SMALL WORLD KIDS INC
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>v010009_ex10-5.txt
<TEXT>

                             SUBORDINATION AGREEMENT

      THIS  SUBORDINATION  AGREEMENT  (this  "AGREEMENT")  is entered into as of
December 15, 2004, by and among PNC BANK, NATIONAL  ASSOCIATION,  for itself and
as  agent  (collectively,  the  "BANK")  under  the  "Loan  Agreement"  and  the
"Guaranty"  (as those terms are defined  below),  SMALL  WORLD KIDS,  INC.  (the
"DEBTOR"), and SWT, LLC (the "CREDITOR").

                                    RECITALS

      The Bank, the Lenders,  and Small World Toys ("BORROWER") are parties to a
Revolving Credit and Security  Agreement,  dated on or about the date hereof (as
amended,  supplemented or replaced from time to time, the "LOAN Agreement"). The
Debtor has provided a Continuing Guaranty (the "GUARANTY") of the obligations of
the Borrower, in favor of the Bank, for itself and as agent for the Lenders (the
"LENDERS")  described therein,  a security agreement securing the Guaranty,  and
various other documents, instruments and agreements all between the Bank and the
Debtor  (collectively,  and as amended,  supplemented  or replaced  from time to
time, the "DEBTOR DOCUMENTS").

      The Creditor has  extended or is  extending to the Debtor  certain  loans,
advances and extensions of credit,  as evidenced by a promissory  note dated May
20, 2004 in the original  principal  amount of  $5,000,000  and having an unpaid
principal  balance  of  $5,000,000  (the  "SUBORDINATED  NOTE")  and  the  other
agreements, documents and instruments between Creditor and Debtor (collectively,
with the Subordinated Note, the "CREDITOR DOCUMENTS").

      The Bank and the Creditor hereby desire to set forth the respective rights
and obligations each has as against the other with respect to the Debtor.

      NOW, THEREFORE,  the parties hereto, intending to be legally bound, hereby
agree as follows:

      1.    DEFINITIONS.

            "COLLATERAL"  means any collateral now or in the future securing the
Obligations,  including but not limited to claims  against any guarantors of the
Obligations and any collateral securing such guarantees.  In addition,  Creditor
agrees that any funds of the Debtor which Creditor  obtains through the exercise
of any right of setoff or other similar right, constitute Collateral.

            "OBLIGATIONS"  means  all  loans,  advances,   debts,   liabilities,
obligations,  covenants  and  duties  owing by the Debtor to the Bank (or to any
other direct or indirect  subsidiary of PNC Bank Corp.),  or owing by the Debtor
to the other Lenders  pursuant to the Debtor  Documents,  of any kind or nature,
present or future  (including  any interest  accruing  thereon after maturity or
after the filing of any  petition  in  bankruptcy,  or the  commencement  of any
insolvency, reorganization or like proceeding relating to the Debtor, whether or
not a claim  for  post-filing  or  post-petition  interest  is  allowed  in such
proceeding), whether or not evidenced by any note, guaranty or other instrument,
whether arising under any agreement,  instrument or

<PAGE>

document,  whether or not for the payment of money, whether arising by reason of
an extension of credit,  opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or other interest
rate protection or similar  agreement,  or in any other manner,  whether arising
out of overdrafts on deposit or other  accounts or  electronic  funds  transfers
(whether through automated clearing houses or otherwise) or out of the Bank's or
any Lender's non-receipt of or inability to collect funds or otherwise not being
made  whole in  connection  with  depository  transfer  check  or other  similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation),  absolute or contingent,  joint or several,  due or to become
due, now existing or hereafter arising, and any amendments, extensions, renewals
or increases  and all costs and  expenses of the Bank or any Lender  incurred in
the  documentation,   negotiation,  modification,   enforcement,  collection  or
otherwise  in  connection  with  any  of  the  foregoing,  including  reasonable
attorneys' fees and expenses.

            "OTHER NOTES" means, collectively,  (a) the Secured Promissory Note,
dated May 20, 2004,  by Savon Team Sports,  Inc. (now known as Small World Kids,
Inc.),  in  favor  of  Eddy  Goldwasser,  in  the  stated  principal  amount  of
$1,000,000,  (b) the Promissory  Note, dated May 20, 2004, by Savon Team Sports,
Inc. (now known as Small World Kids, Inc.), in favor of Eddy Goldwasser,  in the
stated  principal  amount  of  "$700,000  (Subject  to  Adjustment)",   (c)  the
promissory  note,  dated  September  17,  2004,  by Grantor,  in favor of Strome
Hedgecap Ltd. and/or Strome  Investment  Management,  in the principal amount of
$1,200,000 (the "STROME  NOTE"),  (d) the promissory  note,  dated September __,
2004, by Grantor,  in favor of St. Cloud Capital Partners L.P., in the principal
amount of $2,000,000 (the "ST. CLOUD NOTE").

            "SUBORDINATED DEBT" means any loans, advances,  debts,  liabilities,
obligations,  covenants  and duties  owing by the Debtor to the  Creditor of any
kind or  nature,  present  or  future,  whether  or not  evidenced  by any note,
guaranty or other instrument, whether arising under any agreement, instrument or
document,  whether or not for the payment of money, whether arising by reason of
an extension of credit, loan or guarantee or in any other manner, whether direct
or indirect, absolute or contingent, joint or several, due or to become due, now
existing or  hereafter  arising  (including  any such  obligations  purchased or
otherwise  acquired by Creditor),  whether  consisting  of principal,  interest,
expense payments,  management and consulting fees, liquidation costs, attorneys'
fees and costs or otherwise,  and all whether arising or created pursuant to the
Creditor Documents or otherwise.

            "SUBORDINATE INTEREST" means any lien, ownership interest,  security
interest or other  interest or claim now held or hereafter  acquired by Creditor
in the Collateral.

      2.    SUBORDINATION.

            (a) Subject to Section 3 hereof,  the  Creditor  hereby  irrevocably
subordinates  and  postpones  the  payment  and the time of  payment  of all the
Subordinated   Debt  and  all  claims  and  demands  arising  therefrom  to  the
Obligations  and  directs  that  the  Obligations  be paid in  full  before  the
Subordinated  Debt, and Creditor agrees not to ask for, demand, sue for, take or
receive all or any part of the  Subordinated  Debt nor any  additional  security
therefor unless and until all of the Obligations have been paid and performed in
full, in cash.


                                      -2-
<PAGE>

            (b) Creditor shall:  (i) make notations on the books of the Creditor
beside all accounts or on such other  statements  evidencing  or  recording  any
Subordinated  Debt to the effect that such  Subordinated  Debt is subject to the
provisions of this  Agreement,  (ii) furnish the Bank,  upon Bank's request from
time to time,  a statement  of the account  between the  Creditor and the Debtor
representing the Subordinated Debt and copies of each of the Creditor Documents,
and  (iii)  give the  Bank,  upon its  request,  full  and  free  access  to the
Creditor's  books pertaining only to such accounts with the right to make copies
thereof.  Each  and  every  Creditor  Document  that is a  promissory  note or a
negotiable  instrument  shall  bear a legend  as set  forth in  paragraph  13(c)
hereof,  but this Agreement shall be fully effective,  even if no such legend is
affixed.

            (c) Creditor  represents and warrants that as of the date hereof the
Debtor is not  indebted to Creditor  except  under the  Subordinated  Note in an
amount not  exceeding  $5,000,000,  and that Creditor has not executed any other
subordination  agreement  with  respect  to such debt or the  Collateral  or the
Debtor.

            (d) All security  interests now or hereafter acquired by Bank in any
or all of the Collateral,  in which the Debtor now has or hereafter acquires any
ownership, leasehold or other interest, shall at all times be prior and superior
to the Subordinate Interest.  Said priority shall be applicable  irrespective of
the time or order of attachment  or  perfection of any security  interest or the
time or order of filing of any financing  statements or other documents,  or any
statutes,  rules or law, or court decisions to the contrary.  Creditor shall not
collect,  take  possession of,  foreclose  upon, or exercise any other rights or
remedies  with respect to, the  Collateral,  judicially  or  non-judicially,  or
attempt to do any of the foregoing,  without the prior written  consent of Bank,
which shall be a matter of Bank's sole discretion.

      3.  PAYMENTS TO  CREDITOR.  Notwithstanding  any other  provision  of this
Agreement,  the  Debtor  shall  be  entitled  to pay and the  Creditor  shall be
entitled to receive each of the following  payments,  provided that (i) no Event
of Default  exists  under the Debtor  Documents  or the Loan  Agreement or would
result  from such  payment,  and that  neither  Debtor nor  Creditor  shall have
breached any of their representations,  warranties, or covenants hereunder, (ii)
Borrower  would have been in  compliance  with the Fixed Charge  Coverage  Ratio
requirements  of Section 6.5(b) of the Loan Agreement for the quarter that ended
immediately  preceding  such  payment if all amounts  paid by Borrower to Debtor
since the end of such  quarter  had been  given  effect as of such  quarter  for
purposes of calculating the Fixed Charge  Coverage  Ratio,  and (iii) based upon
Borrower's  financial  trends,  Borrower will be in  compliance  with said Fixed
Charge Coverage Ratio requirements for future quarters (as determined by Bank in
its good faith business judgment based upon information provided by Borrower):

            (a) The regularly scheduled payments of interest (at the non-default
rate),  in the amounts and when due in the ordinary course of business under the
terms of the Subordinated Note (as in effect on the date hereof), provided that,
at the time of such payments,  the Borrower has "Adjusted Undrawn  Availability"
(as defined in the Loan Agreement) of not less than $500,000,


                                      -3-
<PAGE>

            (b) The regularly  scheduled  payments of principal,  in the amounts
and  when  due in the  ordinary  course  of  business,  under  the  terms of the
Subordinated  Note (as in  effect  on the  date  hereof),  provided  that (i) no
"Seasonal Advance" (as defined in the Loan Agreement) is outstanding and (ii) at
the time of such payments,  the Borrower has "Undrawn  Availability" (as defined
in the Loan Agreement) of not less than $1,000,000, and

            (c) Prepayments of principal and interest (at the non-default  rate)
owed under the  Subordinated  Note (as in effect on the date  hereof),  provided
that  (i)  no  "Seasonal   Advance"  (as  defined  in  the  Loan  Agreement)  is
outstanding,  (ii) at the  time of such  payments,  the  Borrower  has  "Undrawn
Availability"  (as defined in the Loan  Agreement) of not less than  $1,000,000,
(iii) the aggregate of the payments allowed  pursuant to this  subsection,  when
aggregated  with all  prepayments  of principal  and interest  made on the Other
Notes,  shall not at any time exceed an amount equal to 75% of the  aggregate of
the cash  consideration,  net of related expenses,  that Debtor has received for
the issuance of equity  securities of Debtor after the date hereof and for which
Debtor has  delivered to Bank evidence  satisfactory  to Bank that such cash has
been received, and (iv) no payments shall be allowed pursuant to this subsection
until all  indebtedness  under the St.  Cloud Note and the Strome  Note has been
paid in full.

Except for  payments  expressly  allowed  pursuant to this  Section,  if any, no
payments of  principal  on the  Subordinated  Debt,  or  interest,  or costs and
expenses, or other payments, shall be permitted or made.

      4.  SECURITY.  The Debtor shall not grant and the Creditor  shall not take
any additional lien on or security interest in any of the Debtor's property, now
owned or hereafter acquired or created, without the prior written consent of the
Bank.

      5. DEFAULT;  STANDSTILL LIMITATION.  The Creditor shall promptly give Bank
written  notice of any  default  under any  document,  instrument  or  agreement
evidencing,  securing  or  relating  to  any  of the  Subordinated  Debt  or the
Subordinate Interest.  Notwithstanding any breach or default by the Debtor under
the Creditor Documents, the Creditor shall not at any time or in any manner: (a)
commence  or  join  in  any  proceeding  to  recover  any  amounts  due  on  the
Subordinated Debt,  commence or join in any involuntary  bankruptcy  petition or
similar judicial proceeding against Debtor,  foreclose upon, take possession of,
or attempt to realize on any  Collateral,  or proceed in any way to enforce  any
claims it has or may have  against  the Debtor  under the  Subordinated  Debt or
otherwise,  or (b) contest,  protest or object to any action taken by Bank under
the Debtor  Documents,  the Loan  Agreement or  otherwise,  unless and until the
Obligations have been fully and indefeasibly paid and satisfied in full.

      6.  BANKRUPTCY/PROBATE  OF DEBTOR.  In the event a petition  or action for
relief  shall be filed by or against  the Debtor  under any  federal  bankruptcy
statute  in effect  from  time to time,  or under  any  other  law  relating  to
bankruptcy, insolvency, reorganization, receivership, general assignment for the
benefit of creditors,  moratorium,  creditor  composition,  arrangement or other
relief  for  debtors,  the  claims  of the  Bank  and the  Lenders  (secured  or
unsecured)  against  the  assets or estate of the Debtor  for  repayment  of the
Obligations shall be indefeasibly paid in full before any payment is made to the
Creditor on the Subordinated Debt,  whether such payment is in cash,  securities
or any other form of property or rights. The Bank may, in its discretion, file a
proof of claim for or collect the Creditor's  claim first for the benefit of the
Bank and/or the other Lenders to the extent of the unpaid  Obligations  and then
for the benefit of the Creditor  (but without  creating any duty or liability to
the Creditor other than to remit to the Creditor distributions, if any, actually
received in such proceedings  after the Obligations have been paid and satisfied
in  full)  directly  from  the  receiver,  trustee,  custodian,   liquidator  or
representative  of the Debtor's  estate in such  proceeding.  The Debtor and the
Creditor shall furnish all assignments,  powers or other documents  requested by
the Bank to facilitate such direct collection by the Bank.


                                      -4-
<PAGE>

      7.  RECEIPT OF  PAYMENTS  BY  CREDITOR.  Should the  Creditor  directly or
indirectly  receive any payment or distribution  not permitted by the provisions
of this  Agreement or any  Collateral or proceeds  thereof  (including,  without
limitation,  any funds  obtained  through the exercise of any right of setoff or
similar right),  prior to the full and indefeasible  payment and satisfaction of
the Obligations and the  termination of all financing  arrangements  between the
Bank and the Debtor,  the Creditor will deliver the same to the Bank in the form
received  (except  for the  endorsement  or  assignment  of the  Creditor  where
necessary),  for  application to the Obligations in such order and manner as the
Bank may elect. Until so delivered,  the Creditor shall hold the same, in trust,
for the Bank as property of the Bank,  and shall not commingle  such property of
the Bank with any other property held by the Creditor. In the event the Creditor
fails  to make any such  endorsement  or  assignment,  the  Bank,  or any of its
officers or employees on behalf of the Bank, is hereby irrevocably authorized in
its own  name or in the  name  of the  Creditor  to  make  such  endorsement  or
assignment   and   is   hereby   irrevocably   appointed   as   the   Creditor's
attorney-in-fact for those purposes.

      8.    BANK'S RIGHTS.

            (a) The Creditor  hereby  consents that at any time and from time to
time,  without  further  consent of or notice to the Creditor and without in any
manner  affecting,  impairing,  lessening or releasing any of the  provisions of
this Agreement,  the Bank and Lenders may, in their sole discretion:  (i) renew,
compromise,  extend, expand, postpone, waive, accelerate,  terminate, change the
payment terms of, or otherwise modify the Obligations or amend,  renew,  replace
or  terminate  the  Debtor  Documents  or any and all  other  agreements  now or
hereafter  related  to the  Obligations;  (ii)  extend  credit to the  Debtor or
Borrower  in  whatever  amount on a secured  or  unsecured  basis or take  other
support for the  Obligations  and  exchange,  enforce,  waive,  sell,  transfer,
collect,  adjust or  release  any such  security  or other  support  or any part
thereof;  (iii) apply any and all payments or proceeds of such security or other
support  and in  any  order  or  manner  as the  Bank,  in its  discretion,  may
determine;  and (iv) release or substitute any party liable on the  Obligations,
any guarantor of the Obligations,  or any other party providing  support for the
Obligations.

            (b) This Agreement will not be affected, impaired or released by any
delay or  failure of the Bank or Lenders  to  exercise  any of their  rights and
remedies  against the Debtor or any guarantor or under any of the Obligations or
against any  Collateral,  by any failure of the Bank or Lenders to take steps to
perfect or maintain any lien on, or to preserve any rights to, any Collateral by
any  irregularity,  unenforceability  or invalidity of any of the Obligations or
any part thereof or any security or guarantee therefor, or by any other event or
circumstance  which  otherwise  might  constitute a defense  available  to, or a
discharge of, the Debtor or a subordinated  creditor. The Creditor hereby waives
demand, presentment for performance,  protest, notice of



                                      -5-
<PAGE>


dishonor  and  of  protest  with  respect  to  the  Subordinated  Debt  and  the
Collateral,  notice of acceptance of this Agreement, notice of the making of any
of the  Obligations  and notice of  default  under any of the  Obligations.  The
Creditor  waives any right to require  Bank or Lenders to marshal  any assets in
favor of the Creditor or against or in payment of any or all of the Obligations.
Creditor  further  waives any defense  arising by reason of any claim or defense
based  upon an  election  of  remedies  by Bank or  Lenders  which in any manner
impairs, affects, reduces, releases, destroys and/or extinguishes the Creditor's
subrogation  rights,  rights to proceed  against  the Debtor for  reimbursement,
and/or any other rights of the Creditor.

            (c) Nothing in this  Agreement  will obligate the Bank or Lenders to
grant  credit to, or continue  financing  arrangements  with,  the Debtor or the
Borrower.

      9. CONTINUING AGREEMENT. This is a continuing agreement and will remain in
full force and effect  until all of the  Obligations  and all of the  Creditor's
obligations  and  undertakings to the Bank and Lenders have been fully performed
and until all the Debtor  Documents  have been  terminated.  This Agreement will
continue to be effective or will be  automatically  reinstated,  as the case may
be, if at any time payment of all or any part of the Obligations is rescinded or
must otherwise be returned by the Bank or Lenders upon  insolvency,  bankruptcy,
or reorganization of the Debtor or otherwise, all as though such payment had not
been made.

      10. NO CHALLENGE TO LIENS.  The Creditor  agrees that it will not make any
assertion,  claim or argument in any action,  suit or  proceeding  of any nature
whatsoever in any way challenging the priority, validity or effectiveness of the
liens and security interests granted to the Bank or the Lenders.

      11.   DISPOSITION OR RELEASE OF COLLATERAL.

            (a) The  Creditor  agrees that,  until Bank has received  payment in
full of all Obligations, now existing or hereafter arising, Bank may dispose of,
and exercise  any other  rights with  respect to, any or all of the  Collateral,
free of the Subordinate Interest,  provided that the Creditor retains any rights
it may have as a junior  secured  creditor with respect to the surplus,  if any,
arising from any such disposition or enforcement.

            (b) If at any  time or from  time to  time  the  Collateral,  or any
portion thereof, is in any manner sold or otherwise transferred,  the Creditor's
consent to such disposition  shall be automatically and irrevocably given if the
Bank, in its sole discretion and for any reason,  consents to such  disposition,
and in any event the  Creditor  shall not be entitled  to receive  any  proceeds
(cash or non-cash) of such  disposition  unless and until the  Obligations  have
been indefeasibly paid in full.

            (c) If, at any time and for any reason,  the Bank  releases any lien
on the Collateral,  or any portion thereof,  the Creditor shall likewise release
its lien on the property so released, if the Creditor has obtained such a lien.


                                      -6-
<PAGE>

            (d) Upon any disposition of any of the Collateral by Bank, or by the
Debtor with Bank's written consent,  the Creditor hereby authorizes Bank to file
Uniform  Commercial  Code  termination  statements with respect to any financing
statements in favor of Creditor with respect to Borrower and the Collateral, and
Creditor  agrees,  if requested by Bank, to execute and immediately  deliver any
and all other releases,  terminations  and other  documents or agreements  which
Bank deem necessary to accomplish a disposition  of the  Collateral  free of the
Subordinate  Interest;  provided  that  Creditor  shall  retain its  Subordinate
Interest in the proceeds of the Collateral so disposed of.

      12. ORDER OF PROCEEDINGS.  Nothing in this Agreement is intended to compel
the Bank,  the  Lenders or the  Creditor  at any time to  declare  the Debtor in
default  or compel the Bank or  Lenders  to  proceed  against  or  refrain  from
proceeding  against  any  Collateral  in any order or  manner.  All  rights  and
remedies of the Bank and Lenders with respect to the Collateral, the Debtor, and
any  other  obligors   concerning  the   Obligations   are  cumulative  and  not
alternative.

      13.   ASSIGNMENT OF SUBORDINATED DEBT.

            (a)  The  provisions  hereof  shall  inure  to  the  benefit  of any
financial  institution  obtained by the Debtor,  the Bank,  or the Lenders which
receives a guaranty from Debtor in connection with providing replacement working
capital or other  financing  for the  Borrower  in place of the Bank or Lenders,
regardless of whether any such replacement  lender provides its own financing or
succeeds to the Bank's or Lenders' financing by assignment. If requested by such
replacement  lender,  the Creditor shall execute with such replacement  lender a
subordination agreement substantially similar to this Agreement.

            (b) The  Creditor  also  agrees  that as a  prior  condition  of any
assignment  of any of its  interests  under any of the Creditor  Documents,  the
Creditor shall require the assignee to acknowledge  this Agreement and agree, in
writing, to be bound by the terms and conditions hereof.

            (c)  Each  Creditor  Document  which  is  a  promissory  note  or  a
negotiable  instrument  shall bear the  following  legend,  or a similar  legend
acceptable to Bank, in boldface type:

            THIS NOTE IS SUBJECT TO THE TERMS OF A  SUBORDINATION  AGREEMENT  IN
      FAVOR  OF PNC  BANK,  NATIONAL  ASSOCIATION,  FOR  ITSELF  AND  AS  AGENT.
      NOTWITHSTANDING ANY CONTRARY STATEMENT CONTAINED IN THE WITHIN INSTRUMENT,
      NO PAYMENT ON ACCOUNT OF ANY OBLIGATION ARISING FROM OR IN CONNECTION WITH
      THE WITHIN  INSTRUMENT  OR ANY RELATED  AGREEMENT  (WHETHER OF  PRINCIPAL,
      INTEREST OR OTHERWISE) SHALL BE MADE, PAID, RECEIVED OR ACCEPTED EXCEPT IN
      ACCORDANCE WITH THE TERMS OF SAID SUBORDINATION AGREEMENT.

      14. FINANCING OF FIDUCIARY. In the event of a bankruptcy,  reorganization,
other insolvency or court  proceeding for the Debtor and/or Borrower  commences,
the Bank  and  Lenders  shall  have  the  option  (in  their  sole and  absolute
discretion) to continue to provide financial accommodations (on terms acceptable
to the Bank and  Lenders)  to the  trustee,  other  fiduciary,  or of the Debtor
and/or Borrower as a debtor-in-possession, if the Bank deems such accommodations
to be in its best interests.  The subordination and lien priority  provisions of
this Agreement  shall continue to apply to all advances made during the pendency
of such  court  proceedings,  so that the Bank (for  itself  and/or on behalf of
Lenders)  shall have a prior lien on all  Collateral,  created  before or during
such court  proceeding,  to secure all  Obligations,  whether  created before or
during such court  proceeding.  The Creditor hereby waives any right it may have
to object to  financing  by the Bank or the Lenders  during the pendency of such
court  proceeding  and the  Creditor's  consent to such  financing  shall not be
required  regardless of whether the court supervising such proceeding  approves,
grants or allows adequate protection to the Creditor.


                                      -7-
<PAGE>

      15.  INVESTIGATION OF PARTIES.  The Creditor has entered into the Creditor
Documents  with the Debtor and the Bank has  entered  into the Debtor  Documents
with the Debtor and the Creditor  and the Bank have entered into this  Agreement
each upon its own  independent  investigation,  and each  makes no  warranty  or
representation  as to each other with respect to the financial  condition of the
Debtor,  or its  ability  to repay  its loans to the  Creditor  or the Bank (and
Lenders) in the future.  Nothing in this Agreement shall be deemed to constitute
this  Agreement as a security or create a joint venture or  partnership  between
the Creditor and the Bank for any purpose.

      16.  IMPROPER  ACTION BY CREDITOR.  If the  Creditor,  the Debtor or both,
contrary to this Agreement,  make,  attempt to or threaten to allow the Creditor
to exercise its remedies  against the Debtor  under the Creditor  Documents,  or
make any  payment or take any action  contrary to this  Agreement,  the Bank may
restrain or enjoin the Creditor and the Debtor from so doing, it being expressly
understood  and agreed by the Creditor  and the Debtor that:  (i) the Bank's (or
Lenders')  damages from their actions may at that time be difficult to ascertain
and may be  irreparable,  and (ii) the Creditor and the Debtor waive any defense
or claim that the Bank (or Lenders) or the Debtor cannot demonstrate  damages or
can be made whole by the awarding of damages.

      17.  INDEMNIFICATION OF BANK. The Creditor agrees to indemnify and to hold
the Bank and the  Lenders,  and each of their  officers,  directors,  agents and
employees, harmless from any and all losses, damages, liabilities,  expenses and
obligations,  including attorneys' fees and expenses, as they arise, relating to
actions of the Creditor taken contrary to this Agreement.

      18. NOTICES. All notices, demands, requests, consents, approvals and other
communications  required or permitted  hereunder  must be in writing and will be
effective  upon  receipt.   Such  notices  and  other   communications   may  be
hand-delivered,  sent by facsimile  transmission  with  confirmation of delivery
with a copy sent by first-class mail, or sent by nationally recognized overnight
courier  service,  to a party's address set forth below or to such other address
as any party may give to the other in writing for such purpose:


TO THE BANK:                    PNC BANK, NATIONAL ASSOCIATION
                                2 NORTH LAKE AVENUE, SUITE 440
                                PASADENA, CALIFORNIA  91101
                                ATTENTION:  PORTFOLIO MANAGER
                                FACSIMILE NO.: (626) 432-4589



                                      -8-
<PAGE>

TO THE CREDITOR:                SWT, LLC
                                5711 BUCKINGHAM PARKWAY
                                CULVER CITY, CALIFORNIA 90230
                                ATTENTION:  BOB RANKIN
                                FACSIMILE NO.: (310) 410-9606

TO THE DEBTOR:                  SMALL WORLD KIDS, INC.
                                5711 BUCKINGHAM PARKWAY
                                CULVER CITY, CALIFORNIA 90230
                                ATTENTION:  BOB RANKIN
                                FACSIMILE NO.: (310) 410-9606


      19.  PRESERVATION  OF  RIGHTS.  No delay or  omission  on the  Bank's  (or
Lenders') part to exercise any right or power arising  hereunder will impair any
such right or power or be  considered  a waiver of any such right or power,  nor
will the Bank's (or Lenders') action or inaction impair any such right or power.
The Bank's (and Lenders')  rights and remedies  hereunder are cumulative and not
exclusive of any other  rights or remedies  which the Bank (or Lenders) may have
under  other  agreements,  at law or in  equity.  Nothing in this  Agreement  is
intended  to  modify,  alter,  reduce or impair  any  rights  which the Bank (or
Lenders) or the Creditor may have against the Debtor under the Debtor  Documents
or the Creditor  Documents,  respectively,  or under any other agreement between
them, or either of them, and the Debtor.

      20.  ILLEGALITY.  In case any one or more of the  provisions  contained in
this Agreement should be invalid,  illegal or unenforceable in any respect,  the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired thereby.

      21.  CHANGES  IN  WRITING.  No  modification,  amendment  or waiver of any
provision of this  Agreement  nor consent to any  departure by the Debtor or the
Creditor therefrom, will be effective unless made in a writing and signed by the
Bank,  and then such waiver or consent  shall be effective  only in the specific
instance and for the purpose for which given.

      22.  ENTIRE  AGREEMENT.   This  Agreement  (including  the  documents  and
instruments  referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings,  both written and oral, among the
parties with respect to the subject matter hereof.

      23.  COUNTERPARTS.   This  Agreement  may  be  signed  in  any  number  of
counterpart copies and by the parties hereto on separate  counterparts,  but all
such  copies  shall  constitute  one and the  same  instrument.  Delivery  of an
executed  counterpart  of a  signature  page  to  this  Agreement  by  facsimile
transmission shall be effective as delivery of a manually executed  counterpart.
Any party so executing this Agreement by facsimile  transmission  shall promptly
deliver a manually  executed  counterpart,  provided  that any  failure to do so
shall  not  affect  the  validity  of  the  counterpart  executed  by  facsimile
transmission.

      24. SUCCESSORS AND ASSIGNS.  This Agreement will be binding upon and inure
to the benefit of the Debtor,  the  Creditor  and the Bank and their  respective
heirs,  executors,  administrators,  successors and assigns (including,  without
limitation, the Lenders and any of their participants);  provided, however, that
neither the Debtor nor the  Creditor  may assign this  Agreement  in whole or in
part  without  the Bank's  prior  written  consent  and the Bank at any time may
assign this  Agreement in whole or in part.  No claims or rights are intended to
be created  hereunder  for the benefit of the Debtor or any alleged  third party
beneficiary hereof.


                                      -9-
<PAGE>


      25. INTERPRETATION.  In this Agreement, unless the parties otherwise agree
in writing, the singular includes the plural and the plural the singular;  words
importing any gender include the other genders; the word "or" shall be deemed to
include  "and/or",  the words  "including",  "includes"  and "include"  shall be
deemed to be followed by the words "without limitation"; references to articles,
sections  (or  subdivisions  of  sections)  or  exhibits  are to  those  of this
Agreement  unless  otherwise  indicated;  and references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modifications to such instruments,  but only to the extent such amendments
and other  modifications  are not  prohibited  by the  terms of this  Agreement.
Section  headings in this  Agreement are included for  convenience  of reference
only and shall not constitute a part of this Agreement for any other purpose. If
this  Agreement is executed by more than one party as Debtor or by more than one
party as Creditor, the obligations of such persons or entities hereunder will be
joint and several.

      26.  GOVERNING LAW AND  JURISDICTION.  This Agreement shall be governed by
and  construed in  accordance  with the laws of the State of New York applied to
contracts  to be  performed  wholly  within the State of New York.  Any judicial
proceeding  brought by or against Creditor or Debtor with respect this Agreement
or any related  agreement may be brought in any court of competent  jurisdiction
in New York  County,  State of New York,  United  States  of  America,  and,  by
execution and delivery of this  Agreement,  Creditor and Debtor each accepts for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any  judgment  rendered  thereby  in  connection  with this  Agreement.
Creditor and Debtor each hereby waives  personal  service of any and all process
upon it and consents  that all such service of process may be made by registered
mail (return  receipt  requested) and service so made shall be deemed  completed
five (5) days after the same shall  have been so  deposited  in the mails of the
United States of America. Nothing herein shall affect the right to serve process
in any  manner  permitted  by law or  shall  limit  the  right  of Bank to bring
proceedings  against Creditor or Debtor in the courts of any other jurisdiction.
Creditor and Debtor each waives any objection to  jurisdiction  and venue of any
action  instituted  hereunder  in such  courts in New York  County and shall not
assert any defense with respect  thereto based on lack of  jurisdiction or venue
or based upon forum non conveniens. Creditor and Debtor each waives the right to
remove  any  judicial   proceeding   brought  against  Creditor  or  Debtor  (as
applicable) in connection  with this Agreement in any state court to any federal
court. Any judicial proceeding by Creditor or Debtor against Agent or any Lender
involving,  directly or  indirectly,  any matter or claim in any way arising out
of, related to or connected with this Agreement or any related agreement,  shall
be brought  only in a federal or state court  located in the County of New York,
State of New York.

      27.  WAIVER OF JURY TRIAL.  EACH OF THE DEBTOR,  THE CREDITOR AND THE BANK
IRREVOCABLY  WAIVES  ANY AND ALL  RIGHT  IT MAY  HAVE TO A TRIAL  BY JURY IN ANY
ACTION,  PROCEEDING  OR CLAIM OF ANY  NATURE  RELATING  TO THIS  AGREEMENT,  ANY
DOCUMENTS  EXECUTED  IN  CONNECTION  WITH  THIS  AGREEMENT  OR  ANY  TRANSACTION
CONTEMPLATED  IN ANY OF SUCH  DOCUMENTS.  THE DEBTOR,  THE CREDITOR AND THE BANK
ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.


                                      -10-
<PAGE>


      WITNESS the due execution  hereof as a document under seal, as of the date
first written above.

DEBTOR:                              CREDITOR:

SMALL WORLD KIDS, INC.               SWT, LLC

By:                                  By:
     ----------------------------         ------------------------------

Name:                                Name:
       --------------------------          -----------------------------

Title:                               Title:
        -------------------------           -----------------------------



                                     BANK:

                                     PNC BANK, NATIONAL ASSOCIATION,
                                     FOR ITSELF AND AS AGENT

                                     By:
                                          ------------------------------

                                     Name:
                                           -----------------------------

                                     Title:
                                            -----------------------------



                                      -11-
<PAGE>


                    ACKNOWLEDGEMENT RE SIGNATORY FOR CREDITOR


STATE OF _______________________ )
                                 ) SS.:
COUNTY OF ______________________ )


      On  the  ___  day  of  ___________,   2004,   before  me  personally  came
_________________,  to me known,  who being by me duly sworn, did depose and say
that he/she is the _______________ of _______________,  the __________ described
in and which executed the foregoing  instrument;  and that he/she signed his/her
name  thereto as the act and deed of such  corporation  by order of the board of
directors of said corporation.


                                       -----------------------------------------
                                       Notary Public


</TEXT>
</DOCUMENT>
