respect
          to any
          Event of Default with respect to a Loan Party set forth in Section 9.1(d),
          in which case such obligation shall automatically terminate) and, at all
          times
          thereafter, any Loan made by the Lender and the issuance of any Letter
          of Credit
          shall be in the Lender’s sole and absolute discretion. Notwithstanding any such
          termination, until all Obligations shall have been fully and indefeasibly
          paid
          and satisfied, the Lender shall retain all rights under guaranties and
          all
          security in existing and future Receivables, Inventory, General Intangibles,
          Investment Property and Equipment of the Borrower and all other Collateral
          held
          by it hereunder and under the Security Documents, and the Borrower shall
          continue to turn over all Collections to the Lender.

         

        
          
            
            

          

          
            -64-

            
              

            

          

          
            
            

          

           

        

        (c) Cash
          Collateralization.
          With
          respect to all Letters of Credit outstanding at the time of the acceleration
          of
          the Obligations under Section 9.2(a) or otherwise at any time after the
          Expiration Date, the Borrower shall at such time deposit in a cash collateral
          account established by or on behalf of the Lender an amount equal to 105%
          of the
          aggregate then undrawn and unexpired amount of such Letters of Credit.
          Amounts
          held in such cash collateral account shall be under the sole dominion and
          control of the Lender and applied by the Lender to the payment of drafts
          drawn
          under such Letters of Credit, and the balance, if any, in such cash collateral
          account, after all such Letters of Credit shall have expired or been fully
          drawn
          upon shall be applied to repay the other Obligations. After all such Letters
          of
          Credit shall have expired or been fully drawn upon and all Obligations
          shall
          have been satisfied, the balance, if any, in such cash collateral account
          shall
          be returned to the Borrower or to such other Person as may be lawfully
          entitled
          thereto.

         

        SECTION
          9.3 Other
          Remedies.

         

        (a) Upon
          the
          occurrence and during the continuance of an Event of Default, the Lender
          shall
          have all rights and remedies with respect to the Obligations and the Collateral
          under applicable law and the Loan Documents, and the Lender may do any
          or all of
          the following:

         

        
          	 	
                  (i)

                	
                  remove
                    for copying all documents, instruments, files and records (including
                    the
                    copying of any computer records) relating to the Borrower’s Receivables or
                    use (at the expense of the Borrower) such supplies or space of
                    the
                    Borrower at the Borrower’s places of business necessary to administer,
                    enforce and collect such Receivables including, without limitation,
                    any
                    supporting obligations;

                


        

         

        
          	 	
                  (ii)

                	
                  accelerate
                    or extend the time of payment, compromise, issue credits, or
                    bring suit on
                    the Borrower’s Receivables (in the name of the Borrower or the Lender) and
                    otherwise administer and collect such
                    Receivables;

                


        

         

        
          	 	
                  (iii)

                	
                  sell,
                    assign and deliver the Borrower’s Receivables with or without
                    advertisement, at public or private sale, for cash, on credit
                    or
                    otherwise, subject to applicable law;
                    and

                


        

         

        
          	 	
                  (iv)

                	
                  foreclose
                    the security interests created pursuant to the Loan Documents
                    by any
                    available procedure, or take possession of any or all of the
                    Collateral,
                    without judicial process and enter any premises where any Collateral
                    may
                    be located for the purpose of taking possession of or removing
                    the
                    same.

                


        

         

        
          
            
            

          

          
            -65-

            
              

            

          

          
            
            

          

           

        

        (b) The
          Lender may bid or become a purchaser at any sale, free from any right of
          redemption, which right is expressly waived by the Borrower. If notice
          of
          intended disposition of any Collateral is required by law, it is agreed
          that ten
          days’ notice shall constitute reasonable notification. The Borrower will
          assemble the Collateral and make it available at such locations as the
          Lender
          may specify, whether at the premises of the Borrower or elsewhere, and
          will make
          available to the Lender the premises and facilities of the Borrower for
          the
          purpose of the Lender’s taking possession of or removing the Collateral or
          putting the Collateral in saleable form. The Lender may sell the Collateral
          or
          any part thereof in one or more parcels at public or private sale, at any
          exchange, broker’s board or at any of the Lender’s offices or elsewhere, for
          cash, on credit or for future delivery, and upon such other terms as the
          Lender
          may deem commercially reasonable. The Lender shall not be obligated to
          make any
          sale of Collateral regardless of notice of sale having been given. The
          Lender
          may adjourn any public or private sale from time to time by announcement
          at the
          time and place fixed therefor, and such sale may, without further notice,
          be
          made at the time and place to which it was so adjourned. The Borrower hereby
          grants the Lender a license to enter and occupy any of the Borrower’s leased or
          owned premises and facilities, without charge, to exercise any of the Lender’s
          rights or remedies.

         

        SECTION
          9.4 License
          for Use of Software and Other Intellectual Property.
          The
          Borrower hereby grants to the Lender a license or other right to use, without
          charge, all computer software programs, data bases, processes, trademarks,
          tradenames, copyrights, labels, trade secrets, service marks, advertising
          materials and other rights, assets and materials used by the Borrower in
          connection with its businesses or in connection with the
          Collateral.

         

        SECTION
          9.5 No
          Marshalling; Deficiencies; Remedies Cumulative.
          The
          Lender shall have no obligation to marshal any Collateral or to seek recourse
          against or satisfaction of any of the Obligations from one source before
          seeking
          recourse against or satisfaction from another source. The net cash proceeds
          resulting from the Lender’s exercise of any of the foregoing rights to liquidate
          all or substantially all of the Collateral, including any and all Collections
          (after deducting all of the Lender’s expenses related thereto), shall be applied
          by the Lender to such of the Obligations and in such order as the Lender
          shall
          elect in its sole and absolute discretion, whether due or to become due.
          The
          Borrower shall remain liable to the Lender for any deficiencies, and the
          Lender
          in turn agrees to remit to the Borrower or its successor or assign any
          surplus
          resulting therefrom. All of the Lender’s remedies under the Loan Documents shall
          be cumulative, may be exercised simultaneously against any Collateral and
          either
          Loan Party or in such order and with respect to such Collateral or such
          Loan
          Party as the Lender may deem desirable, and are not intended to be
          exhaustive.

         

        SECTION
          9.6 Waivers.
          Except
          as may be otherwise specifically provided herein or in any other Loan Document,
          the Borrower hereby waives any right to a judicial or other hearing with
          respect
          to any action or prejudgment remedy or proceeding by the Lender to take
          possession, exercise control over, or dispose of any item of Collateral
          in any
          instance (regardless of where the same may be located) where such action
          is
          permitted under the terms of this Agreement or any other Loan Document
          or by
          applicable law or of the time, place or terms of sale in connection with
          the
          exercise of the Lender’s rights hereunder and also waives any bonds, security or
          sureties required by any statute, rule or other law as an incident to any
          taking
          of possession by the Lender of any Collateral. The Borrower also waives
          any
          damages (direct, consequential or otherwise) occasioned by the enforcement
          of
          the Lender’s rights under this Agreement or any other Loan Document including
          the taking of possession of any Collateral or the giving of notice to any
          account debtor or the collection of any Receivable of the Borrower. The
          Borrower
          also consents that the Lender may enter upon any premises owned by or leased
          to
          it without obligations to pay rent or for use and occupancy, through self-help,
          without judicial process and without having first obtained an order of
          any
          court. These waivers and all other waivers provided for in this Agreement
          and
          the other Loan Documents have been negotiated by the parties, and the Borrower
          acknowledges that it has been represented by counsel of its own choice,
          has
          consulted such counsel with respect to its rights hereunder and has freely
          and
          voluntarily entered into this Agreement and the other Loan Documents as
          the
          result of arm’s-length negotiations.

         

        
          
            
            

          

          
            -66-

            
              

            

          

          
            
            

          

           

        

        SECTION
          9.7 Further
          Rights of the Lender.

         

        (a) Further
          Assurances.
          The
          Borrower shall do all things and shall execute and deliver all documents
          and
          instruments reasonably requested by the Lender to protect or perfect any
          Lien
          (and the priority thereof) of the Lender on the Collateral. The Lender
          is
          authorized to describe the Collateral covered by any financing statement
          filed
          by it under the Code as “all assets” or “all personal property” of the Borrower
          or by using a similar supergeneric description.

         

        (b) Insurance;
          Etc.
          If the
          Borrower shall fail to purchase or maintain insurance (where applicable),
          or to
          pay any tax, assessment, governmental charge or levy, except as the same
          may be
          otherwise permitted hereunder or which is being contested in good faith
          by
          appropriate proceedings and for which adequate reserves have been established
          in
          accordance with GAAP, or if any Lien prohibited hereby shall not be paid
          in full
          and discharged or if the Borrower shall fail to perform or comply with
          any other
          covenant, promise or obligation to the Lender hereunder or under any other
          Loan
          Document, the Lender may (but shall not be required to) perform, pay, satisfy,
          discharge or bond the same for the account of the Borrower, and all amounts
          so
          paid by the Lender shall be treated as a Base Rate Advance hereunder and
          shall
          constitute part of the Obligations.

         

        SECTION
          9.8 Interest
          and Letter of Credit Fees After Event of Default.
          The
          Borrower agrees and acknowledges that the additional interest and fees
          that may
          be charged under Section 4.2 (a) are an inducement to the Lender to
          make Advances and to cause Letters of Credit to be issued hereunder and
          that the
          Lender would not consummate the transactions contemplated by this Agreement
          without the inclusion of such provisions, (b) are fair and reasonable
          estimates of the Lender’s costs of administering the credit facility upon an
          Event of Default, and (c) are intended to estimate the Lender’s increased
          risks upon an Event of Default.

         

        
          
            
            

          

          
            -67-

            
              

            

          

          
            
            

          

           

        

        ARTICLE
          X

        ASSIGNMENTS
          AND PARTICIPATIONS

         

        SECTION
          10.1 Assignments.
          The
          Borrower shall not assign this Agreement or any right or obligation hereunder
          without the prior written consent of the Lender. The Lender may assign
          (without
          the consent of the Borrower) to one or more Persons all or a portion of
          its
          rights and obligations under this Agreement, the Note and the other Loan
          Documents.

         

        SECTION
          10.2 Participations.
          The
          Lender may sell participations in or to all or a portion of its rights
          and
          obligations under this Agreement (including, without limitation, all or
          a
          portion of the Loans and the Note); provided,
          however,
          that in
          such event the Lender’s obligations under this Agreement shall remain
          unchanged.

         

        SECTION
          10.3 Disclosure.
          The
          Lender may, in connection with any assignment or participation or proposed
          assignment or participation pursuant to this Article X, disclose to the
          assignee or participant or proposed assignee or participant any information
          relating to the Loan Parties.

         

        ARTICLE
          XI

        GENERAL
          PROVISIONS

         

        SECTION
          11.1 Notices.
          Except
          as otherwise provided herein, all notices and other communications hereunder
          shall be in writing and sent by certified or registered mail, return receipt
          requested, by overnight delivery service, with all charges prepaid, by
          hand
          delivery, or by telecopier followed by a hard copy sent by regular mail,
          if to
          the Lender, then to CitiCapital Commercial Corporation, 450 Mamaroneck
          Avenue,
          Harrison, New York 10528, Telecopy: (914) 899-7861, Attn.: Account Manager,
          International Playthings, Inc., with a copy to CitiCapital Commercial
          Corporation, 450 Mamaroneck Avenue, Harrison, New York 10528, Telecopy:
          (914)
          899-7238, Attn.: Robert R. Goldberg, Esq., and if to the Borrower, then to
          International Playthings, Inc., 75D Lackawanna Avenue, Parsippany, New
          Jersey
          07054, Telecopy: (973) 316-5883, Attn.: Mr. Michael Varda, Chief Operating
          Officer, with a copy to Connell Foley LLP, 888 Seventh Avenue, New York,
          New
          York 10106, Telecopy: (212) 262-3118, Attn.: John Cromie, Esq., or, in
          each
          case, to such other address as the Borrower or the Lender may specify to
          the
          other party in the manner required hereunder. All such notices and
          correspondence shall be deemed given (i) if sent by certified or registered
          mail, three Business Days after being postmarked, (ii) if sent by overnight
          delivery service or by hand delivery, when received at the above stated
          addresses or when delivery is refused and (iii) if sent by telecopier
          transmission, when such transmission is confirmed.

         

        SECTION
          11.2 Delays;
          Partial Exercise of Remedies.
          No
          delay or omission of the Lender to exercise any right or remedy hereunder
          shall
          impair any such right or operate as a waiver thereof. No single or partial
          exercise by the Lender of any right or remedy shall preclude any other
          or
          further exercise thereof, or preclude any other right or remedy.

         

        SECTION
          11.3 Right
          of Setoff.
          In
          addition to and not in limitation of all rights of offset that the Lender
          or any
          of its Affiliates may have under applicable law, and whether or not the
          Lender
          has made any demand or the Obligations of the Borrower have matured, the
          Lender
          and its Affiliates shall have the right to set off and apply any and all
          deposits (general or special, time or demand, provisional or final, or
          any other
          type) at any time held and any other Indebtedness at any time owing by
          the
          Lender or any of its Affiliates to or for the credit or the account of
          the
          Borrower or any of its Affiliates against any and all of the Obligations.
          In the
          event that the Lender exercises any of its rights under this Section 11.3,
          the Lender shall provide notice to the Borrower of such exercise, provided
          that
          the failure to give such notice shall not affect the validity of the exercise
          of
          such rights.

         

        
          
            
            

          

          
            -68-

            
              

            

          

          
            
            

          

           

        

        SECTION
          11.4 Indemnification;
          Reimbursement of Expenses of Collection.

         

        (a) The
          Borrower hereby agrees that, whether or not any of the transactions contemplated
          by this Agreement or the other Loan Documents are consummated, the Borrower
          will
          indemnify, defend and hold harmless (on an after-tax basis) the Lender,
          each
          issuer of a Letter of Credit and their respective successors, assigns,
          directors, officers, agents, employees, advisors, shareholders, attorneys
          and
          Affiliates (each, an “Indemnified Party”) from and against any and all losses,
          claims, damages, liabilities, deficiencies, obligations, fines, penalties,
          actions (whether threatened or existing), judgments, suits (whether threatened
          or existing) or expenses (including, without limitation, reasonable fees
          and
          disbursements of counsel, experts, consultants and other professionals)
          incurred
          by any of them (collectively, “Claims”) (except, in the case of each Indemnified
          Party, to the extent that any Claim is determined in a final and non-appealable
          judgment by a court of competent jurisdiction to have directly resulted
          from
          such Indemnified Party’s gross negligence or willful misconduct) arising out of
          or by reason of (i) any litigation, investigation, claim or proceeding
          related to (A) this Agreement, any other Loan Document or the transactions
          contemplated hereby or thereby, (B) any actual or proposed use by the
          Borrower of the proceeds of the Loans, (C) the issuance of any Letter of
          Credit or the acceptance or payment of any document or draft presented
          to any
          issuer thereof, (D) the Lender’s entering into this Agreement, the other
          Loan Documents or any other agreements and documents relating hereto (other
          than
          consequential damages and loss of anticipated profits or earnings), including,
          without limitation, amounts paid in settlement, court costs and the fees
          and
          disbursements of counsel incurred in connection with any such litigation,
          investigation, claim or proceeding, or (E) any Loan made by the Lender, or
          any failure by the Lender to make a Loan, under Section 2.2(f), it being
          understood that (I) the Lender shall be fully indemnified for any Loan made
          by it under Section 2.2(f) in reliance upon any check, draft, document or
          other instrument presented for payment against a controlled disbursement
          account
          of the Borrower, without any duty whatsoever to determine whether such
          presentment is authorized or proper and (II) it shall be the responsibility
          of the Borrower (and not the responsibility of the Lender) to investigate
          and
          determine whether any check, draft, document or other instrument presented
          for
          payment against any such controlled disbursement account has been properly
          presented and to notify the Lender in writing immediately of its discovery
          of
          any such improper presentment, (ii) any remedial or other action taken or
          required to be taken by the Borrower in connection with compliance by the
          Borrower, or any of its properties, with any federal, state or local
          Environmental Laws and (iii) any pending, threatened or actual action,
          claim, proceeding or suit by any shareholder or director of the Borrower
          or any
          actual or purported violation of the Borrower’s Governing Documents or any other
          agreement or instrument to which the Borrower is a party or by which any
          of its
          properties is bound. In addition, the Borrower shall, upon demand, pay
          to the
          Lender all reasonable costs and expenses incurred by the Lender (including
          the
          fees and disbursements of counsel and other professionals) in connection
          with
          the preparation, execution, delivery, administration, modification and
          amendment
          of the Loan Documents, and pay to the Lender all costs and expenses (including
          the fees and disbursements of counsel and other professionals) paid or
          incurred
          by the Lender in (A) enforcing or defending its rights under or in respect
          of this Agreement, the other Loan Documents or any other document or instrument
          now or hereafter executed and delivered in connection herewith,
          (B) collecting the Obligations or otherwise administering this Agreement
          and (C) foreclosing or otherwise realizing upon the Collateral or any part
          thereof. If and to the extent that the obligations of the Borrower hereunder
          are
          unenforceable for any reason, the Borrower hereby agrees to make the maximum
          contribution to the payment and satisfaction of such obligations that is
          permissible under applicable law.

         

        
          
            
            

          

          
            -69-

            
              

            

          

          
            
            

          

           

        

        (b) The
          Borrower’s obligations under Sections 4.7 and 4.8 and this
          Section 11.4 shall survive any termination of this Agreement and the other
          Loan Documents, the termination, expiration or Collateralization of all
          Letters
          of Credit and the payment in full of the Obligations, and are in addition
          to,
          and not in substitution of, any of the other Obligations.

         

        SECTION
          11.5 Amendments
          and Waivers.
          Any
          provision of this Agreement or any other Loan Document may be amended or
          waived
          if, but only if, such amendment or waiver is in writing and signed by the
          Lender
          and the Loan Parties party thereto, and then any such amendment or waiver
          shall
          be effective only to the extent set forth therein.

         

        SECTION
          11.6 Counterparts;
          Telecopied Signatures.
          This
          Agreement and any waiver or amendment hereto may be executed in counterparts
          and
          by the parties hereto in separate counterparts, each of which when so executed
          and delivered shall be an original, but all of which shall together constitute
          one and the same instrument. This Agreement and each of the other Loan Documents
          may be executed and delivered by telecopier or other facsimile transmission
          all
          with the same force and effect as if the same was a fully executed and
          delivered
          original manual counterpart.

         

        SECTION
          11.7 Severability.
          In case
          any provision in or obligation under this Agreement, any Note or any other
          Loan
          Document shall be invalid, illegal or unenforceable in any jurisdiction,
          the
          validity, legality and enforceability of the remaining provisions or
          obligations, or of such provision or obligation in any other jurisdiction,
          shall
          not in any way be affected or impaired thereby.

         

        SECTION
          11.8 Maximum
          Rate.
          Notwithstanding anything to the contrary contained elsewhere in this Agreement
          or in any other Loan Document, the parties hereto hereby agree that all
          agreements between them under this Agreement and the other Loan Documents,
          whether now existing or hereafter arising and whether written or oral,
          are
          expressly limited so that in no contingency or event whatsoever shall the
          amount
          paid, or agreed to be paid, to the Lender for the use, forbearance, or
          detention
          of the money loaned to the Borrower and evidenced hereby or thereby or
          for the
          performance or payment of any covenant or obligation contained herein or
          therein, exceed the maximum non-usurious interest rate, if any, that at
          any time
          or from time to time may be contracted for, taken, reserved, charged or
          received
          on the Obligations, under the laws of the State of New York (or the laws
          of any
          other jurisdiction whose laws may be mandatorily applicable notwithstanding
          other provisions of this Agreement and the other Loan Documents), or under
          applicable federal laws which may presently or hereafter be in effect and
          which
          allow a higher maximum non-usurious interest rate than under the laws of
          the
          State of New York (or such other jurisdiction), in any case after taking
          into
          account, to the extent permitted by applicable law, any and all relevant
          payments or charges under this Agreement and the other Loan Documents executed
          in connection herewith, and any available exemptions, exceptions and exclusions
          (the “Highest Lawful Rate”). If due to any circumstance whatsoever, fulfillment
          of any provision of this Agreement or any of the other Loan Documents at
          the
          time performance of such provision shall be due shall exceed the Highest
          Lawful
          Rate, then, automatically, the obligation to be fulfilled shall be modified
          or
          reduced to the extent necessary to limit such interest to the Highest Lawful
          Rate, and if from any such circumstance the Lender should ever receive
          anything
          of value deemed interest by applicable law which would exceed the Highest
          Lawful
          Rate, such excessive interest shall be applied to the reduction of the
          principal
          amount then outstanding hereunder or on account of any other then outstanding
          Obligations and not to the payment of interest, or if such excessive interest
          exceeds the principal unpaid balance then outstanding hereunder and such
          other
          then outstanding Obligations, such excess shall be refunded to the Borrower.
          All
          sums paid or agreed to be paid to the Lender for the use, forbearance,
          or
          detention of the Obligations and other Indebtedness of the Borrower to
          the
          Lender shall, to the extent permitted by applicable law, be amortized,
          prorated,
          allocated and spread throughout the full term of such Indebtedness, until
          payment in full thereof, so that the actual rate of interest on account
          of all
          such Indebtedness does not exceed the Highest Lawful Rate throughout the
          entire
          term of such Indebtedness. The terms and provisions of this Section shall
          control every other provision of this Agreement, the other Loan Documents
          and
          all other agreements between the parties hereto.

         

        
          
            
            

          

          
            -70-

            
              

            

          

          
            
            

          

           

        

        SECTION
          11.9 Entire
          Agreement; Successors and Assigns; Interpretation.
          This
          Agreement and the other Loan Documents constitute the entire agreement
          between
          the parties, supersede any prior written and verbal agreements between
          them with
          respect to the subject matter hereof and thereof, and shall bind and benefit
          the
          parties and their respective successors and permitted assigns. This Agreement
          shall be deemed to have been jointly drafted, and no provision of it shall
          be
          interpreted or construed for or against a party because such party purportedly
          prepared or requested such provision, any other provision, or this Agreement
          as
          a whole.

         

        SECTION
          11.10 LIMITATION
          OF LIABILITY.
          THE
          LENDER SHALL HAVE NO LIABILITY TO THE BORROWER (WHETHER SOUNDING IN CONTRACT,
          TORT OR EQUITY OR OTHERWISE) FOR LOSSES SUFFERED BY THE BORROWER IN CONNECTION
          WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
          CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING
          IN
          CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
          JUDGMENT OR COURT ORDER BINDING ON THE LENDER THAT THE LOSSES WERE THE
          RESULT OF
          ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
          THE
          LENDER. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST THE LENDER
          FOR
          SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES EXCEPT IN THE CASE
          OF THE
          LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

         

        
          
            
            

          

          
            -71-

            
              

            

          

          
            
            

          

           

        

        SECTION
          11.11 GOVERNING
          LAW.
          THE
          VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND THE OTHER
          LOAN
          DOCUMENTS AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
          OR
          ANY OF THE OTHER LOAN DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT OR
          EQUITY OR
          OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
          OF LAW PROVISIONS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
          OBLIGATIONS LAW) AND DECISIONS OF THE STATE OF NEW YORK.

         

        SECTION
          11.12 SUBMISSION
          TO JURISDICTION.
          ALL
          DISPUTES BETWEEN THE BORROWER AND THE LENDER BASED UPON, ARISING OUT OF,
          OR IN
          ANY WAY RELATING TO (A) THIS AGREEMENT; (B) ANY OTHER LOAN DOCUMENT OR
          OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN THE BORROWER AND
          THE
          LENDER; OR (C) ANY CONDUCT, ACT OR OMISSION OF THE BORROWER, THE LENDER OR
          ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER
          AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR
          OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN
          NEW
          YORK, NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN;
          PROVIDED,
          HOWEVER,
          THAT THE
          LENDER SHALL HAVE THE RIGHT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
          LAW,
          TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN (A) ANY COURTS OF
          COMPETENT JURISDICTION AND VENUE AND (B) ANY LOCATION SELECTED BY THE
          LENDER TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
          A
          JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE BORROWER AGREES
          THAT
          IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS
          IN ANY
          PROCEEDING BROUGHT BY THE LENDER. THE BORROWER WAIVES ANY OBJECTION THAT
          IT MAY
          HAVE TO THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A
          PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
          OF VENUE
          OR BASED ON FORUM NON CONVENIENS.

         

        SECTION
          11.13 SERVICE
          OF PROCESS.
          THE
          BORROWER HEREBY IRREVOCABLY DESIGNATES CONNELL FOLEY LLP, 888 SEVENTH AVENUE,
          NEW YORK, NEW YORK 10106 OR ITS SUCCESSOR AS THE DESIGNEE AND AGENT OF
          THE
          BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER, SERVICE OF PROCESS
          IN
          ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
          LOAN
          DOCUMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT
          AT
          ITS ADDRESS WILL BE PROMPTLY FORWARDED BY MAIL TO THE BORROWER, BUT THE
          FAILURE
          OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE
          OF
          SUCH PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
          LEGAL
          PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

         

        
          
            
            

          

          
            -72-

            
              

            

          

          
            
            

          

           

        

        SECTION
          11.14 JURY
          TRIAL.
          EACH OF
          THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
          LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
          ARISING OUT OF, OR IN ANY WAY RELATING TO (A) THIS AGREEMENT; (B) ANY
          OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT
          BETWEEN
          THE BORROWER AND THE LENDER; OR (C) ANY CONDUCT, ACT OR OMISSION OF THE
          BORROWER, THE LENDER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
          ATTORNEYS OR OTHER AFFILIATES, IN EACH CASE WHETHER SOUNDING IN CONTRACT,
          TORT
          OR EQUITY OR OTHERWISE.

         

        SECTION
          11.15 Publicity.
          The
          Lender may (a) publish in any trade or other publication or otherwise
          publicize to any third party (including its Affiliates) a tombstone, article,
          press release or similar material relating to the financing transactions
          contemplated by this Agreement and (b) provide to industry trade
          organizations related information necessary and customary for inclusion
          in
          league table measurements.

         

        
          
            
            

          

          
            -73-

            
              

            

          

          
            
            

          

        


        IN
          WITNESS WHEREOF,
          each of
          the parties hereto has caused this Agreement to be executed by its proper
          and
          duly authorized officer as of the date first set forth above.

        
          	 	 	 
	 	
                  
                  

                  INTERNATIONAL
                    PLAYTHINGS, INC.

                
	 
 	 
 	 
 
	
                	By:  	/s/
                  Michael Varda
	 	
                  

                  Name: Michael
                    Varda

                  Title: Chief
                    Operating Officer

                


        

        
          
            	 	 	 
	 	
                    
                    

                    
                      CITICAPITAL
                        COMMERCIAL CORPORATION

                    

                  
	 
 	 
 	 
 
	
                  	By:  	/s/
                    Miles M. Martin
	 	
                    

                    
                      Name: Miles M.
                        Martin

                      Title: Vice
                        President

                    

                  


          

        

        


        
          
            
            

          

          
            -74-

            
              

            

          

          
            
            

          

        


        EXHIBIT A

         

        REVOLVING
          PROMISSORY NOTE

         

        
          	$13,000,000	
                  Harrison,
                    New York
December 21,
                    2006

                


        

            

        FOR
          VALUE
          RECEIVED, INTERNATIONAL PLAYTHINGS, INC., a New Jersey Corporation (the
          “Borrower”), hereby unconditionally promises to pay to the order of CitiCapital
          Commercial Corporation, a Delaware corporation (the “Lender”), on the Expiration
          Date, at the Lender’s office at 450 Mamaroneck Avenue, Harrison, New York 10528
          or at such other location as the Lender may from time to time designate
          in
          writing, in lawful money of the United States of America and in immediately
          available funds, the principal amount equal to the lesser of (a) THIRTEEN
          MILLION DOLLARS ($13,000,000) and (b) the aggregate unpaid principal amount
          of the Loans made to the Borrower under Section 2.1(a) of the Loan
          Agreement (as defined below).

         

        The
          Borrower further promises to pay interest in like money and funds to the
          Lender
          at the aforementioned address (or at such other location as the Lender
          may from
          time to time designate in writing) on the unpaid principal amount hereof
          from
          time to time outstanding from and including the date hereof until paid
          in full
          (both before and after judgment and both before and after the occurrence
          of an
          Event of Default) at the rates and on the dates determined in accordance
          with,
          and calculated in the manner set forth in, Sections 4.1 and 4.2 of the Loan
          Agreement. Capitalized terms used but not defined herein shall have the
          meanings
          given them in the Loan and Security Agreement dated as of the date hereof
          (as
          amended, supplemented or otherwise modified from time to time, the “Loan
          Agreement”) between the Borrower and the Lender.

         

        Whenever
          any payment to be made hereunder shall be stated to be due on a day that
          is not
          a Business Day, the payment shall be made on the next succeeding Business
          Day
          (except as otherwise provided in the Loan Agreement) and such extension
          of time
          shall be included in the computation of the amount of interest due
          hereunder.

         

        This
          Note
          is the Note referred to in the Loan Agreement and shall be entitled to
          the
          benefit of all terms and conditions of, and the security of all security
          interests, liens and rights granted under or in connection with, the Loan
          Agreement and the other Loan Documents, and is subject to optional and
          mandatory
          prepayment as provided therein. Upon the occurrence of any one or more
          of the
          Events of Default specified in the Loan Agreement, all amounts then remaining
          unpaid on this Note may be declared to be or may automatically become
          immediately due and payable as provided in the Loan Agreement.

         

        The
          Borrower acknowledges that the holder of this Note may assign, transfer
          or sell
          all or a portion of its rights and interests in, to and under this Note
          to one
          or more Persons as provided in the Loan Agreement and that such Persons
          shall
          thereupon become vested with all of the rights and benefits of the Lender
          in
          respect hereof as to all or that portion of this Note which is so assigned,
          transferred or sold.

         

        
          
            
            

          

          
            A-1

            
              

            

          

          
            
            

          

           

        

        In
          the
          event of any conflict between the terms hereof and the terms and provisions
          of
          the Loan Agreement, the terms and provisions of the Loan Agreement shall
          control.

         

        The
          Borrower waives presentment, demand for payment, protest and notice of
          dishonor
          of this Note and authorizes the holder hereof, without notice, to increase
          or
          decrease the rate of interest on any amount owing under this Note in accordance
          with the Loan Agreement. The Borrower shall make all payments hereunder
          and
          under the Loan Agreement without setoff, deduction or counterclaim. No
          failure
          to exercise and no delay in exercising any rights hereunder on the part
          of the
          holder hereof shall operate as a waiver of such rights. This Note may not
          be
          changed or modified orally, but only by an agreement in writing, which
          is signed
          by the party or parties against whom enforcement of any waiver, change
          or
          modification is sought.

         

        THE
          VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE AND ANY DISPUTE ARISING
          OUT OF OR IN CONNECTION WITH THIS NOTE, WHETHER SOUNDING IN CONTRACT, TORT
          OR
          EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED
          TO THE
          CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW
          YORK.

         

        
          
            
            

          

          
            A-2

            
              

            

          

          
            
            

          

        


        THE
          BORROWER AND, BY ITS ACCEPTANCE HEREOF, THE LENDER HEREBY WAIVES TO THE
          FULLEST
          EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
          BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS NOTE OR ANY
          CONDUCT,
          ACT OR OMISSION OF THE BORROWER, THE LENDER OR ANY OF THEIR RESPECTIVE
          DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES,
          IN EACH
          CASE WHETHER SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE.

        
          	 	 	 
	 	
                  INTERNATIONAL
                    PLAYTHINGS, INC.

                
	 
 	 
 	 
 
	
                	By:  	/s/
                  Michael Varda
	 	
                  

                  Michael
                    Varda

                  Chief
                    Operating Officer

                


        

        


        
          
            
            

          

          
            A-3