Document:

OMNIBUS
      AMENDMENT NO. 1

    

    This
      Omnibus Amendment No. 1, dated as of January 26, 2007, by and between SMALL
      WORLD KIDS, INC., a Nevada corporation (the “Parent”),
      SMALL
      WORLD TOYS, INC., a California corporation (the “Subsidiary”
and
      together with the Parent, the “Companies”
and,
      each a “Company”)
      and
      Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”),
      amends (i) that certain Security Agreement, dated as of February 28, 2006 by
      and
      among the Companies and Laurus (as amended, modified or supplemented from time
      to time, the “Security
      Agreement”),
      (ii)
      that certain Overadvance Side Letter, dated as of October 10, 2006 by and among
      the Companies and Laurus (as amended, modified or supplemented from time to
      time, the “Overadvance
      Side Letter”),
      and
      (iii) that certain Common Stock Purchase Warrant issued by the Parent to Laurus
      on February 28, 2006 (as amended, modified or supplemented from time to time,
      the “Warrant”
and,
      together with the Security Agreement, the Overadvance Side Letter and the
      Ancillary Agreements referred to in the Security Agreement, collectively, the
      “Loan
      Documents”).
      Capitalized terms used but not defined herein shall have the meanings given
      them
      in the Security Agreement.

     

    PREAMBLE

    

    WHEREAS,
      the
      Companies and Laurus desire to amend certain of the Loan Documents.

     

     NOW,
      THEREFORE,
      in
      consideration of the covenants, agreements and conditions hereinafter set forth,
      and other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, the parties hereto agree as follows:

     

    1. Amendments
      to Security Agreement.
      

     

    
      	 	
              a.

            	
              The
                second paragraph of the definition of “Eligible Accounts” appearing in
                Annex A to the Security Agreement is hereby amended by deleting the
                percentage “15%” appearing therein and inserting the percentage “32.5%” in
                lieu thereof.

            

    

     

    
      	 	
              b.

            	
              Paragraph
                13(b) Covenants - Listing is deleted in its entirely and is no longer
                in
                full force and effect.

            

    

     

    
      	 	
              c.

            	
              Paragraph
                13(d) Covenants - Reporting Requirements is deleted in its entirely
                and is
                no longer in full force and effect.

            

    

     

    
      	 	
              d.

            	
              Paragraph
                19(q) of Events of Default is deleted in its entirely and is no longer
                in
                full force of effect.

            

    

     

    
      	 	
              e.

            	
              Paragraph
                11 is hereby amended by adding the following new subsections (e)
                and
                (f):

            

    

     

    “(e) As
      soon
      as available and in any event within thirty (30) days after the end of each
      calendar month (or more frequently if requested by Laurus), an
      unaudited/internal balance sheet and statements of income, retained earnings
      and
      cash flows of each of the Parent and its Subsidiaries as at the end of and
      for
      such month and otherwise in form and substance satisfactory to
      Laurus;”

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “(f) The
      Parent shall deliver, or cause the applicable Subsidiary of the Parent to
      deliver, such other information as Laurus shall reasonably
      request.”

     

    2. Amendment
      to Overadvance Side Letter.
      The
      Second paragraph of the Overadvance Side Letter is hereby amended by deleting
      the first sentence of such second paragraph and inserting the following sentence
      in lieu thereof:

     

    “In
      connection with making the Overadvance, for a period commencing on the date
      hereof through and including February 28, 2008 (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.”

     

    3. Amendment
      to Warrant.
      Effective upon the Waiver Effective Date, Section 10 of the Warrant is hereby
      deleted in its entirety and the following new Section 10 inserted in lieu
      thereof:

     

    “10. Maximum
      Exercise.
      Notwithstanding anything herein to the contrary, in no event shall the Holder
      be
      entitled to exercise any portion of this Warrant in excess of that portion
      of
      this Warrant upon exercise of which the sum of (1) the number of shares of
      Common Stock beneficially owned by the Holder and its Affiliates (other than
      shares of Common Stock which may be deemed beneficially owned through the
      ownership of the unexercised portion of the Warrant or the unexercised or
      unconverted portion of any other security of the Holder subject to a limitation
      on conversion analogous to the limitations contained herein) and (2) the number
      of shares of Common Stock issuable upon the exercise of the portion of this
      Warrant with respect to which the determination of this proviso is being made,
      would result in beneficial ownership by the Holder and its Affiliates of any
      amount greater than 9.99% of the then outstanding shares of Common Stock
      (whether or not, at the time of such exercise, the Holder and its Affiliates
      beneficially own more than 9.99% of the then outstanding shares of Common
      Stock). As used herein, the term “Affiliate”
means
      any person or entity that, directly or indirectly through one or more
      intermediaries, controls or is controlled by or is under common control with
      a
      person or entity, as such terms are used in and construed under Rule 144 under
      the Securities Act.   For purposes of the second preceding sentence,
      beneficial ownership shall be determined in accordance with Section 13(d) of
      the
      Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
      except as otherwise provided in clause (1) of such sentence. For any reason
      at
      any time, upon written or oral request of the Holder, the Company shall within
      one (1) business day confirm orally and in writing to the Holder the number
      of
      shares of Common Stock outstanding as of any given date.  The limitations
      set forth herein (x) may be waived by the Holder upon provision of no less
      than
      sixty-one (61) days prior written notice to the Company and (y) shall
      automatically become null and void following notice to the Company upon the
      occurrence and during the continuance of an Event of Default (as defined in
      the
      Security Agreement dated as of the date hereof among the Holder, the Company
      and
      various subsidiaries of the Company).”

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    4. The
      Parent and Laurus agree that, upon execution of this Amendment by the Parent
      and
      Laurus, the Parent will be deemed to have received notice from Laurus of Laurus’
waiver of the 4.99% conversion limitation set forth in Section 10 of the
      Warrant, which waiver shall become effective on the 61st
      day
      following the date hereof (the “Waiver
      Effective Date”).

     

    5. The
      Parent will, on the date hereof, issue to Laurus a warrant (the “Additional Warrant”)
      to
      purchase 685,185 shares of the Common Stock of the Parent with an exercise
      price
      of $0.01 per share, such Additional Warrant to be in the form attached hereto
      as
      Exhibit A. The Parent further agrees that if at any time after the date hereof
      there is not an effective Registration Statement covering all of the shares
      of
      Common Stock issuable upon exercise of the Additional Warrant (the “Additional
      Warrant Shares”)
      and
      the Company shall determine to prepare and file with the Securities and Exchange
      Commission a registration statement relating to an offering for its own account
      or the account of others under the Securities Act of any of its equity
      securities, other than on Form S-4 or Form S-8 (each as promulgated under the
      Securities Act) or their then equivalents relating to equity securities to
      be
      issued solely in connection with any acquisition of any entity or business
      or
      equity securities issuable in connection with stock option or other employee
      benefit plans, then the Company shall send to each Holder of the Additional
      Warrant written notice of such determination and, if within fifteen (15) days
      after receipt of such notice, any such Holder shall so request in writing,
      the
      Company shall include in such registration statement all or any part of such
      Additional Warrant Shares such Holder requests to be registered to the extent
      the Company may do so without violating registration rights of others which
      exist as of the date of this Agreement, subject to customary underwriter
      cutbacks applicable to all holders of registration rights and subject to
      obtaining any required consent of any selling stockholder(s) to such inclusion
      under such registration statement.

     

    6. The
      amendments set forth above shall be effective as of the date first above written
      (the “Amendment
      Effective Date”)
      on the
      date when each Company and Laurus shall have executed (and witnessed where
      applicable) and each Company shall have delivered to Laurus its respective
      counterpart to this Amendment and, in the case of the Parent only, the
      Additional Warrant.

     

    7. Except
      as
      specifically set forth in this Amendment, there are no other amendments,
      modifications or waivers to the Loan Documents, and all of the other forms,
      terms and provisions of the Loan Documents remain in full force and
      effect.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    8. Each
      Company hereby represents and warrants to Laurus that (i) no Event of Default
      exists on the date hereof, (ii) on the date hereof, all representations,
      warranties and covenants made by such Company in connection with the Loan
      Documents are true, correct and complete and (iii) on the date hereof, all
      of
      such Company’s and its Subsidiaries’ covenant requirements set forth in the Loan
      Documents have been met.

     

    9. From
      and
      after the Amendment Effective Date, all references in the Loan Documents shall
      be deemed to be references to the Loan Documents, as the case may be, as
      modified hereby.

     

    10.  The
      Parent understands that the Parent has an affirmative obligation to make prompt
      public disclosure of material agreements and material amendments to such
      agreements. The Parent will file an 8K disclosing the terms of this amendment
      along with this Amendment within three business days following the execution
      of
      this Amendment. 

     

    11. This
      Amendment shall be binding upon the parties hereto and their respective
      successors and permitted assigns and shall inure to the benefit of and be
      enforceable by each of the parties hereto and their respective successors and
      permitted assigns. THIS
      AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
      THE
      LAW OF THE STATE OF NEW YORK.
      This
      Amendment may be executed in any number of counterparts, each of which shall
      be
      an original, but all of which shall constitute one instrument.

     

    [signature
      page follows]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      each of
      the parties hereto has executed this Amendment or has caused this Amendment
      to
      be executed on its behalf by a representative duly authorized, all as of the
      date first above set forth.

     

    

    
      	
              PARENT:

            	 	 	
              LAURUS:

            
	 	 	 	 
	
              SMALL
                WORLD KIDS, INC.

            	 	 	
              LAURUS
                MASTER FUND, LTD.

            
	 	 	 	 
	 	 	 	 
	
              By:

            	 	 	
              By:

            	 
	
              Name:

            	 	 	
              Name:

            	 
	
              Title:

            	 	 	
              Title:

            	 

    

     

     

    
      	
              SUBSIDIARY:

            
	 
	
              SMALL
                WORLD TOYS, INC.

            
	 
	 
	
              By:

            	 
	
              Name:

            	 
	
              Title:

            	 

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A

    

    Additional
      Warrant

     

    
      
        
        

      

      
        6SECOND
      AMENDMENT TO REGISTRATION RIGHTS AGREEMENT

     

    This
      Second Amendment (the “Amendment”) to the Registration Rights Agreement dated as
      of February 28, 2006 (the “Registration Agreement”) between Small World Kids,
      Inc., a Nevada corporation (the “Company”) and Laurus Master Fund, Ltd.
      (“Laurus”) is made as of January 26, 2007 with reference to the following
      (capitalized terms used herein and not otherwise defined shall have the meaning
      assigned to such terms in the Registration Agreement):

    

    A. Pursuant
      to the Registration Agreement, the Company is required to file with the
      Commission a Registration Statement for the shares underlying the issuance
      of
      the Warrant.

    

    NOW
      THEREFORE, the parties agree to amend the Registration Agreement without any
      penalty to the Company as follows:

    

    1.  Registration.
      Paragraph 2 of the Registration Agreement - Registration is deleted in its
      entirely and is no longer in full force and effect. No default is incurred
      or
      penalties are owed for withdrawing the Registration Statement that was
      originally filed on June 15, 2006 and amended by Amendment No. 1 to the
      Registration Statement filed on October 4, 2006 and not having the registration
      statement declared effective within 180 days of the date of the Registration
      Rights Agreement.

     

    2.  Effect
      of Amendment.
      Except
      as expressly provided herein, all the terms, provisions and conditions of the
      Registration Agreement shall remain the full force and effect and the
      obligations of the parties with respect thereto shall, except as specifically
      provided herein, be unaffected by this Amendment.

    

    IN
      WITNESS THEREOF, the parties have executed this Second Amendment as of the
      date
      set forth above.

    

    

    
      	 	
              Small
                World Kids, Inc.

               

               

              By:____________________________________

            
	 	 
	 	
              Laurus
                Master Fund Ltd.

               

               

              By:___________________________________

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