Document:

REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement ("Agreement") is entered into as of
      October 6, 2006 by and among Small World Kids, Inc., a Nevada corporation
      (the "Company"), and the Purchasers (the "Purchasers") named in that certain
      Note Purchase Agreement of even date herewith (the "Purchase Agreement") and
      who
      have signed the counterpart signature page to this Agreement.

     

    WHEREAS,
      concurrently herewith, Purchasers have purchased secured convertible promissory
      notes (the "Notes") in the aggregate Face Amount of $330,000.

     

    WHEREAS,
      in connection with the Notes, the Company is issuing to Purchasers Common Stock
      Purchase Warrants ("Warrants") exercisable for shares of the Company's Common
      Stock (the "Warrants").

     

    WHEREAS,
      entering into this Agreement is a condition precedent to the obligation of
      the
      Purchasers to purchase the Notes under the Purchase Agreement.

     

    WHEREAS,
      the capitalized terms used in this Agreement that are not defined herein shall
      have the meanings ascribed to them in the Purchase Agreement.

     

    NOW
      THEREFORE, in consideration of the mutual agreements, covenants and conditions
      and releases contained herein, the Company and Purchasers hereby agree as
      follows:

     

    1.  Definitions.
      As used
      herein:

     

    1.1.  The
      term
      "Holder" means any person owning or having the right to acquire Registrable
      Shares or any assignee thereof in accordance with Section 2.8
      hereof.

     

    1.2.  The
      terms
      "register," "registered," and "registration" refer to a registration effected
      by
      preparing and filing a registration statement in compliance with the Securities
      Act (as defined below) and the applicable rules and regulations thereunder,
      and
      the declaration or ordering of the effectiveness of such registration
      statement.

     

    1.3.  For
      the
      purposes hereof, the term "Registrable Shares" means and includes (i) the
      shares of Common Stock of the Company issued or issuable upon conversion of
      the
      Notes, (ii) the shares of Common Stock of the Company issued or issuable
      upon exercise of the Warrants, and (iii) any shares or other securities issued
      or issuable as a result of a stock split, dividend or other distribution with
      respect to or in exchange for or in replacement of the shares referenced in
      (i)
      and (ii) above, excluding in all cases, however, any Registrable Shares sold
      by
      a Person in a transaction in which his or her rights under Section 2 are
      not assigned.

     

    1.4.  The
      term
      "Ownership Percentage" means and includes, with respect to each Holder of
      Registrable Shares requesting inclusion of Registrable Shares in an offering
      pursuant to this Agreement, the number of Registrable Shares held by such Holder
      divided by the aggregate of (i) all Registrable Shares held by all Holders
      requesting registration in such offering and (ii) the total number of all
      other securities entitled to registration pursuant to any agreement with the
      Company and held by others participating in the underwriting.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.5.  The
      term
      "Securities Act" means the Securities Act of 1933, as amended.

     

    1.6.  The
      term
      "Public Offering" means and includes the closing of an underwritten public
      offering pursuant to an effective registration statement under the Securities
      Act, covering the offer and sale of securities to the general public for the
      account of the Company.

     

    2.  Registration
      Rights.

     

    2.1.  "Piggy
      Back" Registration.
      If at
      any time the Company shall determine to register under the Securities Act
      (including pursuant to a demand of any stockholder of the Company exercising
      registration rights) any of its Common Stock (other than a registration relating
      solely to the sale of securities to participants in a Company employee benefits
      plan, a registration on any form which does not include substantially the same
      information as would be required to be included in a registration statement
      covering the sale of the Registrable Shares), it shall send to each Holder
      written notice of such determination and, if within twenty (20) days after
      receipt of such notice, such Holder shall so request in writing, the Company
      shall use its best efforts to include in such registration statement all of
      the
      Registrable Shares that such Holder requests to be registered, except that
      if,
      in connection with any offering involving an underwriting of Common Stock to
      be
      issued by the Company, the managing underwriter shall impose a limitation on
      the
      number of shares of Common Stock included in any such registration statement
      because, in such underwriter's judgment, such limitation is necessary based
      on
      market conditions, the Company shall be obligated to include in such
      registration statement, with respect to the requesting Holder, only an amount
      of
      Registrable Shares equal to the product of (i) the number of Registrable
      Shares that remain available for registration after the underwriter's cut back
      and (ii) such Holder's Ownership Percentage, as that term is defined in
      Section 1.4. If any Holder disapproves of the terms of such underwriting,
      he may elect to withdraw therefrom by written notice to the Company and the
      underwriter.

     

    2.2.  Effectiveness.

     

    (a)  The
      Company will use its best efforts to maintain the effectiveness for the period
      described in the plan of distribution set forth in the registration
      statement.

     

    (b)  The
      Company will from time to time amend or supplement such registration statement
      and the prospectus contained therein as and to the extent necessary to comply
      with the Securities Act and any applicable state securities statute or
      regulation.

     

    
      
         

      

      
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    2.3.  Indemnification.

     

    (a)  Indemnification
      of Holders.
      In the
      event that the Company registers any of the Registrable Shares under the
      Securities Act, the Company will indemnify and hold harmless each Holder and
      each underwriter of the Registrable Shares so registered (including any broker
      or dealer through whom such shares may be sold) and each person, if any, who
      controls such Holder within the meaning of the Securities Act or any such
      underwriter within the meaning of Section 15 of the Securities Act from and
      against any and all losses, claims, damages, expenses or liabilities (or any
      action in respect thereof), joint or several, to which they or any of them
      become subject under the Securities Act or under any other statute or at common
      law or otherwise, and, except as hereinafter provided, will reimburse each
      such
      Holder, such Holder's directors and officers, each such underwriter and each
      such controlling person, if any, for any legal or other expenses reasonably
      incurred by them or any of them, as such expenses are incurred, in connection
      with investigating, defending, or settling any actions whether or not resulting
      in any liability, insofar as such losses, claims, damages, expenses, liabilities
      or actions arise out of or are based upon (i) any untrue statement or
      alleged untrue statement of a material fact contained in the registration
      statement, in any preliminary or amended preliminary prospectus or in the
      prospectus (or the registration statement or prospectus as from time to time
      amended or supplemented by the Company); (ii) arise out of or are based
      upon the omission or alleged omission to state therein a material fact required
      to be stated therein or necessary in order to make the statements therein not
      misleading; or (iii) any violation by the Company of the Securities Act,
      the Securities Exchange Act of 1934, as amended (the "Exchange Act"), a state
      securities law or any rule or regulation under the Securities Act, the Exchange
      Act or any state securities law; provided, however, that the indemnity contained
      in this Section 2.3(a) will not apply where such untrue statement or
      omission was made in such registration statement, preliminary or amended,
      preliminary prospectus or prospectus in reliance upon and in conformity with
      information furnished in writing to the Company in connection therewith by
      such
      Holder of Registrable Shares, any such underwriter or any such controlling
      person expressly for use therein. Promptly after receipt by any Holder of
      Registrable Shares, any underwriter or any controlling person of notice of
      the
      commencement of any action in respect of which indemnity may be sought against
      the Company, such Holder of Registrable Shares, or such underwriter or such
      controlling person, as the case may be, will notify the Company in writing
      of
      the commencement thereof, and, subject to the provisions hereinafter stated,
      the
      Company shall assume the defense of such action (including the employment of
      counsel, who shall be counsel reasonably satisfactory to such Holder of
      Registrable Shares, such underwriter or such controlling person, as the case
      may
      be), and the payment of expenses insofar as such action shall relate to any
      alleged liability in respect of which indemnity may be sought against the
      Company. Such Holder of Registrable Shares, any such underwriter or any such
      controlling person shall have the right to employ separate counsel in any such
      action and to participate in the defense thereof in the event the representation
      of such Holder, underwriter or controlling person by counsel retained by or
      on
      the behalf of the Company would be inappropriate due to conflicts of interest
      between any such person and any other party represented by such counsel in
      such
      proceeding or action, in which case the Company shall pay, as incurred, the
      fees
      and expenses of such separate counsel. The Company shall not be liable to
      indemnify any person under this Section 2.3(a) for any settlement of any
      such action effected without the Company's consent (which consent shall not
      be
      unreasonably withheld). The Company shall not, except with the approval of
      each
      party being indemnified under this Section 2.3(a) (which approval will not
      be unreasonably withheld), consent to entry of any judgment or enter into any
      settlement that does not include as an unconditional term thereof the giving
      by
      the claimant or plaintiff to the parties being so indemnified of a release
      from
      all liability in respect to such claim or litigation.

     

    
      
         

      

      
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    (b)  Indemnification
      of Company.
      In the
      event that the Company registers any of the Registrable Shares under the
      Securities Act, each Holder of the Registrable Shares so registered will
      indemnify and hold harmless the Company, each of its directors, each of its
      officers who have signed the registration statement, each underwriter of the
      Registrable Shares so registered (including any broker or dealer through whom
      any of such shares may be sold) and each person, if any, who controls the
      Company within the meaning of Section 15 of the Securities Act from and
      against any and all losses, claims, damages, expenses or liabilities (or any
      action in respect thereof), joint or several, to which they or any of them
      may
      become subject under the Securities Act or under any other statute or at common
      law or otherwise, and, except as hereinafter provided, will reimburse the
      Company and each such director, officer, underwriter or controlling person
      for
      any legal or other expenses reasonably incurred by them or any of them, as
      such
      expenses are incurred, in connection with investigating or defending any actions
      whether or not resulting in any liability, insofar as such losses, claims,
      damages, expenses, liabilities or actions arise out of or are based upon any
      untrue statement or alleged untrue statement of a material fact contained in
      the
      registration statement, in any preliminary or amended preliminary prospectus
      or
      in the prospectus (or the registration statement or prospectus as from time
      to
      time amended or supplemented) or arise out of or are based upon the omission
      or
      alleged omission to state therein a material fact required to be stated therein
      or necessary in order to make the statements therein not misleading, but only
      insofar as any such statement or omission was made in reliance upon and in
      conformity with information furnished in writing to the Company in connection
      therewith by such Holder, expressly for use therein; provided, however, that
      such Holder's obligations hereunder shall be limited to an amount equal to
      the
      net proceeds to such Holder of the Registrable Shares sold in such registration.
      Promptly after receipt of notice of the commencement of any action in respect
      of
      which indemnity may be sought against such Holder of Registrable Shares, the
      Company will notify such Holder of Registrable Shares in writing of the
      commencement thereof, and such Holder of Registrable Shares shall, subject
      to
      the provisions hereinafter stated, assume the defense of such action (including
      the employment of counsel, who shall be counsel reasonably satisfactory to
      the
      Company) and the payment of expenses insofar as such action shall relate to
      the
      alleged liability in respect of which indemnity may be sought against such
      Holder of Registrable Shares. The Company and each such director, officer,
      underwriter or controlling person shall have the right to employ separate
      counsel in any such action and to participate in the defense thereof in the
      event the representation of the Company, any of its officers or directors or
      any
      underwriter or controlling person by counsel retained by or on the behalf of
      such Holder would be inappropriate due to conflicts of interest between any
      such
      person and any other party represented by such counsel in such proceeding or
      action, in which case such Holder shall pay, as incurred, the fees and expenses
      of such separate counsel, but only one such counsel. Notwithstanding the two
      preceding sentences, if the action is one in which the Company may be obligated
      to indemnify any Holder of Registrable Shares pursuant to Section 2.3, the
      Company shall have the right to assume the defense of such action, subject
      to
      the right of such Holders to participate therein as permitted by
      Section 2.3. Such Holder shall not be liable to indemnify any person for
      any settlement of any such action effected without such Holder's consent (which
      consent shall not be unreasonably withheld). Such Holder shall not, except
      with
      the approval of the Company (which approval shall not be unreasonably withheld),
      consent to entry of any judgment or enter into any settlement that does not
      include as an unconditional term thereof the giving by the claimant or plaintiff
      to the party being so indemnified of a release from all liability in respect
      to
      such claim or litigation.

     

    
      
         

      

      
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    2.4.  Contribution.
      If the
      indemnification provided for in Section 2.3 is held by a court of competent
      jurisdiction to be unavailable to an indemnified party with respect to any
      loss,
      liability, claim, damage, or expense referred to therein, then the indemnifying
      party, in lieu of indemnifying such indemnified party hereunder, shall
      contribute to the amount paid or payable by such indemnified party as a result
      of such loss, liability, claim, damage, or expense in such proportion as is
      appropriate to reflect the relative fault of the indemnifying party on the
      one
      hand and of the indemnified party on the other in connection with the statements
      or omissions that resulted in such loss, liability, claim, damage, or expense
      as
      well as any other relevant equitable considerations. The relative fault of
      the
      indemnifying party and of the indemnified party shall be determined by reference
      to, among other things, whether the untrue or alleged untrue statement of a
      material fact or the omission to state a material fact relates to information
      supplied by the indemnifying party or by the indemnified party and the parties'
      relative intent, knowledge, access to information, and opportunity to correct
      or
      prevent such statement or omission.

     

    2.5.  Exchange
      Act Registration.
      With a
      view to making available to the Holders the benefits of Rule 144
      promulgated under the Act and any other rule or regulation of the Securities
      and
      Exchange Commission (the "SEC") that may at any time permit a Holder to sell
      securities of the Company to the public without registration or pursuant to
      a
      registration on Form S-3, the Company agrees to:

     

    (a)  file
      on a
      timely basis with the Securities and Exchange Commission all information that
      the Commission may require under either of Section 13 or Section 15(d)
      of the Exchange Act and, so long as it is required to file such information,
      take all action that may be required as a condition to the availability of
      Rule 144 under the Securities Act (or any successor exemptive rule
      hereinafter in effect) with respect to the Company's Common Stock;
      and

     

    (b)  furnish
      to any Holder forthwith upon request (i) a written statement by the Company
      as to its compliance with the reporting requirements of Rule 144,
      (ii) a copy of the most recent annual or quarterly report of the Company as
      filed with the Securities and Exchange Commission, and (iii) any other
      reports and documents that a Holder may reasonably request in availing itself
      of
      any rule or regulation of the SEC allowing a Holder to sell any such Registrable
      Shares without registration.

     

    2.6.  Further
      Obligations of the Company.
      Whenever the Company is required hereunder to register Registrable Shares,
      it
      agrees that it shall also do the following:

     

    (a)  Furnish
      to each selling Holder such copies of each preliminary and final prospectus
      and
      any other documents that such Holder may reasonably request to facilitate the
      public offering of its Registrable Shares;

     

    (b)  Use
      its
      best efforts to register or qualify the Registrable Shares to be registered
      pursuant to this Agreement under the applicable securities or "blue sky" laws
      of
      such jurisdictions as any selling Holder may reasonably request and keep such
      registration or qualification effective during the period set forth in
      Section 2.2(a) above; provided, however, that the Company shall not be
      obligated to qualify to do business in any jurisdiction where it is not then
      so
      qualified or to take any action that would subject it to the service of process
      in suits other than those arising out of the offer or sale of the securities
      covered by the registration statement in any jurisdiction where it is not then
      so subject;

     

    
      
         

      

      
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    (c)  Notify
      each Holder of Registrable Shares covered by such registration statement at
      any
      time when a prospectus relating thereto is required to be delivered under the
      Act of the happening of any event as a result of which the prospectus included
      in such registration statement, as then in effect, includes an untrue statement
      of a material fact or omits to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading in the light
      of the circumstances then existing;

     

    (d)  Cause
      all
      such Registrable Shares registered pursuant hereunder to be listed on each
      securities exchange on which similar securities issued by the Company are then
      listed;

     

    (e)  Provide
      a
      transfer agent and registrar for all Registrable Shares registered pursuant
      hereunder and a CUSIP number for all such Registrable Shares, in each case
      not
      later than the effective date of such registration;

     

    (f)  In
      the
      event of any underwritten public offering, enter into and perform its
      obligations under an underwriting agreement and other customary agreements,
      in
      usual and customary form, with the managing underwriter of such offering. Each
      Holder participating in such underwriting shall also enter into and perform
      its
      obligations under such an agreement;

     

    (g)  Furnish,
      at the request of any Holder requesting registration of Registrable Shares
      pursuant to this Section 2, on the date that such Registrable Shares are
      delivered to the underwriters for sale in connection with a registration
      pursuant to this Section 2, if such securities are being sold through
      underwriters, or, if such securities are not being sold through underwriters,
      on
      the date that the registration statement with respect to such securities becomes
      effective:

     

    (i)  at
      the
      request of any Holder, to furnish on the effective date of the Registration
      Statement or, if the offering is underwritten, on the date that Registrable
      Shares are delivered to the underwriters for sale, an opinion of counsel, dated
      such date, representing the Company for the purposes of such registration,
      addressed to the underwriters and to such Holder, stating that such registration
      statement has become effective under the Securities Act and that (i) to the
      best knowledge of such counsel, no stop order suspending the effectiveness
      thereof has been issued and no proceedings for that purpose have been instituted
      or are pending or contemplated under the Securities Act, (ii) the
      registration statement, the related prospectus and each amendment or supplement
      thereof comply as to form in all material respects with the requirements of
      the
      Securities Act (except that such counsel need not express any opinion as to
      financial statements or other financial data contained therein), and
      (iii) such other opinions as reasonably may be requested by counsel for the
      underwriters or by such Holder or its counsel;

     

    (ii)  "comfort"
      letters signed by the Company's independent public accountants who have examined
      and reported on the Company's financial statements included in the registration
      statement, to the extent permitted by the standards of the American Institute
      of
      Certified Public Accountants, covering substantially the same matters with
      respect to the registration statement (and the prospectus included therein)
      and
      (in the case of the accountants' "comfort" letters) with respect to events
      subsequent to the date of the financial statements, as are customarily covered
      in opinions of issuer's counsel and in accountants' "comfort" letters delivered
      to the underwriters in underwritten public offerings of securities, but only
      if
      and to the extent that the Company is required to deliver or cause the delivery
      of such opinion or "comfort" letters to the underwriters in an underwritten
      public offering of securities;

     

    
      
         

      

      
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    (h)  Make
      available for inspection by any seller of Registrable Shares, any underwriter
      participating in any disposition pursuant to such registration statement, and
      any attorney, accountant or other agent retained by any such seller or
      underwriter, all financial and other records, pertinent corporate documents
      and
      properties of the Company, and cause the Company's officers, directors,
      employees and independent accountants to supply all information reasonably
      requested by any such seller, underwriter, attorney, accountant or agent in
      connection with such registration statement;

     

    (i)  Furnish
      to each selling Holder, upon request, a copy of all documents filed and all
      correspondence from or to the Securities and Exchange Commission in connection
      with any such offering unless confidential treatment of such information has
      been requested of the Securities and Exchange Commission;

     

    (j)  Keep
      such
      registration continuously effective for the period of time specified in
      Section 2.2(a) above;

     

    (k)  promptly
      prepare and file with the SEC such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to comply with the provisions of the Securities Act, and to keep
      such
      registration statement effective for that period of time specified in
      Section 2.2(a) above;

     

    (l)  use
      best
      efforts to obtain the withdrawal of any order suspending the effectiveness
      of a
      registration statement, or the lifting of any suspension of the qualification
      of
      any of the Registrable Shares for sale in any jurisdiction, at the earliest
      possible moment; and

     

    (m)  Take
      such
      other actions as shall be reasonably requested by any Holder.

     

    2.7.  Expenses.
      In the
      case of a registration under Section 2.1 the Company shall bear all costs
      and expenses of each such registration, including, but not limited to, printing,
      legal and accounting expenses, Securities and Exchange Commission filing fees
      and "blue sky" fees and expenses; provided, however, that the Company shall
      have
      no obligation to pay or otherwise bear (i) any portion of the fees or
      disbursements of more than one counsel for the Holders in connection with the
      registration of their Registrable Shares, which in no event shall exceed
      $25,000, (ii) any portion of the underwriter's commissions or discounts
      attributable to the Registrable Shares being offered and sold by the Holders
      of
      Registrable Shares, or (iii) any of such expenses if the payment of such
      expenses by the Company is prohibited by the laws of a state in which such
      offering is qualified and only to the extent so prohibited.

     

    2.8.  Transfer
      of Registration Rights.
      The
      registration rights of a Holder of Registrable Shares under this Agreement
      may
      be transferred as set forth below provided (1) the transferee is bound by
      the terms of this Agreement and (2) the Company is given written notice
      prior to such transfer. Accordingly, the registration rights of a Holder of
      Registrable Shares may be transferred (i) to any partner or affiliate of a
      Holder, (ii) in the case of an individual, to any member of the immediate
      family of such individual or to any trust for the benefit of the individual
      or
      any such family member or members, or (iii) to any other transferee which
      receives at least 50% of the Registrable Shares held by the transferror.
      Notwithstanding the foregoing, the registration rights of a Holder under this
      Agreement may not be transferred to an entity, or a person controlled by, under
      common control with or controlling such entity, which is a direct competitor
      of
      the Company.

     

    
      
         

      

      
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    2.9.  Market
      Stand-Off Agreement.
      Provided that all Holders are treated equally and all officers and directors
      of
      the Company are also so bound, no Holder shall, to the extent requested by
      any
      managing underwriter of the Company, sell or otherwise transfer or dispose
      of
      (other than to donees who agree to be similarly bound) any Registrable Shares
      during a period (the "Stand-Off Period") not to exceed 180 days following the
      effective date of a registration statement of any secondary offering of the
      Company under the Securities Act, (or in each case such shorter period as the
      Company or managing underwriter may authorize), and except in each case, for
      securities sold as part of the offering covered by such registration statement
      in accordance with the provisions of this Agreement. In order to enforce the
      foregoing covenant, the Company may impose stock transfer restrictions with
      respect to the Registrable Shares of each Holder until the end of the Stand-Off
      Period; provided, that (a) the Holders shall not be subject to this
      provision unless each officer, director and each person then owning greater
      than
      one percent (1%) of the outstanding Common Stock (on a fully diluted basis)
      has
      executed and remains bound by a comparable obligation; and (b) nothing
      herein shall prevent any Holder from making a distribution of Registrable Shares
      to an affiliate of such Holder that is otherwise in compliance with applicable
      securities laws, so long as such distributee agrees to be so bound.

     

    Notwithstanding
      the foregoing, the obligations described in this Section 2.9 shall not
      apply to a registration relating solely to employee benefit plans on
      Form S-1 or Form S-8 or similar forms which may be promulgated in the
      future, or a registration relating solely to an SEC Rule 145 transaction on
      Form S-4 or similar forms which may be promulgated in the
      future.

     

    2.10.  Termination
      of Registration Rights.
      The
      obligations of the Company to register any Holder's Registrable Shares pursuant
      to this Section 2 shall terminate at such time as all of a Holder's
      Registrable Shares may immediately be sold under Rule 144 during any ninety
      (90) day period, free of any lock-up or market stand-off
      restrictions.

     

    3.  Assignability.
      This
      Agreement shall be binding upon and inure to the benefit of the respective
      heirs, successors and assigns of the parties hereto.

     

    4.  Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of California.

     

    5.  Amendment.
      Any
      modification, amendment, or waiver of this Agreement or any provision hereof,
      either retroactively or prospectively, shall be in writing and executed by
      the
      Company and the holders of not less than fifty percent (50%) of the Registrable
      Shares which shall be binding upon all of the parties hereto.

     

    
      
         

      

      
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    6.  Counterparts.
      This
      Agreement may be executed in any number of counterparts and via facsimile,
      each
      of which shall be an original, but all of which together shall constitute one
      instrument.

     

    7.  Notice.
      Any
      notices and other communications required or permitted under this Agreement
      shall be effective if in writing and delivered personally or sent by telecopier,
      federal express or registered or certified mail, postage prepaid, addressed
      as
      follows:

     

    If
      to the
      Purchaser, to:  The
      names
      and addresses set forth on Exhibit A

     

    
      	
              with
                a copy to:

            	 	
              James
                E. McCormick III, Esq. 

              Allen
                Matkins Leck Gamble Mallory & Natsis LLP

              1900
                Main Street, 5th Floor

              Irvine,
                California 92614-7321

              Facsimile:
                (949) 553-8354

              Email:
                kmccormick@allenmatkins.com

            
	 	 	 
	
              If
                to the Company, to:

            	 	
              Small
                World Kids, Inc.

              5711
                Buckingham Parkway

              Culver
                City, California 90230

              Facsimile:
                (310) 252-1195

            
	 	 	 
	
              with
                a copy to:

            	 	
              David
                L. Ficksman

              Troy
                & Gould Professional Corporation

              1801
                Century Park East, 16th Floor

              Los
                Angeles, California 90067

            

    

     

    Unless
      otherwise specified herein, such notices or other communications shall be deemed
      effective (a) on the date delivered, if delivered personally, (b) two
      business days after being sent, if sent by Federal Express, (c) one
      business day after being sent, if sent by telecopier with confirmation of good
      transmission and receipt, and (d) three business days after being sent, if
      sent by registered or certified mail. Each of the parties herewith shall be
      entitled to specify another address by giving notice as aforesaid to each of
      the
      other parties hereto.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Registration Rights
      Agreement to be executed by their respective officers thereunto duly authorized,
      as of the date first above written.

    
      	 	 	 
	 	
              SMALL
                WORLD KIDS, INC.

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                Debra Fine

            
	 	
              Title:
                Chief Executive Officer

            

    

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    This
      is
      the counterpart signature page for Purchasers pursuant to the Registration
      Rights Agreement with Small World Kids, Inc., a Nevada corporation.

    
      	 	 	 
	
              PURCHASERS: 

            	 	 
	 	
              HONG
                KONG LEAGUE CENTRAL CREDIT UNION

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	 	
              

              Name:
                

              Title:   

            
	 	 	 
	 	 	
              Dated:
                October 6, 2006 

            
	 	 	 
	 	 	
              Address:

            
	 	 	
              c/o
                SBI Advisors, LLC

              610
                Newport Center Drive, Suite 1205

              Newport
                Beach, California 92660

              Attention:
                David Wang 

              Fax
                Number: 949-679-7280

            
	 	 	 
	 	 	 
	 	 	
              SBI
                ADVISORS, LLC

            
	 	 	 
	 	By:	 
	 	 	
              

              Name:
                

              Title:
                

            
	 	 	 
	 	 	
              
                Dated:
                October 6, 2006

            
	 	 	 
	 	 	
              Address:

            
	 	 	
              610
                Newport Center Drive, Suite 1205

              Newport
                Beach, California 92660

              Attention:
                David Wang 

              Fax
                Number: 949-679-7280

            
	 	 	 
	 	 	 
	 	 	
              KERSHAW
                MACKIE & COMPANY

            
	 	 	 
	 	 	 
	 	By:	 
	 	
              

              Name:
                

              Title:
                

            
	 	
            
	 	
              Dated:
                October 6, 2006

            
	 	 
	 	
              Address:

            
	 	
              2405
                S. Broadway

              Santa
                Ana, California 

              Attention:
                David S. Kershaw

              Fax
                Number: (949) 709-1842

            

    

     

    
      
         

      

      
        -10-October
                __, 2006

            

    

    

    

    Small
      World Kids, Inc.

    Small
      World Toys, Inc.

    5711
      Buckingham Parkway 

    Culver
      City, CA 90230

    

    Re: Overadvance
      Side Letter

     

    Reference
      is made to (a) the Security Agreement, dated as of February 28, 2006 by and
      between Small
      World Kids, Inc., a Nevada corporation (the “Parent”),
      Small
      World Toys, Inc., a California corporation (“SMT”
and
      together with the Parent, the “Companies”
and,
      each a “Company”)
      and
      Laurus Master Fund, Ltd. (“Laurus”)
      (as
      amended, supplemented, restated or modified from time to time, the “Security
      Agreement”),
      and
      the Ancillary Agreements referred to in the Security Agreement, and (b) all
      documents, instruments and agreements executed in connection with the agreements
      referenced in the foregoing clause (a) (all documents referred to in the
      foregoing clauses (a) and (b), collectively, the “Documents”).
      Capitalized terms used but not defined herein shall have the meanings ascribed
      them in the Security Agreement. Laurus is hereby notifying the Companies of
      its
      decision to exercise the discretion granted to it pursuant to Section 2(a)(ii)
      of the Security Agreement to make Loans to the Companies during the Period
      (as
      defined below) in excess of the Formula Amount (the “Overadvance”).
      The
      aggregate principal amount of the Overadvance as of the date hereof shall be
      $1,500,000, of which amount $750,000 is already currently outstanding and
      $750,000 will be funded to the Companies upon the effectiveness of this
      Agreement. Notwithstanding the foregoing, the Overadvance shall at no time
      exceed the lesser of (x) $1,500,000 and (y) the sum of the Capital Availability
      Amount less the then applicable Formula Amount (the “Maximum
      Overadvance Amount”).

    

    In
      connection with making the Overadvance, for a period of one (1) year from the
      date hereof (the “Period”),
      Laurus hereby waives compliance with Section 3 of the Security Agreement, but
      solely as such provision relates to the immediate repayment requirement for
      Overadvances. Laurus further agrees that solely for such Period (but not
      thereafter), (i) the incurrence and existence of the Overadvance shall not
      trigger an Event of Default under Section 19(a) of the Security
      Agreement
      and (ii)
      notwithstanding anything to the contrary set forth in Section 5(b)(ii) of the
      Security Agreement, during the Period, the rate of interest applicable to such
      Overadvance shall be the “prime rate” published in The
      Wall Street Journal
      from
      time to time (the “Prime
      Rate”),
      plus
      two percent (2%) (the “Overadvance
      Rate”).
      Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
      payable monthly, in arrears, commencing on November 1, 2006 on the first
      business day of each consecutive calendar month thereafter through and including
      the expiration of the Period, whether by acceleration or otherwise. All other
      terms and provisions of the Security Agreement and the Ancillary Agreements
      shall remain in full force and effect. The Overadvance Rate shall not at any
      time be less than eight percent (8.0%). For the avoidance of doubt, all
      proceeds
      applied by any Company in repayment of its obligations to Laurus hereunder
      and
      under the Security Agreement and the Ancillary Agreements shall be first applied
      as a repayment of the Overadvance unless otherwise agreed by Laurus. Once
      repaid, at the sole discretion of Laurus, the Overadvance may be reborrowed
      during the Period provided that the aggregate amount of all Overadvances
      outstanding at any time shall not exceed the Maximum Overadvance Amount.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    The
      Companies hereby acknowledge that all
      amounts outstanding under the Overadvance (together
      with accrued interest and fees which remain unpaid in respect thereof) on the
      date of expiration of the Period shall, jointly and severally, be repaid in
      full
      by the Companies on such date of expiration.
      The
      failure to make any required repayment of an Overadvance shall give rise to
      an
      immediate Event of Default.

     

    The
      Parent understands that it has an affirmative obligation to make prompt public
      disclosure of material agreements and material amendments to such agreements.
      It
      is the Parent’s determination that neither this letter nor the terms and
      provisions of this letter, (collectively, the “Information”)
      are
      material. The Parent has had an opportunity to consult with counsel concerning
      this determination. The Parent hereby agrees that Laurus shall not be in
      violation of any duty to any Company or its shareholders, nor shall Laurus
      be
      deemed to be misappropriating any information of any Company, if Laurus sells
      shares of common stock of the Parent, or otherwise engages in transactions
      with
      respect to securities of the Parent, while in possession of the
      Information.

    

    This
      letter may not be amended or waived except by an instrument in writing signed
      by
      each of the Companies and Laurus. This letter may be executed in any number
      of
      counterparts, each of which shall be an original and all of which, when taken
      together, shall constitute one agreement. Delivery of an executed signature
      page
      of this letter by facsimile transmission shall be effective as delivery of
      a
      manually executed counterpart hereof or thereof, as the case may be. THIS LETTER
      SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
      OF
      NEW YORK. This letter sets forth the entire agreement between the parties hereto
      as to the matters set forth herein and supersede all prior communications,
      written or oral, with respect to the matters herein.

     

    This
      Overadvance Side Letter shall for all purposes be deemed to be an Ancillary
      Agreement.

     

    If
      the
      foregoing meets with the Companies’ approval please signify the Companies’
acceptance of the terms hereof by signing below. 

     

    
      	 	 	 
	 	LAURUS
              MASTER FUND, LTD.
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name: 

              Title: 

            

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    AGREED
      AND ACCEPTED ON THE DATE HEREOF:

     

    SMALL
      WORLD KIDS, INC.,
      a Nevada corporation

     

     

    
      	By:	   	 	 
	Name: 	  	 	 
	Title: 	  	 	 

    

     

     

    SMALL
      WORLD TOYS, INC., a California corporation 

     

    
      	By:	   	 	 
	Name: 	  	 	 
	Title: 	  	 	 

    

     

    
      
         

      

      
        3

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