Seasonal Advance Note between Small World Toys and PNC Bank, Dated December 15, 2004

Summary

This agreement is a $1,500,000 promissory note issued by Small World Toys to PNC Bank under a broader Revolving Credit and Security Agreement. Small World Toys promises to repay the principal and interest as specified in the Loan Agreement, with the note secured by liens and subject to mandatory and voluntary prepayment terms. If Small World Toys defaults, the note becomes immediately due, and legal fees may apply. The agreement is governed by New York law.

EX-10.3 4 v010009_ex10-3.txt SEASONAL ADVANCE NOTE $1,500,000 Date: December 15, 2004 This Term Note is executed and delivered under and pursuant to the terms of that certain Revolving Credit and Security Agreement dated as of December 15, 2004 (as amended, restated, supplemented or modified from time to time, the "Loan Agreement") by and among SMALL WORLD TOYS, a California corporation ("Borrower"), with its principal place of business located at 5711 Buckingham Parkway, Culver City, California 90230, PNC BANK, NATIONAL ASSOCIATION ("PNC"), the various financial institutions named therein or which hereafter become a party thereto (together with PNC, collectively, "Lenders"), and PNC as agent for Lenders (in such capacity "Agent"). Capitalized terms not otherwise defined herein shall have the meanings provided in the Loan Agreement. FOR VALUE RECEIVED, Borrower hereby promises to pay to the order of PNC, at the office of Agent located at PNC Bank Center, Two Tower Center, 8th Floor, East Brunswick, New Jersey 08816, or at such other place as Agent may from time to time designate to Borrower in writing: (i) the principal sum of One Million Five Hundred Thousand Dollars ($1,500,000) or, if different from such amount, the unpaid principal balance of PNC's Commitment Percentage of the Seasonal Advances as may from time to time be due and owing under the Loan Agreement, payable in accordance with the provisions of the Loan Agreement and subject to acceleration upon the occurrence of an Event of Default under the Loan Agreement or earlier termination of the Loan Agreement pursuant to the terms thereof; and (ii) interest on the principal amount of this Note from time to time outstanding, payable at the Seasonal Advance Rate in accordance with the provisions of the Loan Agreement. In no event, however, shall interest exceed the maximum interest rate permitted by law. Upon and after the occurrence of an Event of Default, and during the continuation thereof, interest shall be payable at the Default Rate. This Note is one of the Seasonal Advance Notes referred to in the Loan Agreement. This Note is secured, inter alia, by the liens granted pursuant to the Loan Agreement and the Other Documents, is entitled to the benefits of the Loan Agreement and the Other Documents, and is subject to all of the agreements, terms and conditions therein contained. This Note is subject to mandatory prepayment and may be voluntarily prepaid, in whole or in part, on the terms and conditions set forth in the Loan Agreement. If an Event of Default under Section 10.7 of the Loan Agreement shall occur, then this Note shall immediately become due and payable, without notice, together with reasonable attorneys' fees incurred to obtain or enforce payment hereof. If any other Event of Default shall occur under the Loan Agreement or any of the Loan Documents, which is not cured within any applicable grace period, then this Note may, as provided in the Loan Agreement, be declared to be immediately due and payable, without notice, together with reasonable attorneys' fees incurred to obtain or enforce payment hereof. This Note shall be construed and enforced in accordance with the laws of the State of New York. Borrower expressly waives any presentment, demand, protest, notice of protest, or notice of any kind except as expressly provided in the Loan Agreement. SMALL WORLD TOYS By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 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 -2-