SEC Filing | JAKKS Pacific Inc.

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 1997

FILE NO. 333-22583
================================================================================

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2 TO

FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------

JAKKS PACIFIC, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

DELAWARE 3944 95-4527222
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CODE NUMBER) IDENTIFICATION NO.)

24955 PACIFIC COAST HIGHWAY, #B202, MALIBU, CALIFORNIA 90265 (310) 456-7799
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)

24955 PACIFIC COAST HIGHWAY, #B202, MALIBU, CALIFORNIA 90265
(ADDRESS OF PRINCIPAL OR INTENDED PRINCIPAL PLACE OF BUSINESS)

JACK FRIEDMAN, CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
JAKKS PACIFIC, INC.

24955 PACIFIC COAST HIGHWAY, #B202, MALIBU, CALIFORNIA 90265 (310) 456-7799
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------

COPIES TO:

MURRAY L. SKALA, ESQ. ROBERT K. MONTGOMERY, ESQ.
GABRIEL KASZOVITZ, ESQ. EBEN PAUL PERISON, ESQ.
FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA & BASS, GIBSON, DUNN & CRUTCHER LLP
LLP 2029 CENTURY PARK EAST, SUITE 4000
750 LEXINGTON AVENUE LOS ANGELES, CALIFORNIA 90067-3026
NEW YORK, NEW YORK 10022-1200 (310) 552-8500
(212) 888-8200 FAX: (310) 551-8741
FAX: (212) 888-7776

------------------------

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

CALCULATION OF REGISTRATION FEE

==================================================================================================================
AMOUNT OF SHARES PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO OFFERING PRICE PER MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------

Common Stock par value $.001.......... 1,800,000 $8.50 $15,300,000 $4,636.36
- ------------------------------------------------------------------------------------------------------------------
Common Stock par value $.001(2)....... 270,000 $8.50 $2,295,000 $695.45
- ------------------------------------------------------------------------------------------------------------------
Representative's Warrants............. 119,000 $.001 $119 $.04
- ------------------------------------------------------------------------------------------------------------------
Common Stock par value $.001
underlying Representative's
Warrants............................ 119,000 $11.05 $1,314,950 $398.47
- ------------------------------------------------------------------------------------------------------------------
Total................................. $18,910,069 $5,730.32(3)
==================================================================================================================

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.

(2) Represents 270,000 shares of Common Stock which the Underwriters have the
option to purchase from two of the Selling Stockholders to cover
over-allotments, if any.

(3) $7,445.69 has been paid in registration fees.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE AN AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"), ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
2

JAKKS PACIFIC, INC.

CROSS-REFERENCE SHEET

FORM SB-2 ITEM NUMBER AND CAPTION CAPTION IN PROSPECTUS
- ------------------------------------------------- -----------------------------------------

1. Front of Registration Statement and
Outside Front Cover of Prospectus........ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus Cover Pages................ Inside Front and Outside Back
3. Summary Information and Risk Factors..... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................... Use of Proceeds
5. Determination of Offering Price.......... Outside Front Cover Page; Underwriting
7. Selling Security Holders................. Principal and Selling Stockholders;
Additional Registered Shares
8. Plan of Distribution..................... Outside Front and Outside Back Cover
Pages; Inside Front Cover Page;
Underwriting
9. Legal Proceedings........................ Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters
and Control Persons...................... Management; Certain Relationships and
Related Transactions
11. Security Ownership of Certain Beneficial
Owners and Management.................... Principal and Selling Stockholders
12. Description of the Securities............ Prospectus Summary; Description of
Securities
13. Interest of Named Experts and Counsel.... Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Underwriting;
Management -- Indemnification of Officers
and Directors
15. Organization within Last Five Years...... Management; Principal and Selling
Stockholders; Certain Relationships and
Related Transactions
16. Description of Business.................. Prospectus Summary; Business
17. Management's Discussion and Analysis or
Plan of Operations....................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
18. Description of Property.................. Business -- Properties
19. Certain Relationships and Related
Transactions............................. Certain Relationships and Related
Transactions
20. Market for Common Equity and Related
Stockholder Matters...................... Prospectus Summary; Risk Factors;
Capitalization; Description of
Securities; Shares Eligible for Future
Sale; Price Range of Common Stock and
Dividend Policy
21. Executive Compensation................... Management
22. Financial Statements..................... Prospectus Summary; Consolidated
Financial Statements; Capitalization
23. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................... Not Applicable

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 11, 1997

PROSPECTUS

1,800,000 SHARES

[LOGO]
JAKKS PACIFIC, INC.(TM)

COMMON STOCK

Of the 1,800,000 shares of Common Stock offered hereby (the "Offering"),
1,700,000 shares are being sold by JAKKS Pacific, Inc., a Delaware corporation
(the "Company" or "JAKKS"), and 100,000 shares are being sold by the Selling
Stockholders named under "Principal and Selling Stockholders." The Company will
not receive any of the proceeds from sales of Common Stock by the Selling
Stockholders (the "Selling Stockholders"). Common Stock of the Company is traded
on the Nasdaq SmallCap Market under the symbol "JAKK." On April 10, 1997, the
last reported sale price of the Common Stock was $6.81. The Common Stock of the
Company has recently been approved for listing on the Nasdaq National Market
System.

------------------------

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK
AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

=================================================================================================
UNDERWRITING PROCEEDS TO
DISCOUNTS AND PROCEEDS TO SELLING
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)

=================================================================================================
Per Share................ $ $ $ $
- -------------------------------------------------------------------------------------------------
Total (3)................ $ $ $ $
=================================================================================================

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. The
Company has also agreed to sell to Cruttenden Roth Incorporated, the
representative (the "Representative") of the Underwriters, for nominal
consideration, warrants to purchase up to 119,000 shares of Common Stock
exercisable at a per share price equal to 130% of the Price to Public (the
"Representative's Warrants"). See "Underwriting."

(2) Before deducting other expenses of this Offering payable by the Company,
estimated to be $600,000.

(3) Two of the Selling Stockholders have granted the Underwriters an option,
exercisable within 45 days from the date of this Prospectus, to purchase up
to an aggregate of 270,000 additional shares of Common Stock on the same
terms as set forth above, solely for the purpose of covering
over-allotments, if any. If the Underwriters' over-allotment option is
exercised in full, the total Price to the Public, Underwriting Discounts and
Commissions, and Proceeds to the Company and the Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."

------------------------

The shares of Common Stock are offered severally by the Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to certain other conditions. It is expected that
delivery of the certificates representing the shares of Common Stock will be
made against payment therefor at the offices of the Representative, 18301 Von
Karman, Suite 100, Irvine, California 92612, or through the facilities of
Depository Trust Company, on or about , 1997.

CRUTTENDEN ROTH
INCORPORATED

The date of this Prospectus is , 1997
4

[PICTURES]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING BIDS AND PURCHASES, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Each prospective investor is urged to read this
Prospectus in its entirety and should carefully consider the matters set forth
in "Risk Factors."

THE COMPANY

JAKKS Pacific, Inc. (the "Company") develops, manufactures and markets toys
and related products. The Company's principal products are (i) toys and action
figures featuring licensed characters, including characters from the World
Wrestling Federation ("WWF"), (ii) die cast collectible and toy vehicles
marketed under the name Road Champs, (iii) fashion dolls with related
accessories, (iv) electronic toys designed for children and (v) new lines of
radio controlled and battery-operated vehicles.

The Company commenced operations in July 1995, having acquired the doll and
electronic toy operations of Justin Products Limited ("Justin"). In February
1997, the Company acquired the die cast collectible and toy vehicle operations
of the Road Champs Companies. See "Business -- Acquisitions." Including Justin's
operations in the first six months of 1995 and Road Champs operations in 1995
and 1996, the pro forma net sales of the businesses now operated by the Company
have grown from $25.1 million to $27.6 million, respectively, and the pro forma
net earnings of such businesses have grown from $1.2 million to $2.5 million,
respectively.

The Company sells its products through its employees and independent sales
representatives. Purchasers of the Company's products include retail chain
stores, department stores, toy specialty stores and wholesalers. The Road Champs
products are also sold to smaller hobby shops and specialty retailers. The
Company's six largest customers are Toys "R" Us, Wal Mart, Kay-Bee Toys, Kmart,
Target and Caldor.

Over the past few years, the toy industry has experienced substantial
consolidation among both toy companies and toy retailers. The Company believes
that this consolidation provides increased growth opportunity due to retailers'
desires not to be entirely dependent on a few dominant toy companies. Retailer
concentration also enables the Company to ship product, manage account
relationships and track retail sales more effectively with a smaller staff. In
addition, the Company believes that management's experience in the toy industry,
the Company's flexibility and its recent success in developing and marketing
products make it more attractive to toy inventors and developers.

These industry trends and developments lead the Company to believe that it
is well positioned for future growth. The Company's business strategy consists
of the following elements:

- - Develop Core Products. In 1997, the Company is expanding the number of items
it offers as part of its core products. These core products include WWF action
figures, the Road Champs product lines of die cast collectible and toy
vehicles and fashion dolls.

- - Enter New Product Categories. The Company intends to enter into license
agreements in new product categories. The Company recently entered the radio
controlled vehicle category by acquiring the rights to manufacture and sell
Turbo Touch Racer, Reactor and Mini Reactor product lines in North America.
The Company intends to continue to use management's extensive experience in
the toy industry to evaluate toys in new product categories.

- - Strategic Acquisitions. Since inception, the Company has acquired businesses
with proven product lines, such as the Road Champs product lines that have
been sold for over twenty years. Management seeks to continue to acquire
proven product lines with an established history of sales and profitable
operations.

- - Enhance Operating Margins. Management believes that the Company's current
infrastructure can accommodate significant growth without a corresponding
increase in administrative expenses and that such growth will increase
operating margins.

- - Acquire Character and Product Licenses. The Company has licensing agreements
with Titan Sports, Saban Entertainment, Time Warner, Sony and Fox. The Company
intends to continue to pursue new licenses from these and other entertainment
companies.

3
6

- - Develop International Sales. The Company intends to expand its international
sales by capitalizing on management's experience and relations with foreign
distributors and retailers.

- - Stability and Growth. The Company anticipates that its core products will
continue to provide a consistent revenue source. The Company plans to utilize
a portion of the profits from the sales of its core products to invest in new
products.

The Company was incorporated under the laws of Delaware in January 1995.
The Company's executive offices are located at 24955 Pacific Coast Highway,
#B202, Malibu, California 90265 and its telephone number is (310) 456-7799.

4
7

THE OFFERING

Common Stock offered by the
Company and the Selling
Stockholders............. 1,800,000 shares

Common Stock to be
outstanding after the
Offering (1)............. 5,882,969 shares

Use of Proceeds............ The Company intends to use the net proceeds of this
offering to repay short-term debt, to acquire
additional character and product licenses, to
acquire other toy businesses and product lines and
for working capital and other general corporate
purposes. See "Use of Proceeds."

Risk Factors............... The shares offered hereby are speculative and
involve a high degree of risk and should not be
purchased by investors who cannot afford the loss
of their entire investment. See "Risk Factors."

Nasdaq National Market
Trading Symbol............. "JAKK"

- ---------------

(1) Unless otherwise indicated, all share and per share data and information
contained in this Prospectus relating to the number of shares of Common
Stock outstanding does not include: (i) the 568,498 shares reserved for
issuance upon the exercise of options outstanding and options available for
grant; (ii) the 419,000 shares reserved for issuance upon the exercise of
outstanding warrants (including the Representative's Warrants); and (iii)
the 923,077 shares reserved for issuance upon the conversion of convertible
debentures.

5
8

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCLUDING ROAD CHAMPS
ACTUAL --------------------------------
APRIL 1, 1995 PRO FORMA ACTUAL PRO FORMA PRO FORMA
YEAR ENDED (INCEPTION) YEAR ENDED JANUARY 1, 1996 YEAR ENDED YEAR ENDED
DECEMBER 31, TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994(1) 1995(2) 1995(3) 1996(4) 1995(5) 1996(6)
------------- ---------------- --------------- ---------------- ------------- ----------------

STATEMENT OF
OPERATIONS:
Net sales........... $ 4,470 $ 6,077 $ 7,931 $ 12,052 $25,072 $ 27,563
Cost of sales....... 3,121 4,131 5,411 7,231 16,838 16,727
----- ----- ----- ------ ------ ------
Gross profit........ 1,349 1,946 2,520 4,821 8,234 10,836
Selling, general and
administrative
expenses.......... 1,290 1,400 1,901 3,611 6,658 7,754
----- ----- ----- ------ ------ ------
Operating income.... 59 546 619 1,210 1,576 3,082
Interest income and
other, net........ 4 4 4 133 4 133
----- ----- ----- ------ ------ ------
Income before income
taxes............. 63 550 623 1,343 1,580 3,215
Provision for income
taxes............. -- 114 126 163 426 725
----- ----- ----- ------ ------ ------
Net income.......... $ 63 $ 436 $ 497 $ 1,180 $ 1,154 $ 2,490
===== ===== ===== ====== ====== ======
Net income per
share............. $ 0.03 $ 0.20 $ 0.23 $ 0.34 $ 0.48 $ 0.67
Weighted average
number of
shares............ 2,191 2,191 2,191 3,504 2,390 3,702

DECEMBER 31, 1996
--------------------------------------------
ACTUAL PRO FORMA(7) AS ADJUSTED(8)
------- ------------ ---------------

BALANCE SHEET DATA:
Working capital......................................................... $ 7,824 $ 5,312 $14,903
Total assets............................................................ 14,200 28,231 34,860
Short-term debt......................................................... 190 6,117 3,180
Long-term debt.......................................................... -- 6,000 6,000
Stockholders' equity.................................................... 11,746 13,246 22,812

- ---------------
(1) Reflects statement of operations data of Justin for the year ended December
31, 1994.
(2) Reflects the actual consolidated statement of operations data of JAKKS for
the period from April 1, 1995 (inception) to December 31, 1995. The
acquisition of Justin is accounted for as of July 1, 1995.
(3) Reflects pro forma statements of operations for the Company and Justin and
certain adjustments for the year ended December 31, 1995, as if the
acquisition of Justin occurred on January 1, 1995.
(4) Reflects the actual consolidated statement of operations data of JAKKS for
year ended December 31, 1996.
(5) Reflects pro forma statements of operations for the Company and Road Champs
and certain adjustments for the year ended December 31, 1995, as if the
acquisition of Road Champs occurred on January 1, 1995.
(6) Reflects pro forma statements of operations for the Company and Road Champs
and certain adjustments for the year ended December 31, 1996, as if the
acquisition of Road Champs occurred on January 1, 1996.
(7) Reflects pro forma balance sheet data for the Company and Road Champs and
certain adjustments as of December 31, 1996, as if the acquisition of Road
Champs occurred on January 1, 1996 and reflects the issuance of the
convertible debentures in the amount of $6,000,000 in January 1997.

(8) As adjusted to give effect to the sale of 1,700,000 shares of Common Stock
offered by the Company at an assumed offering price of $6.50 per share,
after deducting underwriting discounts and estimated offering expenses
payable by the Company and the application of the estimated net proceeds
therefrom.

6
9

RISK FACTORS

The shares offered hereby are speculative and involve a high degree of
risk. Before making an investment decision, prospective investors should
carefully consider the following risk factors, in addition to other information
in this Prospectus.

DEPENDENCE ON LIMITED NUMBER OF PRODUCT LINES

The Company derives a substantial portion of its revenue from a limited
number of product lines. A decrease in the popularity of a particular product
line or key products within a given product line during any year could have a
material adverse effect on the Company's business, financial condition and
results of operations. Sales of the Road Champs and WWF product lines
represented most of the Company's revenue in 1996 on a pro forma basis. Although
at the present time demand remains strong for the Road Champs and WWF product
lines, there can be no assurance that any of these products will retain their
current popularity. See "Business -- Products" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

CONSUMER PREFERENCES AND NEW PRODUCT INTRODUCTIONS

Consumer preferences in the toy industry are continuously changing and
difficult to predict. Products often have short life cycles and relatively few
achieve market acceptance. There can be no assurance that (i) new products or
product lines introduced by the Company will achieve any significant degree of
market acceptance, (ii) acceptance, if achieved, will be sustained for any
significant amount of time or (iii) such products' life cycles will be
sufficient to permit the Company to recover licensing, manufacturing, marketing
and other costs associated therewith. Failure of new product lines to achieve or
sustain market acceptance could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
success of many of the Company's character related products is dependent on the
popularity of characters generated by movies, television programs and other
media. There can be no assurance that these movies, television programs or other
media will be produced as scheduled, that they will be successful or that such
success will result in substantial promotional value to the Company's products.
See "Business -- Products."

DEPENDENCE ON LICENSING AGREEMENTS

Many of the Company's products are based on characters, designs, concepts
and inventions licensed from third parties. Character licenses permit the
Company to manufacture and market toys based on characters or properties from
movies, television, cartoons, video games, books and magazines. Product licenses
confer rights to exploit original designs, concepts and inventions developed by
toy inventors and designers. The royalty expenses paid under character and
product licenses totaled approximately $762,000 for the fiscal year ended
December 31, 1996. Such expenses were nominal in the fiscal period ended
December 31, 1995.

Competition for desirable licenses is intense. As a result, the Company may
have to pay higher royalties in the future to secure or renew character and
product licenses. No assurance can be made that the Company will be able to
secure or renew character and product licenses on acceptable terms.

Under certain character and product licenses, including the license for
WWF, among others, the Company guarantees minimum royalty payments for a number
of years regardless of the actual sales of the related product. If the Company
fails to sell a sufficient quantity of such products, the Company may incur
losses and might not be able to retain such licenses, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. For the fiscal year ending December 31, 1997, the minimum
guaranteed royalty payments under the Company's existing licenses will be
approximately $730,000. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

COMPETITION

Competition in the toy industry is intense. Many of the Company's
competitors have greater financial resources, stronger name recognition, larger
sales, marketing and product development departments and greater economies of
scale that may cause their products to be more competitively priced. Competition

7
10

extends to the procurement of character and product licenses, as well as to the
marketing and distribution of products, including obtaining adequate shelf space
in retail stores. Such competition may result in price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on the Company's business, financial condition and results of operations.
No assurance can be made that the Company will be able to compete successfully
against current and future competitors. See "Business -- Competition."

ASSIMILATION OF ROAD CHAMPS

The Company acquired Road Champs in February 1997 (the "Road Champs
Acquisition"). The Road Champs Acquisition involves numerous risks, including
difficulties in the integration and assimilation of distinct product lines,
administrative staff and sales forces and differences in methods of operation.
While the Company intends to move quickly to integrate its acquisition of Road
Champs, such integration and consolidation may require considerable management
time and effort and could result in the diversion of management resources from
other important matters. No assurance can be made that the Road Champs
operations will continue to be profitable on an operating basis. See
"Business -- Acquisitions."

The Company's products are generally not manufactured prior to the
placement of an order by a customer. However, a portion of the customers of the
Road Champs product lines are smaller domestic businesses, and as a result, the
Company must carry inventory for and hold accounts receivable from such
customers. Maintaining inventory in the toy industry requires the Company to
warehouse products at significant costs without assurance of future sales.

LIMITED OPERATING HISTORY

The Company commenced operations in April 1995 and did not have any product
lines or revenues until the Justin Acquisition, effective July 1995.
Accordingly, the Company has limited relevant operating history upon which an
evaluation of the Company's performance and prospects can be made. Although
certain of the Company's product lines acquired from Justin and Road Champs have
demonstrated profitability in the past, there can be no assurance that the
Company can profitably market such product lines in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and "Business -- Acquisitions."

CONCENTRATION OF SALES

Sales of the Company's products to its six largest customers accounted for,
in the aggregate, approximately 64.3% and 73.5% of revenue for the fiscal years
ended December 31, 1996 and 1995, respectively, and approximately 51.4% and
53.7% of the Company's revenue on a pro forma basis when combined with Road
Champs for the same periods. No other customer accounted for more than 3% of the
Company's revenue for such periods. The Company does not have written contracts
with or commitments from any of its customers. A substantial reduction in orders
from any of its largest customers or a termination of any of such customer
relationships could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, pressure by large
customers to provide financial incentives to consumers, reduce prices, bear the
risks and the cost of carrying inventory or change sales terms could also have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Marketing and Distribution."

DEPENDENCE ON KEY PERSONNEL

The Company's success is largely dependent upon the experience and
continued services of Jack Friedman, the Company's President. In the event of
the loss of Mr. Friedman's services, no assurance can be given that the Company
will be able to obtain the services of an adequate replacement, and any such
loss or interruption of his services could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
has entered into an employment agreement with Mr. Friedman, expiring on December
31, 2001, which includes, among other things, provisions restricting him from
competing with the Company during the term of his employment and, in certain
circumstances, for a period of

8
11

one year thereafter. The Company currently maintains a key man life insurance
policy in the amount of $2,000,000 on Mr. Friedman's life. See "Management." In
addition, pursuant to the terms of certain convertible debentures issued by the
Company in the amount of $6,000,000, holders of such debentures have the option
to have the Company redeem part or all of such outstanding debentures in the
event of Mr. Friedman's death. The Company is in the process of securing
additional key man life insurance in the amount of $6,000,000. See "Description
of Securities -- Renaissance Debentures."

DEPENDENCE UPON NON-AFFILIATED FOREIGN MANUFACTURERS

The toys sold by the Company are currently produced by nonaffiliated
manufacturers located in the People's Republic of China ("China"). The Company
does not have any long-term contracts with any of these manufacturers. Although
the Company believes that alternate sources of manufacturing are available in
China, Hong Kong, Taiwan and elsewhere if the need were to arise, there can be
no assurance that the supply from such alternate sources would be sufficient to
meet the needs of the Company in the event of a disruption of the Company's
current manufacturing arrangements. See "Business -- Manufacturing and
Supplies."

Since substantially all of the Company's products are manufactured in
China, the Company's operations may be affected by economic, political,
governmental and labor conditions in that country, by China's relationship with
the United States and by fluctuations in the exchange rate of the dollar against
such foreign currency. Furthermore, China currently enjoys "Most Favored Nation"
("MFN") status under U.S. tariff laws. As a result, products imported from China
are subject to normal import duties. China's MFN status is reviewed annually by
Congress, and the renewal of such status may be subject to significant political
uncertainties, with the possibility of non-renewal. The loss of China's MFN
status would result in a substantial increase in the duty on products imported
into the United States from China. China also may be subject to retaliatory
trade restrictions imposed by the United States under various provisions of the
Trade Act of 1974. The United States has in the past threatened the imposition
of punitive 100% tariffs on selected goods and withdrawn the threat of sanctions
only days before sanctions were to take affect. The imposition by the United
States of trade sanctions and subsequent actions by China could result in
manufacturing and distribution disruptions or higher costs to the Company.

The Company maintains offices in Hong Kong to source manufacturing in China
and to monitor production in that country. On July 1, 1997, sovereignty over
Hong Kong will be transferred from the United Kingdom to China. If Hong Kong's
business climate were to significantly change for the worse, such change could
have a material adverse effect on the Company's business, financial condition
and results of operations.

SEASONALITY AND QUARTERLY FLUCTUATIONS

Sales of toys are highly seasonal with a majority of retail sales occurring
during the period of September through December. As a result, approximately 73%
of the Company's 1996 shipments occurred in the third and fourth quarters. Such
seasonality causes the Company's quarterly operating results to fluctuate and
creates an uneven need for working capital. Other factors further contribute to
the fluctuations of the Company's operating results, including new product line
introductions and advertising by the Company and its competitors. See
"Business -- Seasonality and Backlog" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

BROAD DISCRETION AS TO USE OF PROCEEDS

The Company plans to allocate the net proceeds it receives from this
Offering to repay short-term debt, to acquire additional character and product
licenses, to acquire product lines and other toy businesses and for working
capital and other general corporate purposes. Accordingly, management will have
broad discretion with respect to the expenditure of the net proceeds of this
Offering. Purchasers of the securities offered hereby will be entrusting their
funds to the Company's management, upon whose judgment the investors must
depend, with only limited information concerning management's specific
intentions. Although the Company intends to use a portion of the proceeds from
this Offering to acquire additional licenses and to acquire product lines and
other toy businesses, there can be no assurance that suitable acquisitions can
be located, that any such acquisitions can be consummated or that such
acquisitions will be successfully integrated into the Company's operations. See
"Use of Proceeds."

9
12

GOVERNMENT REGULATION

The Company's operations are subject to various laws, rules and
regulations, including the Federal Hazardous Substances Act, the Consumer
Product Safety Act, the Flammable Fabrics Act and the regulations promulgated
under each such Act. Such laws empower the Consumer Product Safety Commission to
protect children from hazardous toys and other articles. The Consumer Product
Safety Commission has the authority to exclude from the market products that are
found to be hazardous and to require a manufacturer to repurchase such products
under certain circumstances. While the Company oversees a quality control
program designed to ensure that its products comply in all material respects
with such regulations, no assurance can be made that, despite testing, defects
will not be found in the Company's products, resulting in product liability
claims, loss of revenue, diversion of resources, damage to the Company's
reputation or increased warranty costs, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Government and Industry Regulation."

PROPRIETARY RIGHTS

The Company relies on copyright and trade secret protection, nondisclosure
agreements and licensing arrangements to establish, protect and enforce
proprietary rights in its products. Despite the efforts of the Company and its
licensors to safeguard and maintain their proprietary rights, there can be no
assurance that the Company or its licensors will be successful in so doing. In
addition, the laws of certain foreign countries may not protect intellectual
property rights to the same extent or in the same manner as the laws of the
United States. Although the Company and its licensors continue to implement
protective measures and intend to defend their proprietary rights vigorously,
there can be no assurance that these efforts will be successful.

The Company is not a party to any present litigation regarding proprietary
rights. However, there can be no assurance that third parties will not assert
intellectual property claims against the Company in the future. Such claims, if
proven, could have a material adverse effect on the Company's business,
financial condition and results of operations. Although such claims may
ultimately prove to be without merit, the necessary management attention to and
legal costs associated with litigation or other resolution of such claims could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- License and Marketing Agreements."

POSSIBLE VOLATILITY OF MARKET PRICE OF COMMON STOCK

Market prices of the securities of toy companies are often volatile. Many
factors may have an impact on the market price of the Company's securities,
including fluctuations in the Company's financial results, the actions of the
Company's customers and competitors (including new product line announcements
and introductions), new regulations affecting foreign manufacturing, other
factors affecting the toy industry generally and sales of the Common Stock into
the public market. In addition, the stock market has, from time to time,
experienced significant price and volume fluctuations that may be unrelated to
the operating performance of particular companies.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this Offering, the Company will have 5,882,969 shares
of Common Stock outstanding, of which the 1,800,000 shares of Common Stock
offered hereby is a part, and 3,857,454 shares will be freely tradeable without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"). The remaining 2,025,515 shares of Common Stock are
"restricted securities," as that term is defined under Rule 144 promulgated
under the Securities Act. Such shares may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act.

10
13

February 1998. Upon the expiration of these lock-up agreements, such shares of
Common Stock will become eligible for sale in the public market, subject to the
provisions of Rule 144 under the Securities Act.

The Company has also granted certain piggy-back registration and demand
registration rights with respect to 198,020 shares of restricted Common Stock,
419,000 shares of restricted Common Stock issuable upon the exercise of
outstanding warrants and 923,077 shares of restricted Common Stock issuable upon
the conversion of outstanding debentures described below. See "Description of
Securities -- Registration Rights."

No predictions can be made as to the effect, if any, that sales of shares
of restricted Common Stock or even the availability of such shares for sale will
have on the market prices prevailing from time to time. The possibility that
substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. In addition, the Company is authorized to issue preferred stock,
without stockholder approval, with such rights, designations and preferences as
are determined by the Board of Directors of the Company (the "Board"). See
"Description of Securities," "Shares Eligible for Future Sale" and
"Underwriting."

The Company has also reserved a total of 987,498 shares of Common Stock for
future issuance upon exercise of options and warrants. These include: (i) an
aggregate of 216,998 shares reserved for issuance to key employees, officers,
directors and consultants upon the exercise of options under the Company's
Amended and Restated 1995 Stock Option Plan (the "Stock Option Plan"), of which
options for 191,750 shares of Common Stock have been previously granted; (ii) an
aggregate of 276,500 shares of Common Stock for issuance upon exercise of
options granted to certain employees prior to adoption of the Stock Option Plan;
(iii) an aggregate of 75,000 shares of Common Stock for issuance upon exercise
of options to a certain consultant outside of the Stock Option Plan; (iv)
150,000 shares for issuance upon exercise of warrants which were issued to the
representatives of the underwriters in the Company's Initial Public Offering in
May 1996 (the "Initial Public Offering"); (v) 150,000 shares for issuance upon
exercise of certain other outstanding warrants; and (vi) 119,000 shares for
issuance upon exercise of the Representative's warrants. The Company has also
reserved 923,077 shares for issuance upon conversion of outstanding debentures
(the "Convertible Debentures").

These options, warrants and debentures, as well as other rights that may be
granted in the future, may hinder future equity financing by the Company.
Further, such rights may be exercised at a time when the Company would otherwise
be able to obtain additional equity capital on terms more favorable to the
Company. See "Description of Securities."

CONTINUING CONTROL BY MANAGEMENT

After this Offering, all executive officers and directors of the Company as
a group will beneficially own, in the aggregate, approximately 27.7% of the
Company's outstanding Common Stock. Accordingly, such stockholders will be able
to exert significant influence in the election of the Board. See "Principal and
Selling Stockholders."

NO DIVIDENDS

The Company has never paid cash or other dividends on its Common Stock. The
Company intends to retain its earnings, if any, to finance the operation and
expansion of its business and, therefore, it does not expect to pay any cash
dividends in the foreseeable future. See "Price Range of Common Stock and
Dividend Policy."

FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical fact, including those with respect to the Company's objectives,
plans and strategy set forth under "Prospectus Summary" and
"Business -- Business Strategy" and those preceded by or that include the words
"believes," "expects," "anticipates," "intends," "plans," "is scheduled to" or
similar expressions, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that those expectations will prove to have
been correct.

11
14

Important factors that could cause actual results to differ materially from the
Company's expectations ("Cautionary Statements") are disclosed in this
Prospectus in conjunction with the forward-looking statements and under these
"Risk Factors." All written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by those Cautionary Statements.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,700,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$9.6 million at an assumed offering price of $6.50 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company. The Company will not receive any proceeds from the sale of
Common Stock by the Selling Stockholders.

Of such net proceeds, the Company expects to use approximately $2.9 million
for the repayment of short-term debt incurred primarily in connection with the
Road Champs Acquisition, $1.5 million to acquire additional character and
product licenses and approximately $4.0 million to acquire product lines and
other toy businesses. The remaining net proceeds will be used for working
capital and general corporate purposes.

Proceeds not immediately required for the purposes noted above will be
invested principally in short-term bank certificates of deposit, short-term
investment grade securities, U.S. government obligations or money market
instruments.

Management intends to use the estimated net proceeds as indicated above. In
the event that the Company's plans change, or if the proceeds of this Offering
or cash flow otherwise prove to be insufficient to fund operations, the Company
may find it necessary or advisable to reallocate some of the proceeds within the
categories above noted or may be required to seek additional financing or
curtail its expansion activities.

12
15

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock trades on the Nasdaq SmallCap Market under the
symbol "JAKK." The following table sets forth the high and low closing sales
prices of the Company's Common Stock in each of the following quarters as
reported by the Nasdaq SmallCap Market since inception of trading on May 1,
1996. The Company's Common Stock has been recently approved for listing on the
Nasdaq National Market System.

HIGH LOW
---- ----

1996
Second quarter (from May 1)................................. 9 6 1/2
Third quarter............................................... 8 3/4 6 1/4
Fourth quarter.............................................. 9 7 1/4
1997
First quarter............................................... 8 5/8 7 1/8
Second quarter (to April 10)................................ 8 1/4 6

The Company has not paid, and has no current plans to pay, dividends on its
Common Stock. The Company intends to retain earnings, if any, for use in its
business to finance the operation and expansion of its business.

13
16

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company; (i) as of December 31, 1996; (ii) on a pro forma basis to reflect
the issuance of the Convertible Debentures in the principal amount of $6.0
million in January 1997, the issuance of 198,020 shares of Common Stock and
incurrence of obligations in connection with the Road Champs Acquisition in
February 1997; and (iii) as adjusted to give effect to the sale of 1,700,000
shares of Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom. See "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements of the Company
and the Notes thereto included elsewhere in this Prospectus.

DECEMBER 31, 1996
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)

Short-term debt............................................. $ 190 $ 6,117 $ 3,180
======= ======= =======
Long-term debt.............................................. $ -- $ 6,000 $ 6,000
------- ------- -------
Stockholders' equity:
Preferred stock, $.001 par value; 5,000 shares authorized,
no shares issued....................................... $ -- $ -- $ --
Common stock, $.001 par value; 25,000,000 shares
authorized: 3,984,949 issued and outstanding, actual;
4,182,969 issued and outstanding, pro forma; 5,882,969
issued and outstanding, as adjusted.................... 4 4 6
Additional paid-in capital................................ 10,321 11,821 21,385
Retained earnings......................................... 1,616 1,616 1,616
------- ------- -------
11,941 13,441 23,007
Less unearned compensation from grant of options.......... 195 195 195
------- ------- -------
Net stockholders' equity.................................. 11,746 13,246 22,812
------- ------- -------
Total capitalization................................... $11,746 $19,246 $28,812
======= ======= =======

14
17

PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)

The following unaudited pro forma consolidated balance sheet and statement
of operations have been derived from the Company's audited consolidated balance
sheet as of December 31, 1996 and its statement of operations for the year then
ended. Adjustments have been made to such information to give effect to (i) the
issuance of the Convertible Debentures as if such issuance had occurred as of
December 31, 1996 and (ii) the acquisition of Road Champs as if such acquisition
had occurred as of January 1, 1996. The pro forma adjustments are based upon
currently available information and upon certain assumptions that management of
the Company believes are reasonable.

The following unaudited pro forma consolidated financial statements are not
necessarily indicative of future results of operations of the Company or the
results of operations that might have occurred if the acquisition had taken
place as of January 1, 1996. The unaudited consolidated pro forma financial
statements should be read in conjunction with the financial statements of the
Company and Road Champs, including the Notes thereto, included elsewhere herein.

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18

JAKKS PACIFIC, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED BALANCE SHEET
ADJUSTED FOR THE ISSUANCE OF CONVERTIBLE DEBENTURES
AND ACQUISITION OF ROAD CHAMPS, INC.
AS OF DECEMBER 31, 1996

JAKKS
ACTUAL PRO FORMA PRO FORMA
BALANCE SHEET ADJUSTMENTS BALANCE SHEET
-------------- ------------ -------------

ASSETS
Current assets:
Cash.............................................................. $ 6,355,260 $ 1,872,400 (1)(2) $ 8,227,660
Accounts receivable............................................... 2,420,470 -- 2,420,470
Inventory......................................................... 140,105 1,987,941 (2) 2,128,046
Due from Officers................................................. 120,030 -- 120,030
Prepaid expenses and other current assets......................... 1,241,977 158,373 (2) 1,400,355
----------- ----------- -----------
Total current assets............................................ 10,277,842 4,018,714 14,296,561
----------- ----------- -----------
Property and equipment, net......................................... 1,199,797 603,171 (2) 1,802,968
Deferred offering costs............................................. 85,301 510,000 (1) 595,300
Trademarks.......................................................... 1,000,000 (2) 1,000,000
Goodwill, net....................................................... 2,537,697 7,663,241 (2) 10,200,938
Intangibles and other assets........................................ 99,307 236,159 (2) 335,462
----------- ----------- -----------
Total assets.................................................... $ 14,199,944 $14,031,285 $28,231,229
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................. $ 1,816,074 $ 304,742 (2) $ 2,120,816
Reserve for returns and allowances................................ 175,000 300,000 (2) 475,000
Current portion of acquisition debt............................... 190,008 5,926,543 (2) 6,116,551
Income taxes payable.............................................. 272,605 -- 272,605
----------- ----------- -----------
Total current liabilities....................................... 2,453,687 6,531,285 8,984,972
----------- ----------- -----------
Convertible debentures.............................................. -- 6,000,000 (1) 6,000,000
----------- ----------- -----------
Total liabilities............................................... 2,453,687 12,531,285 14,984,972
Stockholders' equity:
Preferred stock, $.001 par value, 5,000 shares authorized; no
shares issued................................................... -- -- --
Common stock, $.001 par value, 25,000,000 shares authorized;
3,984,949 issued and outstanding, actual; 4,182,969 issued and
outstanding, pro forma.......................................... 3,985 198 (2) 4,183
Additional paid-in capital........................................ 10,321,295 1,499,802 (2) 11,821,097
Retained earnings................................................. 1,616,140 -- 1,616,140
----------- ----------- -----------
11,941,420 1,500,000 13,441,420
Less unearned compensation from grant of options.................. 195,163 -- 195,163
----------- ----------- -----------
Net stockholders' equity........................................ 11,746,257 1,500,000 13,246,257
----------- ----------- -----------
Total liabilities and stockholders' equity...................... $ 14,199,944 $14,031,285 $28,231,229
=========== =========== ===========

- ---------------

(1) Reflects the net proceeds of Convertible Debentures, as though they were
issued on December 31, 1996, as follows:

Total Convertible Debentures........................................................ $ 6,000,000
Less: Placement agent and lender closing fees and expenses.......................... 510,000
-----------
Net proceeds........................................................................ $ 5,490,000
===========

(2) Reflects the purchase of Road Champs as of January 31, 1997, consideration
paid at closing, and deferred payments to Road Champs stockholders, as
though the acquisition took place on December 31, 1996, as follows:

Purchase price...................................................................... $12,045,604
Less consideration paid at closing:
Cash........................................................................... 4,619,061
Common stock of JAKKS.......................................................... 1,500,000
-----------
6,119,061
-----------
Total deferred payments due within twelve months of closing......................... $ 5,926,543
===========

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19

JAKKS PACIFIC, INC. AND SUBSIDIARIES

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTED FOR THE ACQUISITION OF ROAD CHAMPS, INC.
FOR THE YEAR ENDED DECEMBER 31, 1996

ACTUAL
ACTUAL ROAD PRO FORMA PRO FORMA
JAKKS CHAMPS COMBINED ADJUSTMENTS RESULTS
----------- ----------- ----------- ----------- -----------

Net sales............................. $12,052,016 $15,510,611 $27,562,627 $ -- $27,562,627
Cost of sales......................... 7,231,296 9,564,332 16,795,628 (68,532)(1) 16,727,096
----------- ----------- ----------- ----------- -----------
Gross profit...................... 4,820,720 5,946,279 10,766,999 68,532 10,835,531
Selling, general and administrative
expenses............................ 3,611,471 4,119,424 7,730,895 23,125(1) 7,754,020
----------- ----------- ----------- ----------- -----------
Income from operations............ 1,209,249 1,826,855 3,036,104 45,407 3,081,511
Interest expense...................... 63,171 45,359 108,530 (45,359)(1) 63,171
Interest income....................... 196,966 196,966 196,966
Other income.......................... 2,733,020 2,733,020 (2,733,020)(2) --
Other expenses........................ 923,841 923,841 (923,841)(2) --
----------- ----------- ----------- ----------- -----------
Income before income taxes........ 1,343,044 3,590,675 4,933,719 (1,718,413) 3,215,306
Provision for income taxes............ 163,275 1,615,276 1,778,551 (1,053,597)(3) 724,954
----------- ----------- ----------- ----------- -----------
Net income........................ $ 1,179,769 $ 1,975,399 $ 3,155,168 $ (664,816) $ 2,490,352
=========== =========== =========== =========== ===========

- ---------------

(1) Reflects the net result from the elimination of certain non-continuing costs
incurred by Road Champs offset by increases in expenses that would have been
incurred by JAKKS had the acquisition been effective as of January 1, 1996.

(2) Primarily reflects the elimination of other income and expense items not
attributable to on-going operations.

(3) To provide for income taxes on Road Champs' adjusted net income.

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20

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto which appear elsewhere in
this Prospectus.

OVERVIEW

The Company was founded in early 1995 to develop, manufacture and markets
toys and related products for children. The Company commenced business
operations as of July 1, 1995, when it assumed operating control over Justin and
has included the results of Justin's operations in its consolidated financial
statements from the effective date of such acquisition. The Justin product lines
accounted for substantially all of the Company's sales for the period from April
1, 1995 (inception) to December 31, 1995.

In 1996, the Company expanded its product lines to include products based
on licensed characters and properties such as WWF action figures and Power
Rangers ZEO mini vehicles. Presently, the Company's products include (i) toys
and action figures featuring licensed characters, including action figures based
on characters from the WWF, (ii) die cast collectible and toy vehicles marketed
under the name Road Champs, (iii) fashion dolls with related accessories, (iv)
electronic toys designed for children and (v) new lines of radio controlled and
battery-operated vehicles.

The toys sold by the Company are currently produced by non-affiliated
manufacturers located in China on letter of credit basis or on open account and
are shipped F.O.B. Hong Kong. These methods allow the Company to keep certain
operating costs down and reduce working capital requirements. To date,
substantially all of the Company's sales have been to domestic customers. The
Company intends to expand distribution of its products internationally.

The Company's products are generally acquired from others or developed for
the Company by non-affiliated third parties, thus minimizing operating costs.
Royalties payable to such developers generally range from 1% to 5% of the
wholesale sales price for each unit of a product sold by the Company.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data as a percentage of net sales. As indicated, the
data is based on twelve month results for each year presented. The 1995 data
reflects the pro forma combined results of Justin and the Company as though the
Justin Acquisition was effective January 1, 1995, and the 1996 data relates
exclusively to the Company's operations:

YEARS ENDED DECEMBER 31,
------------------------
PRO FORMA ACTUAL
1995 1996
--------- ------

Net sales............................................. 100.0% 100.0%
Cost of sales......................................... 68.2 60.0
--------- ------
Gross profit.......................................... 31.8 40.0
Selling, general and administrative expenses.......... 24.0 30.0
--------- ------
Income from operations................................ 7.8 10.0
Other income.......................................... 0.2 --
Interest, net......................................... (0.1) 1.1
--------- ------
Income before income taxes............................ 7.9 11.1
Provision for income taxes............................ 1.6 1.3
--------- ------
Net income.................................. 6.3% 9.8%
======== =====

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21

YEARS ENDED DECEMBER 31, 1996 AND 1995

Net Sales. Net sales were $12.1 million in 1996, an increase of $4.2
million, or 52%, over $7.9 million in 1995. The strong growth in net sales was
due primarily to the introduction of new products including WWF action figures
and Power Rangers ZEO mini vehicles, in addition to the continuing sales of the
Company's other product lines, including fashion dolls and accessories.

Gross Profit. Gross profits were $4.8 million or 40.0% of net sales in
1996. This represents an increase of approximately 148% over gross profits of
$1.9 million or 31.8% of net sales in 1995. This increase is due primarily to
increasing sales of new products featuring licensed characters and properties
with higher after-royalty margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $3.6 million in 1996 and $1.9 million in 1995,
constituting 30.0% and 24.0% of net sales, respectively. The increase as a
percentage of net sales was due to the increase in such expenses in support of
the Company's growth including staffing and infrastructure, as well as expenses
incurred in connection with the placement of the Convertible Debentures and the
Road Champs Acquisition. The Company expects that such fixed costs should
decrease as a percentage of net sales as sales volume increases. The overall
dollar increase in 1996 over 1995 was due mainly to the increase in variable
selling expenses, staffing and infrastructure additions in support of the
Company's growth, the placement of the Convertible Debentures and Road Champs
Acquisition. The increase in variable selling expenses, such as freight and
shipping related expenses, sales commissions and travel expenses, are
attributable to significant increases in net sales. Major accounts are serviced
internally, thereby minimizing sales commissions; however, this benefit is
partially offset by increased travel required by the Company to cover those
accounts. Selling expenses are expected to increase as net sales increase due to
the variable nature of such expenses. From time to time, the Company may
increase its advertising efforts, including the use of more expensive
advertising media such as television if the Company deems it appropriate for
particular products. Such advertising costs may be substantial, and there is no
certainty as to the effectiveness of such advertising or whether any resultant
sales would be sufficient to cover such costs.

Interest, Net. The Company maintained significantly higher average cash
balances during 1996 than in 1995 resulting in significantly higher interest
income, though offset by interest expense consisting mainly of the interest
incurred on the bridge financing conducted by the Company prior to the Initial
Public Offering and the discount amortization on the Justin Acquisition payable.
See "Business -- Acquisitions."

Provision for Income Taxes. Provision for income taxes in 1996 included
foreign income taxes offset by the tax benefit generated by operating losses for
Federal and state tax purposes. In 1995, the provision included Federal, state
and foreign income taxes. The Company's earnings have benefited from a favorable
overall effective tax rate of 12.2% in 1996 and 20.3% in 1995 as a substantial
portion of the Company's earnings were subject to the Hong Kong Corporation Tax,
a flat 16.5%, on its income arising in, or derived from, Hong Kong. At December
31, 1996, the Company had Federal and state net operating loss carryforwards of
approximately $360,000 and $180,000, respectively, available to offset future
taxable income. This carryforward generally begins to expire in 2011 and may be
subject to annual limitations as a result of changes in the Company's ownership.
There can be no assurance that changes in ownership in future periods or any
future losses will not significantly limit the Company's use of the net
operating loss carryforward. In addition, no valuation allowance for its
deferred tax assets, amounting to approximately $146,000 at December 31, 1996,
has been provided for since, in the opinion of management, realization of the
future benefit is probable. In making this determination, management considered
all available evidence, both positive and negative, as well as the weight and
importance given to such evidence.

QUARTERLY FLUCTUATIONS AND SEASONALITY

The Company has experienced significant quarterly fluctuations in operating
results and anticipates such fluctuations in the future. The operating results
for any quarter are not necessarily indicative of results for any future period.
The first quarter for the Company is typically expected to be the least
profitable as a result of lower net sales but substantially similar fixed
operating expenses. The Company's first quarter performance is

19
22

thus expected to be consistent with the toy industry, in general, where many
companies may experience only moderate profits and many others may even
experience losses.

The following tables present the unaudited quarterly results for the
Company and the Company pro forma with Justin for the years indicated. The
seasonality of the business is reflected in this quarterly presentation.

1995
PRO FORMA(1) 1996
--------------------------------- ---------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Net sales....................... $ 219 $1,634 $3,769 $2,309 $ 835 $2,382 $4,458 $4,377
Gross profit.................... 72 501 989 958 418 839 1,804 1,760
Income (loss) before income
taxes......................... (91) 163 436 115 (42) 195 730 460
Net income (loss)............... (76) 136 359 78 20 202 628 330
Net income (loss) per share..... $(0.03) $ 0.06 $ 0.16 $ 0.04 $ 0.01 $ 0.06 $ 0.15 $ 0.08

Net sales....................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit.................... 32.9 30.7 26.2 41.5 50.1 35.2 40.5 40.2
Income (loss) before income
taxes......................... (41.6) 10.0 11.6 5.0 (5.0) 8.2 16.4 10.5
Net income (loss)............... (34.7) 8.3 9.5 3.3 2.4 8.5 14.1 7.5

- ---------------

(1) Pro forma results include Justin's results as though the acquisition took
place as of January 1, 1995.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Company had working capital of $7.8 million,
as compared to a working capital deficit of $0.6 million as of December 31,
1995. Such increase was primarily attributable to the receipt of net proceeds
from the issuance of the Common Stock by the Company in its Initial Public
Offering as well as the placement of the bridge financing in February 1996 and
the subsequent conversion thereof to Common Stock.

Net cash used by operating activities was $0.7 million for the year ended
December 31, 1996. Net cash was used primarily by the increase in accounts
receivable and other current assets, though offset by net earnings, depreciation
and amortization, and increases in accounts payable and accrued expenses. At
December 31, 1996, the Company had cash of $6.4 million.

Net cash provided by operating activities was $1.1 million for the period
from April 1, 1995 (Inception) to December 31, 1995, excluding any effect of
pre-acquisition results of Justin. Net cash was provided primarily from net
earnings and depreciation and amortization as well as from increases in accounts
payable and various other liabilities, offset in part by increases in accounts
receivable and various other assets. As of December 31, 1995, the Company had
cash of $0.1 million.

The Company's investing activities have used net cash of $1.1 million in
1996, consisting primarily of the purchase of molds and tooling used in the
manufacture of the Company's products. As part of the Company's strategy to
develop and market new products, the Company has entered into various character
and product licenses with royalties of 1% to 10% payable on net sales of such
products. As of January 1, 1997, these agreements require future aggregate
minimum guarantees of $2.4 million, exclusive of $0.3 million in advances
already paid.

The Company's financing activities have provided net cash of $8.0 million
in 1996, consisting primarily of the issuance of the Common Stock in connection
with its Initial Public Offering, which provided $7.7 million, net of offering
costs, and the placement of the bridge financing in February 1996 and the
subsequent

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23

conversion thereof to Common Stock, which provided $1.1 million, net of offering
costs, less approximately $0.7 million in debt repaid.

In January 1997, the Company received net proceeds of approximately $5.5
million, net of issuance costs, from the issuance of $6.0 million in convertible
debentures which are convertible into 923,077 shares of Common Stock, subject to
anti-dilution provisions. Such debentures bear interest at 9% per annum, payable
monthly, and are due in December 2003.

In February 1997, the Company acquired Road Champs for approximately $12.0
million. Consideration paid at closing was approximately $4.6 million in cash
plus the issuance of $1.5 million (198,020 shares) of Common Stock. The balance
of the cash consideration ($5.9 million) is payable during the twelve-month
period ending in February 1998. This acquisition provided the Company with
immediate significant growth in the mini vehicle product category with the Road
Champs product line of die cast collectible and toy vehicles. Assets included in
the purchase were molds and tooling, office and warehouse equipment and other
operating assets, as well as license agreements, trade name and goodwill.

The Company believes that its cash flow from operations, cash on hand and
the net proceeds from the issuance of the Convertible Debentures, together with
the net proceeds to the Company from this Offering, will be sufficient to meet
working capital and capital expenditure requirements and provide the Company
with adequate liquidity to meet its anticipated operating needs for the
foreseeable future. Although operating activities are expected to provide cash,
to the extent the Company grows significantly in the future, its operating and
investing activities may use cash and, consequently, such growth may require the
Company to obtain additional sources of financing. There can be no assurance
that any necessary additional financing will be available to the Company on
commercially reasonable terms, if at all.

EXCHANGE RATES

The Company sells substantially all of its products in U.S. dollars and
pays for substantially all of the manufacturing costs in either U.S. or Hong
Kong dollars. Operating expenses of the Hong Kong office are paid in Hong Kong
dollars. The exchange rate of the Hong Kong dollar to the U.S. dollar has been
fixed by the Hong Kong government since 1983 at HK$7.80 to US$1.00 and,
accordingly, has not represented a currency exchange risk to the U.S. dollar. No
assurance can be made that the exchange rate between the United States and Hong
Kong currencies will continue to be fixed or that exchange rate fluctuations
will not have a material adverse effect on the Company's business, financial
condition or results of operations. See "Risk Factors -- Dependence Upon
Non-Affiliated Foreign Manufacturers."

RECENT ACCOUNTING PRONOUNCEMENT

The FASB issued a new standard, SFAS No. 123, "Accounting for Stock-Based
Compensation," which contains a fair value-based method for valuing stock-based
compensation that entities may use, which measures compensation cost at the
grant date based on the fair value of the award. Compensation is then recognized
over the service period, which is usually the vesting period. Alternatively, the
standard permits entities to continue accounting for employee stock option and
similar equity instruments under APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Entities that continue to account for stock options using
APB Opinion No. 25 are required to make pro forma disclosures of net income and
earnings per share, as if the fair value-based method of accounting defined in
SFAS No. 123 had been applied. Management accounts for options under APB Opinion
No. 25. If the alternative accounting-related provisions of SFAS No. 123 had
been adopted at the beginning of 1995, the effect on 1996 and 1995 net income
and earnings per share would have been immaterial.

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BUSINESS

COMPANY OVERVIEW

The Company develops, manufactures and markets toys and related products.
The Company's principal products are (i) toys and action figures featuring
licensed characters, including characters from the WWF, (ii) die cast
collectible and toy vehicles marketed under the name Road Champs, (iii) fashion
dolls with related accessories, (iv) electronic toys designed for children and
(v) new lines of radio controlled and battery-operated vehicles.

Over the past few years, the toy industry has experienced substantial
consolidation among both toy companies and toy retailers. The Company believes
that this consolidation provides increased growth opportunity due to retailers'
desires not to be entirely dependent on a few dominant toy companies. Retailer
concentration also enables the Company to ship product, manage account
relationships and track retail sales more effectively with a smaller staff. In
addition, the Company believes that management's experience in the toy industry,
its flexibility and its recent success in developing and marketing products make
it more attractive to toy inventors and developers.

INDUSTRY OVERVIEW

According to the Toy Manufacturers of America, Inc. ("TMA"), an industry
trade group, total domestic manufacturers' shipments of toys, excluding video
games and accessories, were approximately $13.9 billion in 1996. According to
the TMA, the United States is the world's largest toy market, followed by Japan
and Western Europe. The Company believes the two largest U.S. toy companies,
Mattel and Hasbro, collectively hold a dominant share of the domestic non-video
toy market. In addition, hundreds of smaller companies compete in the design and
development of new toys, the procurement of character and product licenses, the
improvement and expansion of previously introduced products and product lines
and the marketing and distribution of toy products.

The Company's product lines principally fall into four categories within
the toy industry. According to the TMA, for the calendar years ended December
31, 1993, 1994, 1995 and 1996, these categories had approximate domestic
manufacturers' shipments as follows:

4-YEAR
COMPOUND
ANNUAL
GROWTH
1993 1994 1995 1996 RATE
-------- -------- ---------- ---------- --------
(IN THOUSANDS)

Male action figures and accessories...... $641,000 $867,000 $ 716,000 $ 790,000 7.2%
Mini vehicles............................ 237,000 282,000 261,000 313,000 9.7%
Radio controlled vehicles................ 242,000 250,000 289,000 293,000 6.6%
Fashion/mini dolls(1).................... 847,000 913,000 1,128,000 1,273,000 14.5%

- ---------------

(1) The Company believes that most of the sales in the fashion/mini dolls
category were attributable to sales of Mattel's Barbie.

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BUSINESS STRATEGY

The Company's growth strategy consists of the following elements:

- Develop Core Products. In 1997, the Company is expanding the number of items
it offers as part of its core products. These core products include WWF
action figures, the Road Champs product lines of die cast collectible and
toy vehicles and fashion dolls.

- Enter New Product Categories. The Company intends to enter into license
agreements in new product categories. The Company recently entered the radio
controlled vehicle category by acquiring the rights to manufacture and sell
the Turbo Touch Racer, Reactor and Mini Reactor product lines in North
America. The Company intends to continue to use management's extensive
experience in the toy industry to evaluate toys in new product categories.

- Strategic Acquisitions. Since inception, the Company has acquired businesses
with proven product lines, such as the Road Champs product lines that have
been sold for over twenty years. The Company believes that this line should
constitute a significant portion of the Company's 1997 sales and
significantly expand the Company's position in the mini vehicle category.
Management seeks to continue to acquire proven product lines with an
established history of sales and profitable operations.

- Enhance Operating Margins. Management believes that the Company's current
infrastructure can accommodate significant growth without a corresponding
increase in administrative expenses and that such growth will increase
operating margins.

- Acquire Character and Product Licenses. The Company has licensing agreements
with Titan Sports, Saban Entertainment, Time Warner, Sony and Fox. The
Company intends to continue to pursue new licenses from these and other
entertainment companies. The Company also intends to continue to purchase
additional products and product concepts through its existing network of
product developers.

- Develop International Sales. Management believes that foreign markets,
especially Europe and Canada, offer opportunity for growth. The Company
intends to expand its international sales by capitalizing on management's
experience and relations with foreign distributors and retailers.

- Stability and Growth. The Company anticipates that its core products will
continue to provide a consistent revenue source. The Company plans to
utilize a portion of the profits from the sales of its core products to
invest in new products.

There can be no assurance that the Company will be able to implement all or
any part of its growth strategy or, if the Company is able to implement such
strategy, that it will be successful. For a discussion of important factors that
could affect the Company's ability to successfully implement its strategy in the
future, see "Risk Factors."

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PRODUCTS

The following chart sets forth the Company's product lines for 1996 and
proposed product lines for 1997:

- ----------------------------------------------------------------------------------------------
CATEGORIES PRODUCTS
- ----------------------------------------------------------------------------------------------

1996 1997
----------------------------------- ----------------------------------

Male Action World Wrestling Federation (6" World Wrestling Federation (6" and
Figures and Assortments and Figures, Monster 7" Assortments and Figures,
Accessories Ring, Superstar Series 1, 2 and 3, Monster Ring, Superstars Series 3,
Microphone, Limited Edition 4, 5 and 6, Manager Series, Tag
Costumes) Team Series, Microphone, Limited
Edition Figures, 3" Figure Sets
with Wrestling Ring)
Starship Troopers
(Themed wall rollers and pop-ups)
- ----------------------------------------------------------------------------------------------
Mini Vehicles Power Rangers ZEO (Vehicles with Power Rangers ZEO (Vehicles with
attached Figures, Power Launcher, attached Figures, Power Launcher,
Sound Blasters, Stunt Speedsters, Sound Blasters, Stunt Speedsters,
Mini Jet Cycle Stunt Stadium, Mini Mini Jet Cycle Stunt Stadium, Mini
Jet Cycle Play Set) Jet Cycle Play Set)
TURBO Power Rangers (Road
Blasters, Micro Turbo Zords, Turbo
Morpher Wrist Carrying Case)
Road Champs Die Cast Vehicles
(Vehicle, Collection,
Playsets -- including Cars,
Trucks, Motorcycles, Planes,
Helicopters, Buses and Emergency
Vehicles)
Ford/Chevrolet (Road Blasters,
Pocket Road Blasters, Playsets)
- ----------------------------------------------------------------------------------------------
Radio Reactor
Controlled Mini Reactor
Vehicles Turbo Touch Racer
TURBO Power Rangers (Turbo Racers)
- ----------------------------------------------------------------------------------------------
Electronic Toys Sky Com (Base stations, walkie- Sky Com (Base stations, walkie-
talkies) talkies)
Audio Kid (Sing-along radios & Audio Kid (Sing-along radios and
cassette players) cassette players)
- ----------------------------------------------------------------------------------------------
Fashion/Mini Holiday Dolls; Themed Play Sets Holiday Dolls; Themed Play Sets
Dolls Fairytale Favorites (Cinderella,
Snow White, Rapunzel, Princess
Mermaid, Sleeping Beauty)
Starr Model Agency (Midnight Jewel, Starr Model Agency (Shimmer-N-
Fabulous Furs, Prized Pets, Mobile Shine, Floral Sensation, Island
Playset, Carrying Case) Fantasy and Bath & Vanity Dolls;
Sun & Surf, Fun & Fitness and
Stylin' Salon Play Sets)
- ----------------------------------------------------------------------------------------------

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CURRENT PRODUCTS

MALE ACTION FIGURES AND ACCESSORIES

- World Wrestling Federation

The Company has a license with Titan Sports, Inc. ("Titan"), pursuant to
which the Company has the exclusive right to develop and market 6" action
figures of the popular WWF professional wrestlers in the United States
and Canada. These 6" figures feature moveable body parts and real-life
action sounds. A WWF microphone with action background sounds is
available with these figures. This product line, which retails for
approximately $5.99 for the individual figures, was introduced by the
Company in the second quarter of 1996. A second and third series of the
action figures were released in the third and fourth quarters of 1996,
respectively, along with a wrestling ring play set in the fourth quarter
of 1996. The Company intends to expand its current WWF products in 1997,
including seven new series of wrestler figure assortments. Furthermore,
the Company is expanding its WWF product line by introducing lines of 7"
figures, sets of 3" figures with a wrestling ring and a new amplified
microphone.

MINI VEHICLES

- Die Cast Vehicles

Road Champs die cast collectible and toy vehicle products are expected by
management to become the Company's largest product line. The Road Champs
product line consists of die cast new and classic cars, trucks,
motorcycles, emergency and service vehicles (including police cars, fire
trucks and ambulances), buses and aircraft (including propeller planes,
jets and helicopters). As a part of the Road Champs Acquisition, the
Company acquired the right to produce the Road Champs line of collectible
vehicle replicas from Ford, Chevrolet, Jeep, Kawasaki and Yamaha, as well
as the right to use certain corporate names on the die cast vehicles,
such as Pepsi, Goodyear and Hershey. Management believes that these
licenses increase the perceived value of the products. These products are
currently retailing individually from approximately $2.99 to $7.99 and in
play sets from $9.99 to $24.99. See "Risk Factors -- Assimilation of Road
Champs."

- Power Rangers ZEO

The Company has entered into a license agreement with Saban
Merchandising, Inc. and Saban International N.V. (collectively, "Saban")
pursuant to which the Company markets and produces Power Rangers ZEO
vehicles with attached figures, a "Stunt Stadium" and mini vehicles known
as "Sound Blasters" and "Stunt Speedsters." The retail prices for these
products range from approximately $4.99 to $9.99.

FASHION/MINI DOLLS

- Fashion/Mini Dolls

The Company produces various lines of proprietary fashion dolls and
accessories for children between the ages of three and ten. The product
line includes 11 1/2" fashion dolls outfitted to correspond with
particular holidays or events such as Christmas and birthdays and the
Starr Model Agency line comprised of 6 1/2" fashion dolls which come in
various themed outfits such as "Midnight Jewel" and "Prized Pets," as
well as accessories which include mobile play sets, carrying cases and a
sport utility vehicle. In 1997, the Company intends to add to its doll
lines by producing additional Starr Model Agency Playsets, as well as
dolls based on children's classic fairy tales and holidays and other
theme-based play sets.

CHILDREN'S ELECTRONIC TOYS

- Sky Com and Audio Kid

The Company markets and sells a line of children's electronic toys,
including Sky Com base stations and walkie-talkies and Audio Kid
Sing-along radios and cassette players. These products are made of

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durable plastic, with rounded corners to increase safety for children, and big
colorful buttons. The retail prices of these products range from $5.99 to
$24.99.

NEW PRODUCTS

- TURBO Power Ranger

In 1997, the Company, under agreement with Saban, will market and sell
mini vehicles appearing in the anticipated March 1997 release of the
TURBO Power Rangers feature film and related children's television
program. These mini vehicles include TURBO Power Rangers "Road Blasters"
and Micro TURBO Zords, as well as accessories such as a TURBO Morpher
wrist carrying case and a power launcher. The Company also intends to
introduce a radio controlled vehicle called TURBO Power Rangers "Turbo
Racer." The retail price for these products will range from approximately
$5.99 to $12.99.

- Turbo Touch Racer

The Company has entered into a license agreement with Wow Wee
International ("Wow Wee") to market and distribute a radio controlled car
known as Turbo Touch Racer. The car is controlled by a special glove worn
by the user as opposed to the traditional hand-held transmitter. These
toy vehicles are expected to be sold at retail prices ranging from $29.95
to $34.95. The Company anticipates that it will begin to sell these
products in the spring of 1997.

- Reactor and Mini Reactor

The Company has entered into an agreement with Quantum Toy Concepts Pty,
Ltd. to market and sell certain radio controlled vehicles, known as
Reactor, and similar vehicles in smaller sizes, known as Mini Reactor.
These products are expected to be sold at retail prices from $59.99 to
$69.99 for Reactor and from $19.99 to $24.99 for Mini Reactor. Initial
shipments of these products are expected to commence in spring 1997.

- Other Products

The Company plans to market various other toys and products designed for
children including: wall rollers and pop ups related to the Starship
Troopers feature film, which is expected to be released in November 1997;
battery-operated vehicles ("Road Blasters"), based on models from Ford,
Chevrolet and Pontiac; foam mats with licensed cartoon characters,
including Berenstain Bears, Cartoon Network and Looney Tunes Lovables;
and disposable cameras and photo albums with licensed characters,
including Berenstain Bears, The Simpsons and WWF wrestlers.

LICENSE AND MARKETING AGREEMENTS

License Agreements. The Company has entered into a license with Titan for
the use of certain WWF properties and characters of professional wrestlers who
perform in WWF live events broadcast on free and cable television, including
pay-per-view television specials. The Company has the exclusive right to market
those action figures in 7", 6" and 3" sizes in the United States and Canada and
recently acquired the exclusive right to market the same products in Europe,
Africa and Australia. The line also includes related products and accessories.
The Company has been selling WWF products since May 1996. These licenses both
expire on December 31, 1999. The Company has agreed to pay Titan royalties with
certain minimum guarantees. See "Dependence on Licensing Agreements."

The Company has entered into a license agreement with Saban for the use of
the TURBO Power Rangers and Powers Rangers ZEO properties and names on a number
of products. The agreement provides for the sale of such products in mass market
retail stores, specialty stores and toy stores in the United States and Canada.
The agreement terminates on July 31, 1998. The Company pays royalties to Saban
on toys sold with certain minimum guarantees.

Turbo Touch Racer products are sold by the Company under an exclusive
license agreement with Wow Wee. The Company has the rights to market and sell
the Turbo Touch Racer toy vehicles and accessories in the United States. The
agreement expires on June 30, 1998 unless renewed by the Company for additional
twelve month terms. Under that agreement, the Company is obligated to buy
specified amounts of the

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products from Wow Wee and also pay Wow Wee royalties with certain minimum
guarantees. However, the Company may cancel the agreement by payment of the
guaranteed royalties.

The Company's recent Road Champs Acquisition included numerous licenses for
the use of certain well-known corporate names, marks and logos on its Road
Champs product line. Under such licenses, the Company acquired the right to
produce a line of collectible vehicle replicas of certain well-known vehicles
from companies such as Ford, Chevrolet, Jeep, Kawasaki and Yamaha, as well as
the right to use certain highly recognizable corporate names, such as Pepsi,
Goodyear and Hershey on other of the die cast vehicles. Under the terms of such
licenses, which expire on various dates ranging through May 10, 2001 (many of
which include automatic annual extensions without affirmative action taken by
either party), the Company pays the licensor a royalty based on the Company's
sales of each product bearing such licensed name. While the Company is not
required to pay any royalty on certain of the products, the royalties on a
majority of such products generally range from 1% to 5% of sales.

Marketing Agreements. The radio controlled vehicles known as Reactor and
Mini Reactor are sold by the Company in the United States and Canada pursuant to
an exclusive agreement with Quantum Toy Concepts Pty, Ltd., the owner of these
products. The agreement expires December 31, 1998.

MARKETING AND DISTRIBUTION

The Company sells all of its products through its employees and independent
sales representatives. Purchasers of the Company's products include retail chain
stores, department stores, toy specialty stores and wholesalers. The Road Champs
products are also sold to smaller hobby shops and specialty retailers. The
Company's six largest customers are Toys "R" Us, Wal Mart, Kay-Bee Toys, Kmart,
Target and Caldor. For the year ended December 31, 1996, these customers, in the
aggregate, accounted for approximately 64.3% of the Company's sales and 51.4% of
the the Company's sales on a pro forma basis when combined with Road Champs.
Other than purchase orders, the Company does not have written agreements with
its customers but generally sells products pursuant to letters of credit or, in
certain cases, on open account with payment terms typically varying from 30 to
90 days. The termination by one or more of the customers named above of its
relationship with the Company could have a material adverse effect on the
Company's business, financial condition and results of operations. Although the
Company's policy is not to sell any of its products on consignment, in
accordance with industry practice, the Company may sell, on a case-by-case
negotiated basis, its products on a partial consignment basis. To date, there
have been no consignment sales.

The Company directly, or through sales representatives, obtains orders for
its products from its customers and arranges for the manufacture of its products
as discussed below. Cancellations are generally made in writing, and the Company
takes appropriate steps to notify its manufacturers of such cancellations. Based
upon the sales of the Road Champs products in the past, the Company expects
approximately half of the Road Champs products to be sold domestically through
the Company's warehouse in New Jersey, which maintains an inventory for sale.

The Company maintains a full-time sales and marketing staff, many of whom
make on-site visits to customers for the purpose of soliciting orders for
products, and retains a number of independent sales representatives, many of
which had previously been employed by Road Champs, to sell and promote its
products, both domestically and internationally.

The Company generally budgets approximately 3% of its gross revenues for
the advertising of its products, most of which is in conjunction with retailers
in the form of cooperative advertising. The Company, together with retailers,
sometimes tests the consumer acceptance of new products in selected markets
before committing resources to production. In addition, the Company also
advertises its products in trade and consumer magazines and other publications,
as well as marketing its products at major and regional toy trade shows. The
Company has recently engaged an advertising agency to begin producing television
commercials for its radio controlled vehicle line. If management concludes that
sales of a particular product would support the high cost, it may use television
commercials to advertise certain of its products.

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PRODUCT DEVELOPMENT

The Company's products are generally acquired by the Company from others or
developed for the Company by non-affiliated third-parties. If the Company
accepts and develops a third-party's concept for a new toy, it generally pays a
royalty on the toys developed from such concept that are sold, and may, on an
individual basis, guarantee a minimum royalty. Royalties payable to such
developers generally range from 1% to 5% of the wholesale sales price for each
unit of a product sold by the Company. The Company believes that utilizing
experienced third-party inventors gives it access to a wide range of development
talent. The Company currently works with several toy inventors and designers for
the development of new and existing products.

Safety testing of the Company's products is done at the manufacturers'
facilities by engineers employed by the Company or independent third-party
contractors engaged by the Company, and is designed to meet safety regulations
imposed by federal and state governmental authorities. The Company also monitors
quality assurance procedures for its products for safety purposes.

MANUFACTURING AND SUPPLIES

The Company's products are currently produced by manufacturers chosen by
the Company on the basis of quality, reliability and price. Consistent with
industry practice, the use of third-party manufacturers enables the Company to
avoid incurring fixed manufacturing costs. All manufacturing services performed
overseas for the Company are paid for by either letter of credit or open account
with such manufacturers. To date, the Company has not experienced any material
delays in the delivery of its products; however, delivery schedules are subject
to various factors beyond the control of the Company and any delays in the
future could adversely affect the Company's sales. The Company believes that
alternative sources of supply are available and that adequate supplies of
manufactured products can be obtained. See "Risk Factors -- Dependence upon Non-
Affiliated Foreign Manufactures."

Although it does not conduct the day-to-day manufacturing of its products,
the Company participates in the design of the prototype product and production
tooling and molds for the products it develops or acquires. The Company seeks to
insure quality control by actively reviewing the production process and testing
the products produced by its manufacturers.

The principal raw materials used in the production and sale of the
Company's toy products are plastics, plush, printed fabrics, zinc alloy, paper
products and electronic components, all of which are currently available at
reasonable prices from a variety of sources. Although the Company does not
manufacture its products, it owns the molds and tooling used to manufacture such
products. Such molds and tooling are transferable among manufacturers if the
Company chooses to employ alternative manufacturers.

TRADEMARKS AND COPYRIGHTS

Most of the Company's products are produced and sold under trademarks owned
by or licensed to the Company, many of which were acquired by the Company as
part of the Justin Acquisition and the Road Champs Acquisition. See
"Acquisitions." The Company typically registers its properties, and seeks
protection under the trademark, copyright and patent laws of the United States
and other countries where its products are produced or sold.

ACQUISITIONS

Road Champs Acquisition. In February 1997, the Company, through a
wholly-owned subsidiary, purchased all of the shares of Road Champs, Inc. ("RC
Inc."), a Pennsylvania corporation, which owns all of the shares of Road Champs
Ltd. ("RC Ltd."), a Hong Kong corporation, and the operating assets of Die Cast
Associates, Inc., a related Florida corporation (collectively, the "Road Champs
Companies"). As part of such acquisition, the Company purchased, among other
things, the Road Champs inventory, product lines, tools and molds and
trademarks. The net purchase price was approximately $12.0 million. Payments of
approximately $4.6 million in cash and $1.5 million through the issuance of
198,020 shares of Common Stock were made at the closing. Payment of
approximately $2.9 million was deferred and is payable in three installments

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31

in June and October 1997 and February 1998 with interest at the rate of 7% per
annum. Payment of approximately $2.0 million for the inventory will be made over
the six-month period following the closing. Payment of approximately $1.0
million is due on the earlier of the close of this Offering or May 6, 1997. All
outstanding payments are secured by a pledge of the shares of stock of RC Inc.
and RC Ltd. and a security interest in the Road Champs Companies' assets which
is subordinate to the security interest given by the Company to Renaissance
Capital Growth & Income Fund III, Inc. and Renaissance US Growth & Income Trust
PLC (collectively, "Renaissance") to secure payment of the Convertible
Debentures issued by the Company to Renaissance. See "Description of
Securities -- Renaissance Debentures."

Justin Acquisition. In October 1995, the Company acquired substantially all
of the operating assets constituting the toy business of Justin. As part of such
acquisition, the Company purchased, among other things, Justin's inventory,
product lines, tools and molds, and certain of Justin's trademarks. The Company
paid cash consideration of $1,210,435 to Justin, assumed certain of Justin's
liabilities to its creditors in the amount of $718,634, and issued 89,600 shares
of the Common Stock to Justin. The Company further agreed to pay to Justin
percentage payments amounting to 5% of net sales derived from the acquired
product lines through December 31, 1997 and 2.5% of net sales derived from such
products during 1998 and 1999, with minimum annual payments of $250,000 required
for 1995 and 1996. Such percentage payments based on sales in 1995 and 1996
amounted to $264,917 and slightly less than the $250,000 minimum required,
respectively. The Company prepaid $500,000 of such future royalty payments at
the Closing which are to be applied against 100% of percentage payments from
January 1 to June 30 of 1997, 1998 and 1999, and against 50% of percentage
payments for July 1 to December 31 of 1997, 1998 and 1999. The business
operations of Justin are accounted for as operations of the Company as of July
1, 1995, which is the date when the Company assumed operating control over
Justin's business operations.

COMPETITION

Competition in the toy industry is intense. Competition is based on
consumer preferences, quality and price. In recent years, the toy industry has
experienced rapid consolidation driven, in part, by the desire of industry
competitors to offer a range of products across a broader variety of categories.
Many of the Company's competitors have greater financial resources, stronger
name recognition, larger sales, marketing and product development departments
and greater economics of scale that may cause their products to be more
competitively priced. Competition extends to the procurement of character and
product licenses, as well as to the marketing and distribution of products,
including obtaining adequate shelf space in retail stores. See "Risk
Factors -- Competition."

In the toy industry categories in which the Company primarily competes, the
Company's largest competitors are as follows:

Male action figures and accessories... Hasbro, Inc., Playmates, Inc. and Mattel, Inc.
Mini vehicles......................... Tyco, Inc. ("Matchbox") and Mattel, Inc. ("Hot Wheels"),
both of which manufacture vehicles smaller in size than
the Company's Road Champs product line, and Racing
Champions, Inc. and Action Performance Cos., Inc., some
of whose products are the same in size as the Company's
Road Champs products.
Radio controlled vehicles............. Tyco, Inc. (a division of Mattel, Inc.), Kenner, Inc. (a
division of Hasbro, Inc.) and Nikko America, Inc.
Fashion/mini dolls.................... Mattel, Inc., the owner of "Barbie."

The Company also competes with smaller domestic and foreign toy
manufacturers, importers and marketers in each of these categories.

SEASONALITY AND BACKLOG

Sales of toy products are seasonal, with a majority of retail sales
occurring during the period from September through December. Approximately 73%
of the Company's sales in 1996 were made in the third

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and fourth quarters. Generally, the first quarter is the period of lowest
shipments and revenues in the toy industry and therefore the least profitable
due to certain fixed costs. Seasonality factors may cause the Company's
operating results to fluctuate significantly from quarter to quarter. Due to
these fluctuations, the results of operations for any quarterly period may vary
significantly. The Company's results of operations may also fluctuate as a
result of factors such as the timing of new products (and expenses incurred in
connection therewith) of the Company or its competitors, the advertising
activities of its competitors and the emergence of new market entrants. The
Company believes that most of the Company's products have low retail prices and,
as a result, such products may be less subject to seasonal fluctuations.

The Company generally ships products to customers within three to six
months of the date an order is received. The Company's backlog, exclusive of
Road Champs, at March 8, 1997, was approximately $5.3 million, compared to $2.5
million at March 31, 1996. Because customer orders may be canceled at any time
without penalty, the Company believes that backlog may not accurately indicate
sales for any future period.

GOVERNMENT AND INDUSTRY REGULATION

The Company's products are subject to the provisions of the Consumer
Product Safety Act ("CPSA"), the Federal Hazardous Substances Act ("FHSA"), the
Flammable Fabrics Act ("FFA") and the regulations promulgated under each such
Act. The CPSA and the FHSA enable the Consumer Product Safety Commission
("CPSC") to exclude from the market consumer products that fail to comply with
applicable product safety regulations or otherwise create a substantial risk of
injury and articles that contain excessive amounts of a banned hazardous
substance. The FFA enables the CPSC to regulate and enforce flammability
standards for fabrics used in consumer products. The CPSC may also require the
repurchase by the manufacturer of articles which are banned. Similar laws exist
in some states and cities and in various international markets. The Company
maintains a quality control program designed to ensure compliance in all
material respects with all applicable laws.

EMPLOYEES

As of April 10, 1997, the Company employed 55 persons, all of whom are
full-time employees, including three executive officers. Twenty-eight of the
Company's employees are located in the United States, while the remaining
twenty-seven are located in Hong Kong. The Company believes that it has good
relationships with its employees. None of the Company's employees are
represented by a union.

PROPERTIES

The Company leases approximately 1,800 square feet of space at 24955
Pacific Coast Highway, #B202, Malibu, California, all of which is currently used
for the Company's principal executive offices. The lease for such premises
expires on August 31, 1997. The current base rent is $4,730 per month. The
Company also leases, pursuant to a lease expiring on April 20, 2003,
approximately 2,100 square feet of showroom and office space at the Toy Center
South, 200 Fifth Avenue, New York, New York, at a current rental of $5,539 per
month. The Company leases two additional locations in the United States acquired
as a part of the Road Champs Acquisition. One such facility is approximately
2,000 square feet and is used as a showroom at the Toy Center North, 1107
Broadway, New York, New York, at a current rent of $4,959 per month. Such lease
expires on April 30, 2001. The other facility of approximately 51,000 square
feet of warehouse and office space, is at 7 Patton Drive, West Caldwell, New
Jersey, has a current monthly rent of $21,235 and expires on May 31, 2000 or
upon six-month prior notice by either party after July 1997.

The Company also leases two locations in Hong Kong. One such location, at
the Chinachen Golden Plaza, 77 Mody Road, Tsimshatsui East, Kowloon, Hong Kong,
consisting of approximately 1,210 square feet, is leased on a month to month
basis and is used as office space for the Company's sourcing operations. The
base rent for such facility is the U.S. dollar equivalent of $5,119 per month.
The Company acquired the lease for the second Hong Kong location in connection
with the Road Champs Acquisition. The property is located at the Peninsula
Center, 67 Mody Road, Tsimshatsui East, Kowloon, Hong Kong. The lease provides
for a

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monthly rent of the U.S. dollar equivalent of $10,200, consists of approximately
3,200 square feet and is used for office space and expires on March 14, 1998.
The Company will shortly combine all of its Hong Kong operations at the location
previously occupied by Road Champs. The Company expects to lease a modestly
larger space for its offices in California. With such increase, the Company
believes that its facilities in the United States and Hong Kong will be adequate
for its reasonably foreseeable future needs.

ENVIRONMENTAL ISSUES

The Company is subject to legal and financial obligations under
environmental, health and safety laws in the United States and in other
jurisdictions where the Company operates which have such laws. The Company is
not currently aware of any material environmental liabilities associated with
any of its operations. The Company does not believe that any environmental
obligations will have a material adverse impact on the financial condition of
the Company.

LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Company's directors and executive officers are as follows:

NAME AGE POSITION WITH THE COMPANY
---------------------- --- ----------------------------------------------------

Jack Friedman......... 57 Chairman, Chief Executive Officer and President
Stephen G. Berman..... 32 Chief Operating Officer, Executive Vice President,
Secretary and Director
Joel M. Bennett....... 35 Chief Financial Officer
Michael G. Miller..... 49 Director
Murray L. Skala....... 50 Director
Robert E. Glick....... 51 Director

Jack Friedman has been Chairman, Chief Executive Officer and President of
the Company since co-founding it in 1995. From January 1989 until January 1995,
Mr. Friedman was Chief Executive, President, Officer and a director of T-HQ,
Inc., a publicly-held company that develops and sells interactive games and
software. From 1970 to 1989, Mr. Friedman was President and Chief Operating
Officer of LJN Toys, Ltd. ("LJN"), a toy and software company. After LJN was
acquired by MCA/Universal, Inc. ("MCA") in 1986, Mr. Friedman continued as
President until MCA's sale of LJN in late 1989.

Stephen G. Berman has been Chief Operating Officer, Executive Vice
President, Secretary and a director of the Company since co-founding it in 1995.
From October 1991 to August 1995, Mr. Berman was a Vice President and Managing
Director of T-HQ International, Inc., a subsidiary of T-HQ, Inc. From 1988 to
1991, he was President and an owner of Balanced Approach, Inc., a distributor of
personal fitness products and services.

Joel M. Bennett joined the Company in September 1995 as Chief Financial
Officer. From August 1993 to September 1995, he served in several financial
management capacities at Time Warner Entertainment Company, L.P., including
Controller of Warner Brothers Consumer Products Worldwide Merchandising and
Interactive Entertainment. From June 1991 to August 1993, Mr. Bennett was Vice
President and Chief Financial Officer of TTI Technologies, Inc., a direct-mail
computer hardware and software distribution company. From 1986 to June 1991, Mr.
Bennett held various financial management positions at the Walt Disney Company,
including Senior Manager of Finance for the international television syndication
and production division.

Michael G. Miller has been a director of the Company since February 1996.
Since 1979, Mr. Miller has been President and a director of several
privately-held affiliated companies: JAMI Marketing, a list brokerage and list
management consulting firm, JAMI Data, a database management consulting firm,
and JAMI Direct, a direct mail graphic and creative design firm. He is also a
director of Quintel Entertainment, Inc., a publicly-held company in the
telephone entertainment services business.

Murray L. Skala has been a director of the Company since October 1995.
Since 1976, Mr. Skala has been a partner of the law firm Feder, Kaszovitz,
Isaacson, Weber, Skala & Bass LLP, counsel to the Company. Mr. Skala is also a
director of Quintel Entertainment, Inc. and Katz Digital Technologies, Inc., a
publicly-held company in the business of producing digital printing and prepress
services.

Robert E. Glick has been a director of the Company since October 1996. For
more than twenty years, Mr. Glick has been an officer, director and a principal
stockholder in a number of privately-held affiliated companies which manufacture
and market women's apparel.

All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors currently receive
no cash compensation for serving on the Board other than reimbursement of
reasonable expenses incurred in attending meetings. Directors who are not
employees of the Company are entitled to receive options to purchase shares of
Common Stock upon their election as a director and annually while they serve as
directors. See "Amended and Restated 1995 Stock Option Plan." Officers are
elected annually by the Board and serve at the discretion of the Board.

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Until the Convertible Debentures are fully redeemed or converted,
Renaissance has the right to designate one person for nomination by management
as a director of the Company or as an advisor to the Board. Upon certain events
of default under the loan agreement for the convertible debentures, Renaissance
has the right to designate an additional person as director of the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has an Audit Committee, a Compensation Committee and a Stock
Option Committee. The Board does not have a Nominating Committee and performs
the functions of a Nominating Committee itself.

Audit Committee. The functions of the Audit Committee are to recommend the
appointment of the Company's independent certified public accountants and to
review the scope and effect of such audits. Messrs. Miller, Glick and Skala are
the current members of the Audit Committee.

Compensation Committee. The functions of the Compensation Committee are to
make recommendations to the Board regarding compensation of management employees
and to administer plans and programs relating to employee benefits, incentives
and compensation, other than the Stock Option Plan. Messrs. Friedman, Miller and
Skala are the current members of the Compensation Committee.

Stock Option Committee. The function of the Stock Option Committee is to
determine the recipients of and the size of awards granted under the Company's
Stock Option Plan. Messrs. Miller and Glick are the current members of the Stock
Option Committee. Both Stock Option Committee members are non-employee
directors.

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Delaware law permits a corporation, through its Certificate of
Incorporation, to exonerate its directors from certain personal liability to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, other than (a) for any breach of the director's duty of
loyalty to the Company or its stockholders; (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (c) in connection with payment of any illegal dividend or an illegal stock
repurchase or redemption; or (d) for any transaction from which the director
derived an improper personal benefit. This provision does not apply to equitable
remedies such as injunctive relief. The Company's Certificate of Incorporation
includes a provision exonerating its directors to the fullest extent permitted
by Delaware law.

The Company's Certificate of Incorporation authorizes the Company to
indemnify its directors for certain breaches of fiduciary duty to the Company
and its stockholders, and other liabilities, subject to certain limitations.
Such indemnification does not apply to acts or omissions which are knowingly
fraudulent, deliberately dishonest or arise out of willful misconduct.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company,
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

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EXECUTIVE COMPENSATION

The following table sets forth the compensation paid by the Company for the
Company's fiscal years ending December 31, 1995 and 1996 to its Chief Executive
Officer and to each of its executive officers whose compensation exceeded
$100,000 on an annual basis (collectively, the "Named Officers").

SUMMARY COMPENSATION TABLE

LONG-TERM AWARDS COMPENSATION
ANNUAL COMPENSATION -------------------- PAYOUTS
---------------------------------- ----------------------
(E) (F) (I)
OTHER RESTRICTED (H) ALL
(A) (C) (D) ANNUAL STOCK (G) PLAN OTHER
NAME AND (B) SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- --------------------------------- ---- ------- --------- ------------ ---------- ------- ------- ------------

Jack Friedman.................... 1996 226,000 53,722(3) -- -- -- -- --
Chairman, 1995(1) 67,000 -- -- -- -- -- --
Chief Executive Officer and
President
Stephen G. Berman................ 1996 201,000 53,722(3) -- -- -- -- --
Chief Operating Officer, 1995(2) 41,667 -- -- -- -- -- --
Executive Vice President
and Secretary

- ---------------

(1) Mr. Friedman's employment with the Company commenced on September 1, 1995.
See "Employment Agreements."

(2) Mr. Berman's employment with the Company commenced on September 1, 1995. See
"Employment Agreements."

(3) Bonuses were earned in 1996 but were paid during 1997.

The Company did not have any long-term incentive plans in 1995. Neither of
the Named Officers were granted options under the Company's Stock Option Plan in
1996 or 1995.

EMPLOYMENT AGREEMENTS

The Company has entered into an employment agreement with Mr. Friedman
expiring on December 31, 2001. Pursuant to this agreement, Mr. Friedman is
employed as Chief Executive Officer and President. The employment agreement
provides for employment on a full-time basis and contains a provision that Mr.
Friedman will not compete or engage in a business competitive with the current
or anticipated business of the Company during the term of the agreement and for
a period of one year thereafter, if his employment is terminated prior to
December 31, 1997 voluntarily or by the Company for cause, as such term is
defined in the employment agreement. Pursuant to such agreement, the Company
agreed to pay Mr. Friedman a base salary of $296,000 per annum until December
31, 1997, with increases of $25,000 per annum thereafter and an annual bonus
equal to 4% of the Company's pre-tax earnings.

The Company has entered into an employment agreement with Mr. Berman
expiring on December 31, 2001. Pursuant to this agreement, Mr. Berman is
employed as Chief Operating Officer, Executive Vice President, and Secretary.
The employment agreement provides for employment on a full-time basis and
contains a provision that Mr. Berman will not compete or engage in a business
competitive with the current or anticipated business of the Company during the
term of the agreement and for a period of one year thereafter, if his employment
is terminated prior to December 31, 1997 voluntarily or by the Company for
cause, as such term is defined in the employment agreement. Pursuant to such
agreement, the Company agreed to pay Mr. Berman a base salary of $271,000 per
annum until December 31, 1997, with increases of $25,000 per annum thereafter
and an annual bonus equal to 4% of the Company's pre-tax earnings.

The Company has obtained a key-man life insurance policy in the amount of
$2,000,000 on Mr. Friedman's life.

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AMENDED AND RESTATED 1995 STOCK OPTION PLAN

The Company's Amended and Restated 1995 Stock Option Plan (the "Stock
Option Plan") was adopted and approved by the stockholders in December 1995 and
amended by the Board in November 1996. The Stock Option Plan provides for the
grant of options to purchase up to 216,998 shares of the Company's Common Stock.
Such options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the U. S.
Internal Revenue Code or as options that are not intended to meet the
requirements of such section ("Nonstatutory Stock Options"). Under the Stock
Option Plan, Incentive Stock Options may be granted to employees (including
officers) of the Company, and Nonstatutory Stock Options may be granted to
employees (including officers), non-employee directors, consultants or advisors
of the Company.

The Stock Option Plan may be administered by the Board or a committee
chosen by the Board of non-employee directors. The administering body has
discretionary authority to select the persons to whom, the number of shares for
which, the times at which and the exercise price for which options will be
granted.

Stock options granted to an employee expire immediately upon the
termination of employment voluntarily by such employee or for cause by the
Company. Employee stock options may be exercised up to one year after the
termination of employment due to death or disability. Employee stock options may
be exercised up to three months after termination for any other reason. Stock
options granted to a non-employee director expire upon the termination of the
director's services for cause. Non-employee director stock options may be
exercised up to one year after such person is no longer serving as a director
for any other reason.

Incentive Stock Options must have an exercise price greater than or equal
to the fair market value of the shares underlying the option on the date of
grant. Incentive Stock Options granted to the holder of 10% or more of the
Company's Common Stock must have an exercise price of 110% of the underlying
shares' fair market value on the date of grant. The maximum exercise period of
Incentive Stock Options is ten years from the date of grant (five years in the
case of an individual owning more than 10% of the Company's Common Stock). The
aggregate fair market value (determined at the date the option is granted) of
shares with respect to which Incentive Stock Options are exercisable for the
first time by the holder of the option during any calendar year shall not exceed
$100,000. If such amount exceeds $100,000, the Board or the Stock Option
Committee may designate those shares that will be treated as Nonstatutory Stock
Options.

The Stock Option Plan provides for certain grants to non-employee
directors. Non-employee directors serving on the Board when the Stock Option
Plan was adopted each received options to purchase an aggregate of 10,850 shares
of Common Stock at the fair market value of the Common Stock on such date. Newly
appointed non-employee directors receive an option to purchase 10,850 shares at
their then-current fair market value on the date of the appointment. In
addition, every January 1st, each non-employee director receives an option to
purchase 5,425 shares at their then current fair market value.

As of the date of this Prospectus, the Company has granted options to
purchase an aggregate of 191,750 shares of Common Stock under the plan to its
employees and non-employee directors. Pursuant to the terms of the underwriting
agreement with the representatives of the underwriters for the Initial Public
Offering, the option holders at the time of the Initial Public Offering agreed
not to sell or otherwise dispose of shares underlying options until May 1, 1997
without the prior written consent of such representatives. After May 1, 1997,
the Company intends to file a registration statement covering shares issuable
upon exercise of stock options granted under the Stock Option Plan.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information as of the date of this
Prospectus regarding beneficial ownership of the Company's Common Stock, based
upon information obtained from the persons named below, by (i) each person who
is known by the Company to own beneficially more than 5% of the outstanding
shares of its Common Stock, (ii) each of the Company's directors, (iii) each of
the Named Officers, (iv) all executive officers and directors of the Company as
a group and (v) each of the Selling Stockholders.

SHARES SHARES SHARES
BENEFICIALLY OWNED BEING OFFERED BENEFICIALLY OWNED
PRIOR TO OFFERING ------------- AFTER OFFERING
NAME AND ADDRESS ----------------------- ---------------------
OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ----------------------------------- --------- ------- --------- -------

Jack Friedman 1,410,488(1) 33.7% 40,000(2) 1,370,488(3) 23.3%
24955 Pacific Coast Highway,
#B202, Malibu, California 90265
Stephen Berman(4) 216,998 5.2 39,200 177,798 3.0
24955 Pacific Coast Highway,
#B202, Malibu, California 90265
Michael G. Miller 16,275(5) * -- 16,275(5) *
One Blue Hill Plaza
Pearl River, NY 10965
Murray L. Skala 238,696(1)(6) 5.7 45,800(2) 192,896(3) 3.3
750 Lexington Avenue
New York, NY 10022
Robert E. Glick 23,275(7) * -- 23,275(7) *
1400 Broadway
New York, NY 10018
Natacha Friedman 81,374 1.9 15,000 66,374 1.1
19246 E. Country Club Drive
Aventura, FL 33180
Trust for Brooke Friedman 81,374 1.9 15,000 66,374 1.1
750 Lexington Avenue
New York, NY 10022
Trust for Tony Friedman 81,374 1.9 15,000 66,374 1.1
750 Lexington Avenue
New York, NY 10022
Education Trust for 27,124 * 10,000 17,124 *
Tony Friedman
750 Lexington Avenue
New York, NY 10022
Renaissance Capital Growth 923,077(8) 18.1 -- 923,077(8) 14.2
& Income Fund III, Inc.
and Renaissance US Growth &
Income Trust PLC
8080 N. Central Expressway,
Suite 310/LB59
Dallas, Texas 75206
All Officers and Directors as a
Group (six persons) 1,734,485 40.8% 85,000 1,649,485 27.7%
(1)(2)(3)(4)(5)(6)(7)(9)

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- ---------------

* Less than 1% of the Company's outstanding shares.

(1) Includes an aggregate of 189,872 shares held by Mr. Skala as trustee under
trusts for the benefit of the children of Mr. Friedman, the Company's
Chairman, Chief Executive Officer and President.

(2) Includes 40,000 shares held by and being sold by Mr. Skala as trustee under
trusts for the benefit of the children of Mr. Friedman.

(3) Includes 149,872 shares which will be held after the Offering by Mr. Skala
as trustee under trusts for the benefit of the children of Mr. Friedman.

(4) Mr. Berman is the Company's Chief Operating Officer, Executive Vice
President, Secretary and a director.

(5) Represents 16,275 shares which Mr. Miller, a director of the Company, has
the right to acquire pursuant to outstanding stock options.

(6) Includes 27,124 shares owned by Mr. Skala, a director of the Company, 21,700
shares which Mr. Skala has the right to acquire pursuant to outstanding
stock options and an aggregate of 189,872 shares held by Mr. Skala as
trustee under trusts for the benefit of the children of Mr. Friedman.

(7) Includes 16,275 shares which Mr. Glick, a director of the Company, has the
right to acquire pursuant to outstanding stock options.

(8) Consists of 923,077 shares in the aggregate which these two entities have
the right to acquire upon the conversion of an aggregate of $6,000,000 of
convertible debentures owned by them. Each of these entities owns $3,000,000
of such convertible debentures. The Company believes that these two entities
are under common control by a third-party.

(9) Includes 2,000 shares beneficially owned by Joel M. Bennett, the Company's
Chief Financial Officer, and 16,625 shares which Mr. Bennett has the right
to acquire pursuant to outstanding stock options.

Messrs. Friedman and Berman may be deemed "founders" of the Company, as
such term is defined under the federal securities laws.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has made two loans to Joel M. Bennett, the Company's Chief
Financial Officer, in the amounts of $25,000 and $40,000, respectively. The
$25,000 loan bears interest at the rate of 6.15% and is payable at the earlier
of August 27, 1997 or the termination of Mr. Bennett's employment with the
Company. The $40,000 loan bears interest at the rate of 6.02% and is payable at
the earlier of September 20, 1997 or the termination of Mr. Bennett's
employment.

Mr. Skala, a director of the Company, is a partner in the law firm of
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, counsel to the Company. The
Company paid legal fees to Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP
in the amount of approximately $270,000 in 1996 and $75,000 in 1995.

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DESCRIPTION OF SECURITIES

GENERAL

The Company is authorized to issue 25,000,000 shares of Common Stock, par
value $.001 per share, and 5,000 shares of Preferred Stock, par value $.001 per
share. As of the date of this Prospectus, 4,182,969 shares of Common Stock are
outstanding which the Company believes are beneficially owned by approximately
1,400 persons. After an additional 1,700,000 shares of Common Stock are issued
by the Company in this Offering, 5,882,969 shares will be outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, including the election of directors.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election if they choose to do so. The Certificate of Incorporation does not
provide for cumulative voting of directors. Holders of Common Stock will be
entitled to receive dividends ratably, if any, as may be declared from time to
time by the Board out of funds legally available therefor. Holders of Common
Stock will be entitled to receive, pro rata, all assets of the Company available
for distribution to them upon liquidation. In addition, holders of Common Stock
have no preemptive, subscription or redemption rights. All outstanding shares of
Common Stock are, and the Common Stock offered hereby, upon issuance and sale,
will be, fully paid and nonassessable.

PREFERRED STOCK

The Certificate of Incorporation provides that the Company is authorized to
issue "blank check" preferred stock, which may be issued from time to time in
one or more series upon authorization by the Board. The Board, without further
approval of the stockholders, is authorized to fix any dividend rights,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences and any other rights, preferences, privileges and restrictions
applicable to each series of preferred stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of the Common Stock. Under certain circumstances, the issuance of
preferred stock could also make it more difficult for a third party to gain
control of the Company, discourage bids for the Company's Common Stock at a
premium or otherwise adversely affect the market price of the Common Stock. To
date, the Company has not issued any preferred stock.

RENAISSANCE DEBENTURES

In January 1997, the Company issued $6,000,000 of its 9% seven-year
convertible debentures to Renaissance. After payment of a 6% brokerage
commission to Joseph Charles & Associates, Inc. and fees to Renaissance and its
attorneys, net proceeds to the Company were $5,450,000. The debentures are
presently convertible into 923,077 shares of Common Stock. When any shares of
Common Stock are issued by the Company for consideration per share less than the
then existing conversion price of the Convertible Debentures, then in each such
case the conversion price shall be reduced to a new conversion price equal to
the consideration per share received by the Company for such additional shares
of Common Stock; provided however, that prior to such issuance, the Company may
request the holders to waive the right to an adjustment of the conversion price
and in the event such waiver is not granted by the holders, the Company shall
have the right, prior to the issuance of such additional shares, to redeem the
Convertible Debenture at 120% of face value. The number of shares of Common
Stock into which the debentures are convertible are also subject to adjustment
for certain changes in capital structure and other events.

The indebtedness must be repaid in part each month beginning December 1999,
in the amount of 1% of the then unpaid balance, and in full at December 31,
2003. Pursuant to the terms of the Convertible Debentures, holders of such
debentures also have the option to have the Company redeem part or all of such
outstanding debentures in the event of Mr. Friedman's death. The Company is in
the process of securing additional key man life insurance in the amount of
$6,000,000. The indebtedness to Renaissance is secured by

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all of the Company's assets. The Company has the right to prepay all or part of
such indebtedness in certain events at 120% of their original $6,000,000 face
value.

Renaissance has certain demand and piggy-back registration rights for the
shares into which its debentures are convertible that may require the Company to
register for public resale the shares of Common Stock issuable thereunder.
Renaissance also has the right to designate one person for nomination by
management as a director of the Company or as an advisor to the Board. Upon
certain events of default under the loan agreement for the convertible
debentures, Renaissance has the right to designate an additional person as
director of the Company.

WARRANTS AND OPTIONS

In connection with the Initial Public Offering, the Company issued to the
representatives of the underwriters warrants (the "IPO Warrants") to purchase an
aggregate of 150,000 shares of Common Stock at an exercise price of $9.375 per
share. Such warrants expire on May 1, 2001. Holders of such warrants possess
certain demand and incidental registration rights that may require the Company
to register for public resale the shares of Common Stock issuable thereunder.

For its assistance with the Renaissance financing, the Company issued to
Joseph Charles & Associates, Inc. a warrant (the "Renaissance Warrants") to
purchase an aggregate of 150,000 shares of Common Stock at an exercise price of
$8.00 per share. Such warrant expires on January 8, 2002. Holders of such
warrants possess certain demand and incidental registration rights that may
require the Company to register for public resale the shares of Common Stock
issuable thereunder.

The Company has agreed to sell to the Representative or its designees, for
nominal consideration, the Representative's Warrants to purchase up to 119,000
shares of Common Stock at an exercise price equal to 130% of the public offering
price. The Representative or its designees possess certain demand and incidental
registration rights that may require the Company to register for public resale
the shares of Common Stock issuable thereunder. The Representative's Warrants
are exercisable for a period of four years beginning one year from the date of
this Prospectus. See "Underwriting."

Pursuant to the Stock Option Plan, the Company has granted options to
certain of its employees for the purchase of an aggregate of 137,500 shares of
Common Stock, at prices ranging from $6.75 to $8.25 per share, and options to
its non-employee directors to purchase an aggregate of 54,250 shares of Common
Stock, at prices ranging from $4.50 to $8.25 per share. Options granted under
the Stock Option Plan are exercisable for periods of up to ten years and may
contain such other terms as the administering body may determine. The Company
also granted options to certain employees for the purchase of an aggregate of
276,500 shares of Common Stock, at $2.00 per share, prior to the adoption of the
Stock Option Plan, as well as options to purchase 75,000 shares of Common Stock
to a consultant outside of the Stock Option Plan, at prices ranging from $7.50
to $7.625.

REGISTRATION RIGHTS

In connection with the Road Champs Acquisition, the Company issued 198,020
shares of Common Stock to the stockholders of Road Champs, Inc. Such
stockholders are entitled to certain registration rights which provide that the
Company must use its best efforts to file a registration statement under the
Securities Act prior to February 6, 1998 for the public resale of such shares of
Common Stock and use its best efforts to cause such registration statement to
become effective.

Holders of the Convertible Debentures are entitled to certain registration
rights with respect to the shares of Common Stock issuable upon conversion of
the Convertible Debentures. At any time after six months from the date of this
Prospectus, such holders have the right to have such shares registered, but the
costs of such registration shall be at such holder's cost. Beginning in January
1999, such holders may demand registration of such shares on two occasions at
the Company's expense, but not more often than once a year.

Holders of the IPO Warrants are entitled to certain registration rights
with respect to the shares of Common Stock issuable under the IPO Warrants. At
any time after May 1, 1997, holders of the IPO

40
43

Warrants may request that the Company file a registration statement under the
Securities Act for the public resale of the Common Stock issuable upon exercise
of the IPO Warrants. Upon such request and, subject to certain conditions, the
Company will be required to prepare and file any such registration statement and
to use its best efforts to cause such registration statement to become
effective. The holders of the IPO Warrants have the right to demand registration
as described above on at least two separate occasions.

The Holders of the Renaissance Warrants also possess demand registration
rights with respect to the shares of Common Stock issuable pursuant thereto.

The Holders of the Representative's Warrants possess demand registration
rights with respect to the shares of Common Stock issuable pursuant to the
Representative's Warrants. Such rights are exercisable at any time after one
year from the date of this Prospectus. These rights may be exercised on one
occasion.

In the event the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of others, the
holders of the Convertible Debentures, the IPO Warrants, the Renaissance
Warrants and the Representative's Warrants are entitled to notice of such
registration and to include the shares of Common Stock underlying such
debentures and warrants therein. The Company is generally obligated to bear the
expenses, other than underwriting discounts and sales commissions, of the above
described registrations.

TRANSFER AGENT

The transfer agent for the Common Stock is U.S. Stock Transfer Corporation,
Glendale, California 91204.

41
44

SHARES ELIGIBLE FOR FUTURE SALE

Upon the consummation of this Offering, the Company will have 5,882,969
shares of Common Stock outstanding. Of such shares, 3,857,454 shares (including
the 1,800,000 shares of Common Stock offered hereby) will be freely tradeable
without restriction or further registration under the Securities Act, except
shares purchased by an affiliate of the Company. Another 2,025,515 shares of
Common Stock are "restricted securities," as the term is defined under Rule 144.
Such shares were acquired by their owners prior to this Offering in transactions
not involving a public offering. Such shares may only be sold pursuant to a
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144, or pursuant to another exemption under the
Securities Act.

The executive officers, directors, certain other shareholders of the
Company and their affiliates have agreed, pursuant to lock-up agreements with
the Representative, that they will not for a period of 180 days from the date of
this Prospectus, without the prior written consent of the Representative, sell
or otherwise dispose of an aggregate of approximately 1,635,984 restricted
shares of Common Stock. The Representative may, in its sole discretion and at
any time without notice, release all or any portion of the securities subject to
any of such lock-up agreements. In addition, certain other shareholders of the
Company have agreed, pursuant to a lock-up agreement with the Company, that they
will not sell or otherwise dispose of an aggregate of 198,020 restricted shares
of Common Stock prior to February 1998. Upon the expiration of these lock-up
agreements, an aggregate of 1,834,004 of such shares of Common Stock will become
eligible for sale in the public market, subject to the provisions of Rule 144
under the Securities Act.

In general, under Rule 144 under the Securities Act, as currently in
effect, a person (or persons whose shares are aggregated) who has beneficially
owned restricted shares (as that term is defined in Rule 144) for at least two
years, including any person who may be deemed to be an affiliate of the Company,
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of then-outstanding shares of
Common Stock (approximately 58,829 shares immediately after this Offering) or
the average weekly trading volume in the Common Stock as reported by Nasdaq
during the four calendar weeks preceding such sale. Sales pursuant to Rule 144
also are subject to certain other requirements relating to the manner and notice
of sale and availability of current public information about the Company.
Affiliates may publicly sell shares not constituting restricted securities under
Rule 144 in accordance with the foregoing volume limitations and other
restrictions, but without regard to the two-year holding period. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days immediately preceding a sale by such person, and who
has beneficially owned restricted shares for at least three years, is entitled
to sell such shares under Rule 144 without regard to the volume limitations and
other conditions described above.

The SEC has adopted amendments, effective April 29, 1997, reducing the
required two-year holding period under Rule 144 to one year and reducing the
required three-year holding period under Rule 144(k) to two years. The
amendments may be relied upon by holders of restricted securities on or after
April 29, 1997 and will allow such holders to sell restricted securities in the
open market significantly earlier than currently permitted. Approximately
1,827,495 restricted shares of Common Stock of the Company have been held for
over one year.

An additional 962,250 shares of Common Stock that are issuable upon
exercise of outstanding warrants and options will, under Rule 144, be eligible
for sale into the public securities markets one year after the warrant or option
is exercised and 923,077 shares of Common Stock that are issuable upon
conversion of the Convertible Debentures will be eligible for sale into the
public securities market after January 8, 1998, subject to the volume, manner
and notice of sale and other conditions of Rule 144 described above.

The Company has granted certain piggy-back and demand registration rights
with respect to 198,020 restricted shares outstanding, 419,000 restricted shares
issuable upon the exercise of outstanding warrants and 923,077 restricted shares
issuable upon the conversion of outstanding debentures. See "Description of
Securities -- Registration Rights."

The Company makes no prediction as to the effect, if any, that future sales
of shares or the availability of shares for future sale will have on the
prevailing market price of the Common Stock. Sales of substantial amounts of the
Common Stock in the public market or the perception that such sales could occur
could have an adverse effect on the prevailing market price of the Common Stock.

42
45

UNDERWRITING

The Underwriters named below, for whom Cruttenden Roth Incorporated is
acting as the representative (the "Representative"), have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Selling Stockholders the number of shares of Common
Stock set forth opposite their respective names below. The nature of the
obligations of the Underwriters is such that if any of such shares are
purchased, all must be purchased.

NUMBER OF SHARES
UNDERWRITERS TO BE PURCHASED
------------------------------------------------------------- ----------------

Cruttenden Roth Incorporated................................. 1,800,000

Total.............................................. 1,800,000
=========

The Underwriters initially propose to offer the shares of Common Stock
offered hereby to the public at the price set forth on the cover page of this
Prospectus. The Underwriters may allow a concession to selected dealers who are
members of the National Association of Securities Dealers, Inc. (the "NASD") not
in excess of $ per share, and the Underwriters may allow, and such
dealers may reallow, to members of the NASD a concession not in excess of
$ per share.

Two of the Selling Stockholders have granted an option to the Underwriters,
exercisable within 45 days after the date of this Prospectus, to purchase up to
an additional 270,000 shares of Common Stock, less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriters may exercise the
option only for the purpose of covering over-allotments. If such over-allotment
option is exercised by the Underwriters in full, 250,000 of the over-allotment
shares will be sold by Mr. Friedman and 20,000 by Mr. Berman. To the extent the
Underwriters exercise such option, each Underwriter will be committed, subject
to certain conditions, to purchase that number of additional shares of Common
Stock which is proportionate to such Underwriter's initial commitment. If the
over-allotment option is exercised by the Underwriters only in part, Mr.
Friedman and Mr. Berman will sell the lesser number of the over-allotment shares
in the same proportions. To the extent that the Underwriters exercise such
option, each Underwriter will be committed, subject to certain conditions, to
purchase that number of additional shares of Common Stock which is proportionate
to such Underwriter's initial commitment.

The Company has agreed to sell to the Representative or its designee, for
nominal consideration, the Representative's Warrants to purchase up to 119,000
shares of Common Stock at an exercise price per share equal to 130% of the Price
to Public set forth on the cover page of this Prospectus. The Representative's
Warrants are exercisable for a period of four years beginning one year from the
date of this Prospectus and are not transferable for a period of one year from
the date of this Prospectus except to officers of the Representative or any
successor thereto. The Representative's Warrants include a net exercise
provision permitting the holder(s) to pay the exercise price by cancellation of
the exercisability of a number of shares with a fair market value, after
deducting the exercise price therefore, equal to the aggregate exercise price of
the Representative's Warrants then being exercised. In addition, the Company has
granted certain rights to the holders of the Representative's Warrants to
register the Representative's Warrants and the Common Stock underlying the
Representative's Warrants under the Securities Act.

As underwriting compensation in connection with the Offering, the Company
will pay the Underwriters' legal fees and expenses, estimated to be $200,000. In
addition, the Company will reimburse the underwriters for certain expenses
incurred in connection with the underwriters' "road show."

43
46

Except in connection with acquisitions, strategic commercial transactions
or pursuant to the exercise of options to purchase up to 216,998 shares of
Common Stock that have been and may be granted under the Company's Stock Option
Plan at an exercise price at least equal to fair market value of the shares of
Common Stock, the Company has agreed, for a period of six months from the
closing of this Offering, that it will not issue or sell any shares of Common
Stock or other equity securities of the Company or purchase any shares of the
Common Stock of the Company without the prior written consent of the
Representative. In addition, the officers, directors and certain stockholders of
the Company have agreed that they will not sell any additional shares of Common
Stock of the Company owned by them, except for their shares offered in this
Offering and the 7,000 registered shares owned by Mr. Glick, for a period of 180
days from the consummation of this Offering without the prior written consent of
the Representative, provided that intra-family transfers or transfers to family
trusts shall not be thus restricted.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments which the Underwriters may be required to make in respect thereof.

In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with the Securities Exchange Act of 1934 pursuant to which such persons may bid
for or purchase Common Stock for the purpose of stabilizing its market price.
The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such shares of Common
Stock or may exercise the Underwriter's over-allotment option referred to above.
In addition, the Representative, on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the Offering), for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph are required, and,
if they are undertaken, they may be discontinued at any time.

The Representative has advised the Company that the Underwriters do not
expect to confirm any sales by the Underwriters to accounts over which they
exercise discretionary authority.

LEGAL MATTERS

The legality of the Common Stock offered hereby has been passed upon for
the Company and the Selling Stockholders by Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass, LLP, New York, New York. Murray L. Skala, a director of the
Company, the owner of 27,124 shares of Common Stock and one of the Selling
Stockholders, is a partner of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass,
LLP. Gibson, Dunn & Crutcher LLP, Los Angeles, California, has passed upon legal
matters for the Representative in connection with this Offering.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1996 and 1995 and for the year ended December 31, 1996 and the period from April
1, 1995 (inception) to December 31, 1995 included in this Prospectus have been
audited by Pannell Kerr Forster, Certified Public Accountants, A Professional
Corporation, Los Angeles, California, independent auditors, as stated in their
report appearing herein and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing. The
combined financial statements of Road Champs, Inc. and Subsidiary and Die Cast
Associates, Inc. as of December 31, 1996 and 1995 and for the years then ended
included in this Prospectus have been audited by Pannell Kerr Forster PC, New
York, New York, independent auditors, as stated in their report appearing herein
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

44
47

ADDITIONAL INFORMATION

Since May 1, 1996, the Company has been subject to the reporting
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company has and will continue to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company may be inspected and copied
at the public reference facilities of the Commission in Washington, D.C. Copies
of such materials can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. In addition, the
Commission maintains a web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The Company's Common Stock is
listed on the Nasdaq SmallCap Market and reports and information concerning the
Company can be also inspected through such exchange. The Company intends to
furnish its stockholders with annual reports containing audited financial
statements and such other periodic reports as the Company deems appropriate or
as may be required by law.

The Company will provide without charge to each person who receives the
Prospectus, upon written or oral request of such person, a copy of any of the
information that is incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such requests
should be directed by mail to Joel M. Bennett, Chief Financial Officer, JAKKS
Pacific, Inc., 24955 Pacific Coast Highway, Suite #B202, Malibu, California
90265 or by telephone at (310) 456-7799.

The Company has filed with the Commission a Registration Statement on Form
SB-2 and all schedules and exhibits thereto under the Securities Act with
respect to the Common Stock offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
Offering, reference is made to such Registration Statement, including the
exhibits filed therewith, which may be inspected without charge at the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the Registration Statement may be obtained from the Commission at its
principal office upon payment of prescribed fees. Statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, where the content or other document has been filed as
an exhibit to the Registration Statement, each such statement is qualified in
all respects by reference to the applicable document filed with the Commission.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical fact, including those with
respect to the Company's objectives, plans and strategy set forth under
"Prospectus Summary" and "Business -- Business Strategy" and those preceded by
or that include the words "believes," "expects," "anticipates," "intends,"
"plans," "is scheduled to" or similar expressions, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
those expectations will prove to be correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed in this Prospectus in conjunction with the
forward-looking statements and under "Risk Factors." All written and oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by those Cautionary Statements.

45
48

INDEX TO FINANCIAL STATEMENTS

PAGE
----

JAKKS Pacific, Inc. and Subsidiaries
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets......................................................... F-3
Consolidated Statements of Operations............................................... F-4
Consolidated Statements of Stockholders' Equity..................................... F-5
Consolidated Statements of Cash Flows............................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7

Road Champs, Inc. and Subsidiary and Die Cast Associates, Inc.
Independent Auditors' Report........................................................ F-17
Combined Balance Sheets............................................................. F-18
Combined Statements of Operations................................................... F-19
Combined Statements of Stockholders' Equity......................................... F-20
Combined Statements of Cash Flows................................................... F-21
Notes to Combined Financial Statements.............................................. F-22

F-1
49

INDEPENDENT AUDITORS' REPORT

The Stockholders
JAKKS Pacific, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of JAKKS
Pacific, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year and nine months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of JAKKS
Pacific, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and cash flows for the year and nine months then ended, in
conformity with generally accepted accounting principles.

PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation

Los Angeles, California
January 23, 1997, except for note 15, for which
the date is February 6, 1997

F-2
50

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

DECEMBER 31,
--------------------------
1996 1995
----------- ----------

Current assets:
Cash............................................................. $ 6,355,260 $ 81,752
Accounts receivable.............................................. 2,420,470 575,489
Inventory........................................................ 140,105 86,128
Deferred product development costs............................... 515,870 89,171
Prepaid expenses and other....................................... 450,107 129,735
Advanced royalty payments........................................ 276,000 50,000
Advances to officers............................................. 120,030 --
----------- ----------
Total current assets..................................... 10,277,842 1,012,275
Property and equipment
Office furniture and equipment................................... 121,305 92,156
Molds and tooling................................................ 1,350,949 325,577
Leasehold improvements........................................... 4,808 675
----------- ----------
Total.................................................... 1,477,062 418,408
Less accumulated depreciation and amortization................... 277,265 55,448
----------- ----------
Net property and equipment............................... 1,199,797 362,960
Deferred offering and acquisition costs............................ 85,301 74,915
Intangibles and deposits, net...................................... 91,776 51,977
Deferred income taxes.............................................. 7,531 --
Goodwill, net...................................................... 2,537,697 2,626,014
----------- ----------
Total assets....................................................... $14,199,944 $4,128,141
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 1,610,987 $ 711,058
Accrued expenses................................................. 205,087 178,038
Reserve for returns and allowances............................... 175,000 460,513
Current portion of acquisition debt.............................. 190,008 202,485
Income taxes payable............................................. 272,605 80,983
----------- ----------
Total current liabilities................................ 2,453,687 1,633,077
Long-term portion of acquisition debt.............................. -- 229,889
Notes payable to officer........................................... -- 382,816
Deferred income taxes.............................................. -- 32,655
----------- ----------
Total liabilities............................................. 2,453,687 2,278,437
----------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value; 5,000 shares authorized, no
shares issued................................................. -- --
Common stock, $.001 par value; 25,000,000 shares authorized,
issued and outstanding 3,984,949 and 2,000,000 shares,
respectively.................................................. 3,985 2,000
Additional paid-in capital....................................... 10,321,295 1,624,238
Retained earnings................................................ 1,616,140 436,371
----------- ----------
11,941,420 2,062,609
Unearned compensation from grant of options...................... 195,163 212,905
----------- ----------
Net stockholders' equity................................. 11,746,257 1,849,704
----------- ----------
Total liabilities and stockholders' equity......................... $14,199,944 $4,128,141
=========== ==========

See notes to consolidated financial statements.

F-3
51

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

APRIL 1,
1995
(INCEPTION)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------

Net sales.......................................................... $12,052,016 $6,077,763
Cost of sales...................................................... 7,231,296 4,130,997
----------- ----------
Gross profit....................................................... 4,820,720 1,946,766
Selling, general and administrative expenses....................... 3,611,471 1,400,368
----------- ----------
Income from operations............................................. 1,209,249 546,398
Interest expense................................................... 63,171 8,971
Other income....................................................... 196,966 13,382
----------- ----------
Income before provision for income taxes........................... 1,343,044 550,809
Provision for income taxes......................................... 163,275 114,438
----------- ----------
Net income......................................................... $ 1,179,769 $ 436,371
----------- ----------
Net income per share............................................... $ .34 $ .20
----------- ----------
Weighted average common shares outstanding
and common equivalent shares..................................... 3,503,767 2,191,423
=========== ==========

See notes to consolidated financial statements.

F-4
52

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1996 AND APRIL 1, 1995 (INCEPTION) TO DECEMBER 31, 1995

UNEARNED
COMPENSATION
PAR FROM
COMMON VALUE ADDITIONAL GRANT TOTAL
SHARES PER STOCK PAID-IN RETAINED OF STOCKHOLDERS'
OUTSTANDING SHARE AMOUNT CAPITAL EARNINGS OPTIONS EQUITY
--------- ----- ------ ----------- ---------- --------- -----------

Balance, April 1, 1995
(Inception)......... -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock for cash...... 1,896,925 .001 1,897 843,103 -- -- 845,000
Issuance of common
stock in partial
consideration for
purchase of toy
business assets..... 75,951 .001 76 559,924 -- -- 560,000
Issuance of common
stock for
services............ 27,124 .001 27 8,306 -- -- 8,333
Grant of compensatory
stock options....... -- -- -- 212,905 -- (212,905) --
Net income............ -- -- -- -- 436,371 -- 436,371
--------- ----- ------ ---------- --------- --------- -----------
Balance, December 31,
1995................ 2,000,000 .001 2,000 1,624,238 436,371 (212,905) 1,849,704
Issuance of common
stock for cash...... 1,502,000 .001 1,502 7,652,761 -- -- 7,654,263
Issuance of common
stock from bridge
financing
conversion.......... 469,300 .001 469 1,044,310 -- -- 1,044,779
Issuance of common
stock in partial
consideration for
purchase of toy
business assets..... 13,649 .001 14 (14) -- -- --
Earned compensation
from grant of
options............. -- -- -- -- -- 17,742 17,742
Net income............ -- -- -- -- 1,179,769 -- 1,179,769
--------- ----- ------ ---------- --------- --------- -----------
Balance, December 31,
1996................ 3,984,949 $.001 $3,985 $10,321,295 $1,616,140 $(195,163) $11,746,257
========= ===== ====== ========== ========= ========= ===========

See notes to consolidated financial statements.

F-5
53

JAKKS PACIFIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

APRIL 1,
1995
(INCEPTION)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1996 1995
----------- -----------

Cash flows from operating activities:
Net income...................................................... $ 1,179,769 $ 436,371
----------- -----------
Adjustments to reconcile net income to net cash (used) provided
by operating activities:
Depreciation and amortization................................ 338,032 101,203
Earned compensation from stock option grants................. 17,742 --
Changes in operating assets and liabilities:
Accounts receivable........................................ (1,844,981) (575,489)
Inventory.................................................. (53,977) (86,128)
Prepaid expenses and other................................. (973,076) (268,906)
Advances to officers....................................... (120,030) --
Accounts payable........................................... 899,929 711,058
Accrued expenses........................................... 27,049 178,038
Income taxes payable....................................... 191,622 80,983
Reserve for returns and allowances......................... (285,513) 460,513
Deferred income taxes...................................... (40,186) 32,655
----------- -----------
Total adjustments..................................... (1,843,389) 633,927
----------- -----------
Net cash (used) provided by operating activities...... (663,620) 1,070,298
----------- -----------
Cash flows from investing activities
Property and equipment.......................................... (1,058,653) (418,408)
Intangibles and deposits........................................ (49,129) (45,143)
Excess of cost over toy business assets acquired (goodwill)..... -- (2,110,270)
----------- -----------
Net cash (used) by investing activities............... (1,107,782) (2,573,821)
----------- -----------
Cash flows from financing activities
Deferred costs.................................................. (85,301) (74,915)
Proceeds from sale of common stock.............................. 7,669,263 845,000
Proceeds from convertible notes payable......................... 1,104,694 --
Proceeds from (repayments of) note payable to officer........... (382,816) 382,816
Proceeds from (repayments of) acquisition debt.................. (260,930) 432,374
----------- -----------
Net cash provided by financing activities............. 8,044,910 1,585,275
----------- -----------
Net increase in cash.............................................. 6,273,508 81,752
Cash, beginning of year and at inception.......................... 81,752 --
----------- -----------
Cash, at end of year and at December 31, 1995..................... $ 6,355,260 $ 81,752
=========== ===========
Cash paid during the period for:
Interest........................................................ $ 49,638 $ 335
=========== ===========
Income taxes.................................................... $ 11,839 $ 800
=========== ===========

See note 17 for supplemental information to consolidated statements
of cash flows.

See notes to consolidated financial statements.

F-6
54

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996

NOTE 1 -- PRINCIPAL INDUSTRY

JAKKS Pacific, Inc. (the "Company") is engaged in the development,
manufacture and marketing of toys and children's electronics products, some of
which are based on character and product licenses. The Company commenced
operations in July 1995 through the purchase of substantially all of the assets
of a Hong Kong toy company. The Company is marketing its product lines
domestically and internationally.

The Company was incorporated under the laws of the State of Delaware in
January 1995.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include accounts of the Company and
its wholly-owned subsidiaries, JAXXS (HK) Limited, JP (HK) Limited, both Hong
Kong Corporations, J-X Enterprises, Inc., a New York Corporation, and JAKKS
Acquisition Corp., a Delaware Corporation. In consolidation, all significant
intercompany balances and transactions are eliminated.

Cash and cash equivalents

The Company considers all highly liquid assets, having an original maturity
of less than three months, to be cash equivalents.

Use of estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenue and expenses during the
reporting periods. Actual future results could differ from those estimates.

Revenue recognition

Revenue of the Company's products is recognized upon shipment to its
customers. The Company provides allowances for estimated returns at the time of
sales.

Deferred product development costs

The Company defers certain costs related to the preliminary activities
associated with the manufacture of its products, which the Company has
determined have future economic benefit. These costs are then expensed in the
period in which the initial shipment of the related product is made. Management
periodically reviews and revises, when necessary, its estimate of the future
benefit of these costs, and expenses them if it is deemed there no longer is a
future benefit.

Deferred offering and acquisition costs

During 1996, costs incurred for an additional public offering, convertible
debenture offering, and certain acquisition costs were deferred. The deferred
costs will be offset against respective proceeds received and upon completion of
an on-going acquisition to the costs of the new affiliate (note 15).

In 1995, offering costs incurred directly related to the issuance of
convertible promissory notes pursuant to its private offering and costs incurred
directly related to its public offering were capitalized. The Company

F-7
55

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

completed the private offering and public offering in February and May 1996,
respectively, and offset these deferred offering costs against the respective
proceeds received.

Inventory

Inventory is valued at the lower of cost (first-in, first-out) or market.

Property and equipment

Property and equipment are stated at cost and are being depreciated using
the straight-line method over their estimated useful lives as follows:

Personal computers................................ 5 years
Office equipment.................................. 5 years
Furniture and fixtures............................ 5 years
Molds and tooling................................. 3 - 4 years
Leasehold improvements............................ Shorter of length of lease or 10 years

Advertising

Production costs of commercials and programming are charged to operations
in the year during which the production is first aired. The costs of other
advertising, promotion and marketing programs are charged to operations in the
year incurred. Advertising expense for the year ended December 31, 1996 was
approximately $22,000.

Income taxes

The Company does not file a consolidated return with its foreign
subsidiaries. The Company files Federal and state returns and its foreign
subsidiaries file Hong Kong returns. Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized as deductible temporary
differences and operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

Translation of foreign currencies

Monetary assets and liabilities denominated in Hong Kong dollars are
translated into United States dollars at the rates of exchange ruling at the
balance sheet date. Transactions during the period are translated at the rates
ruling at the dates of the transactions.

Profits and losses resulting from the above translation policy are
recognized in the consolidated statements of operations.

Goodwill

Goodwill represents the excess purchase price paid over the fair market
value of the assets acquired of a Hong Kong toy company. Goodwill is being
amortized over 30 years on a straight-line basis. Accumulated amortization at
December 31, 1996 totalled $133,301.

F-8
56

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

The carrying value of goodwill is based on management's current assessment
of recoverability. Management evaluates recoverability using both objective and
subjective factors. Objective factors include management's best estimates of
projected future earnings and cash flows and analysis of recent sales and
earnings trends. Subjective factors include competitive analysis and the
Company's strategic focus.

Intangible assets

Intangible assets consist of organizational costs, product technology
rights and patents. Intangible assets are amortized on a straight-line basis,
over five to six years, the estimated economic lives of the related assets.
Accumulated amortization as of December 31, 1996 and 1995 was $10,834 and
$1,500, respectively.

Reverse stock split

The Company effected a reverse split of its common stock of approximately
one-for-1.843333. All common stock and common stock equivalent shares and per
share amounts have been adjusted retroactively to give effect to the reverse
stock split.

Net income per share

Net income per share is computed using the weighted average number of
shares outstanding of common stock and common equivalent shares from stock
options using the treasury stock method.

NOTE 3 -- ACQUISITION

Effective July 1, 1995, the Company acquired substantially all of the
assets constituting the toy business of Justin Products Limited, a Hong Kong
Corporation ("JPL"). Total consideration paid of $2,965,353 consisted of cash,
assumption of liabilities and the issuance of 89,600 shares of the Company's
common stock.

Other consideration includes percentage payments equal to 5% of the net
sales of the acquired product lines during each of the calendar years 1995,
1996, and 1997, with minimums of $250,000 for each of 1995 and 1996, and 2.5% of
the net sales of the acquired product lines during each of the calendar years
1998 and 1999. Such percentage payments are subject to offset against $500,000
in cash consideration paid. The 1996 minimum percentage payment has been
discounted at 10% and is presented at net as a long-term liability (note 8).
Percentage payments for the year and period ended December 31, 1996 and 1995,
respectively, amounted to $250,000 and $264,917, respectively.

The assets acquired from JPL were as follows:

Furniture and fixtures........................................... $ 47,500
Office equipment................................................. 12,500
Molds and tooling................................................ 250,000
Goodwill......................................................... 2,655,353
----------
Total assets acquired............................................ $2,965,353
==========

NOTE 4 -- CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Company to concentration of credit
risk are cash equivalents and trade receivables. Cash equivalents consist
principally of short-term money market funds. These instruments are short-term
in nature and bear minimal risk. To date, the Company has not experienced losses
on these instruments.

F-9
57

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

The Company maintains cash balances at financial institutions located in
California and Hong Kong. Accounts located in California institutions are
insured by the Federal Deposit Insurance Corporation up to $100,000. At December
31, 1996, the Company's uninsured cash balance totaled $6,476,475.

The Company performs on-going credit evaluations of its customers financial
condition but does not require collateral to support customer receivables. Most
goods are sold on irrevocable letter of credit basis.

Included in the Company's consolidated balance sheets at December 31, 1996
and 1995, are the Company's operating net assets, most of which are located in
facilities in Hong Kong and China and which total approximately $3,531,379 and
$1,019,077, for 1996 and 1995, respectively.

NOTE 5 -- ADVANCES TO OFFICERS

Advances to officers represent balances of $55,030 and $65,000 due from two
of the Company's officers. The $55,030 is due on demand and bears no interest.
The amount of $65,000 relates to two notes receivable, $25,000 and $40,000, that
are due on the earlier of August 27 and September 20, 1997, respectively, or
immediately upon the termination of the officer's employment with the Company
for any reason; the notes receivable bear interest of approximately 6 percent.
See note 18.

NOTE 6 -- ACCRUED EXPENSES

Accrued expenses consist of the following:

1996 1995
-------- --------

Bonuses................................................ $107,444 $ --
Insurance.............................................. -- 36,972
Hong Kong subsidiaries accruals........................ -- 36,531
Reserve for vendor claims arising from the Justin
acquisition.......................................... -- 98,476
Royalties.............................................. 78,060 --
Other.................................................. 19,583 6,059
-------- --------
$205,087 $178,038
======== ========

NOTE 7 -- RESERVE FOR RETURNS AND ALLOWANCES

The Company provides allowances for estimated sales returns and allowances
at the time of sales. In 1996, the balance of the reserve for returns and
allowance was $175,000. In 1995, the reserve for returns and allowances includes
actual amounts due to customers for pre-acquisition obligations assumed by the
Company of $260,513, and an estimated reserve for returns and allowances of
$200,000.

NOTE 8 -- LONG-TERM DEBT

Long-term debt, entirely due in 1997, consists of the following:

1996 1995
-------- --------

Asset purchase obligation.............................. $191,555 $452,485
Less amount representing interest...................... 1,547 20,111
-------- --------
Present value of asset purchase obligation............. 190,008 432,374
Less current portion................................... 190,008 202,485
-------- --------
Long-term portion of asset purchase obligation......... $ -- $229,889
======== ========

F-10
58

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

NOTE 9 -- INCOME TAXES

The provision differs from the expense that would result from applying
Federal statutory rates to income before taxes because of the inclusion of a
provision for state income taxes, and the income of the Company's foreign
subsidiaries is taxed at a rate of 16.5% applicable in Hong Kong. In addition,
the provision includes deferred income taxes resulting from adjustments in the
amount of temporary differences.

Temporary differences arise primarily from differences in timing in the
deduction of state income taxes and the use of the straight-line method of
depreciation for financial reporting purposes and accelerated methods of
depreciation for tax purposes.

The Company does not file a consolidated return with its foreign
subsidiaries. The Company files Federal and state returns and its foreign
subsidiaries file Hong Kong returns. Income taxes reflected in the accompanying
consolidated statements of operations is comprised of the following:

1996 1995
---------- --------

Federal...................................................... $ -- $ 3,030
State and local.............................................. 1,350 2,870
Hong Kong.................................................... 277,994 75,883
--------- --------
279,344 81,783
Deferred..................................................... (116,069) 32,655
--------- --------
$ 163,275 $114,438
========= ========

As of December 31, 1996, the Company has Federal and state net operating
loss carryovers of approximately $360,000 and $180,000, respectively, available
to offset future taxable income. The carryovers expire through 2011.

Deferred tax assets resulting from deductible temporary
differences from loss carryforwards, noncurrent............ $ 145,692 $ --
Deferred tax liabilities resulting from taxable temporary
differences, noncurrent.................................... (138,161) (32,655)
--------- --------
$ 7,531 $(32,655)
========= ========

No valuation allowance for deferred tax assets has been provided for as of
December 31, 1996, since, in the opinion of the Company's management,
realization of the future benefit is probable.

A reconciliation of the statutory United States Federal income tax rate to
the Company's effective income tax rate is as follows:

1996 1995
---------- --------

Statutory income tax rate.................................... 35% 35%
State and local income taxes, net of Federal income tax
effect..................................................... 1 1
Effect of net operating loss carryovers...................... (40) --
Income taxes on foreign earnings at rates other than the
United States Statutory rate not subject to United States
income taxes............................................... 16 (15)
--- ---
12% 21%
=== ===

F-11
59

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1996

The components of earnings before income taxes are as follows:

1996 1995
---------- --------

Domestic..................................................... $ (360,040) $ 16,555
Foreign...................................................... 1,703,084 534,254
---------- --------
$1,343,044 $550,809
========== ========

NOTE 10 -- NOTES PAYABLE -- OFFICER

Notes payable -- officer, is due to a Company officer and stockholder. The
officer advanced monies to the Company totaling $382,816 at an interest rate of
approximately 6%. During 1996, additional advances of $50,000 and $25,000 had
been made to the Company by two of its officers under the same terms disclosed
above. All notes payable were repaid, including accrued interest, during 1996.
See note 18.

NOTE 11 -- LEASES

The Company leases office facilities and certain equipment under operating
leases. The following is a schedule of minimum lease payments.

1997.............................................. $111,342
1998.............................................. 73,402
1999.............................................. 70,682
2000.............................................. 68,925
2001.............................................. 66,467
Thereafter........................................ 132,934
--------
$523,752
========

Rent expense for the year and period ended December 31, 1996 and 1995
totalled $182,690 and $89,737, respectively.

NOTE 12 -- COMMON STOCK AND PREFERRED STOCK

All references to the number of shares of the Company's common stock and
per share amounts have been retroactively restated in the accompanying
consolidated financial statements to reflect the effect of the approximately
one-for-1.843333 reverse stock split.

The Company has 25,005,000 authorized shares of stock consisting of
25,000,000 shares of $.001 par value common stock and 5,000 shares of $.001 par
value preferred stock.

During 1995, the Company issued JPL 75,951 shares of common stock, and an
additional 13,649 shares in connection with the Company's public offering in May
1996, pursuant to the asset purchase agreement (note 3), and has also issued
27,124 shares, valued at $8,333, to the Company's legal counsel for services
rendered.

The Company has entered into a letter of intent with a certain underwriter
relating to a contemplated additional public offering of its Common Stock.

NOTE 13 -- COMMITMENTS

The Company entered into various license agreements whereby the Company may
use certain characters and properties in conjunction with its products. Such
license agreements call for royalties to be paid at 5 to

F-12
60

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

10% of net sales with minimum guarantees and advance payments. Additionally,
under one such license, the Company has committed to spend 12.5% of related net
sales, not to exceed $1,000,000, on advertising per year.

Future minimum royalty guarantees are as follows:

1997............................................. $ 730,451
1998............................................. 714,166
1999............................................. 949,667
----------
Total.................................. $2,394,284
==========

NOTE 14 -- STOCK OPTION PLAN

Under the Company's Amended and Restated 1995 Stock Option Plan, the
Company has reserved 216,998 shares of the Company's Common Stock for issuance
under the Plan. Under the Amended and Restated 1995 Stock Option Plan, employees
(including officers), nonemployee directors and independent consultants may be
granted options to purchase shares of Common Stock. Prior to the adoption of the
Plan in 1995, options for 276,500 shares have been granted at an exercise price
of $2.00 per share. The Company has recorded deferred compensation costs and a
related increase in paid-in capital of $212,905 for the difference between the
grant price and the deemed fair market value of the Common Stock of $2.77 per
share at the date of grant. Such compensation costs will be recognized on a
straight-line basis over the vesting period of the options, which is 25% per
year commencing twelve months after the grant date of such options. In 1996, the
fair value of each employee option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used: risk-free rate of interest of 6.0%; dividend yield of 0%; and expected
lives of 5 years. See note 19.

As of December 31, 1996 and 1995, 91,523 and 206,148 shares were available
for future grant, respectively. Additional shares may become available for grant
to the extent that options presently outstanding under the Plan terminate or
expire unexercised.

Stock option activity pursuant to the Amended and Restated 1995 Plan is
summarized as follows:

WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------

Outstanding, April 1, 1995 (Inception)................... -- $ --
Granted................................................ 10,850 4.50
Exercised.............................................. -- --
Canceled............................................... -- --
-------
Outstanding, December 31, 1995........................... 10,850 4.50
Granted................................................ 114,625 6.70
Exercised.............................................. -- --
Canceled............................................... -- --
------- -----
Outstanding, December 31, 1996........................... 125,475 $ 6.51
======= =====

F-13
61

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

Stock option activity outside of the Amended and Restated 1995 Plan is
summarized as follows:

NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------

Outstanding, April 1, 1995 (Inception)............. -- $ --
Granted.......................................... 276,500 2.00
Exercised........................................ -- --
Canceled......................................... -- --
-------
Outstanding, December 31, 1995..................... 276,500 2.00
Granted.......................................... 75,000 7.54
Exercised........................................ -- --
Canceled......................................... -- --
------- -----
Outstanding, December 31, 1996..................... 351,500 $ 3.18
======= =====

The weighted average fair value of options granted to employees in 1996 and
1995 was $2.30 and $0.77 per share, respectively.

The following table summarizes information about stock options outstanding
and exercisable at December 31, 1996:

OUTSTANDING
-------------------------------------------
WEIGHTED EXERCISABLE
AVERAGE ------------------------------
NUMBER WEIGHTED AVERAGE EXERCISE NUMBER WEIGHTED AVERAGE
OPTION PRICE RANGE OF SHARES LIFE PRICE OF SHARES EXERCISE PRICE
------------------ --------- ---------------- -------- --------- ----------------

$ 2.00 - $8.25 476,975 6.1 years $ 4.06 182,100 $ 5.03

At December 31, 1995, options were exercisable for 10,850 shares at a
weighted average exercise price of $4.50 per share.

In addition, in 1996, 150,000 shares were reserved for issuance upon
exercise of warrants granted to the representatives of the underwriters of the
Company's Initial Public Offering exercisable at $9.375 per share.

NOTE 15 -- SUBSEQUENT EVENTS

On January 8, 1997, the Company issued two $3,000,000 convertible
debentures for a total of $6,000,000. Interest on the principal amounts
outstanding will accrue at 9.0% per annum with the first monthly installment
payable on February 1, 1997. If not sooner redeemed or converted into common
stock, the debentures shall mature on December 31, 2003. Commencing on December
31, 1999, and the first day of each successive month thereafter prior to
maturity, mandatory principal redemption installments, each of such installment
to be in the amount of $10 per $1,000 of the then remaining principal amount of
the debenture. Such debentures are convertible at $8.50 per share into 705,882
shares of the Company's common stock, subject to reset and anti-dilution
provisions. A stock pledge agreement from the Company pledging as security all
outstanding shares of a certain entity being acquired, upon acquisition thereof
from use of loan proceeds, and all of the outstanding shares of the Company's
wholly-owned subsidiaries. In addition, all marketing and manufacturing licenses
acquired or to be acquired, and all machinery and equipment to the extent
assignable by the Company are also to be pledged as security. As compensation
paid to an investment banker, 6% of the gross proceeds was paid in cash and
warrants for the purchase of 150,000 shares of common stock, exercisable at
$8.00 per share, were sold for $0.001 per share.

On February 6, 1997, the Company acquired all of the stock of Road Champs,
Inc. and all of the operating assets of an affiliated company for approximately
$12,045,000. Consideration paid at closing was approximately $4,619,000 in cash
plus the issuance of $1,500,000 (198,020 shares) of the Company's common stock.
The balance of the adjusted purchase price of approximately $2,937,000 is to be
paid in three equal

F-14
62

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

installments, with the third installment payable one year after the closing of
the transactions all of which will carry interest at a rate of 7.0% per annum.
In addition, the payment for inventory of approximately $1,988,000, without
interest, is payable within 30 days of shipment to customers and the balance is
payable no later than August 6, 1997, and a payment of $1,001,000 is due seven
days after the close of an additional public offering of the Company's common
stock, but not later than May 6, 1997. Outstanding balances will be secured by
all acquired shares and assets, however, they will be subordinated to the
security interest for the convertible debentures noted above.

NOTE 16 -- MAJOR CUSTOMERS

Sales to major customers were as follows:

1996 1995
- ------------------------- -------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- ---------- ---------- ---------- ----------

$3,398,059 28.2% $1,890,184 31.1%
1,679,281 13.9 729,332 12.0
1,007,590 8.4 686,787 11.3
847,392 7.0 577,387 9.5
508,941 4.2 571,310 9.4
- ---------- ---- ---------- ----
$7,441,263 61.7% $4,455,000 73.3%
========== ==== ========== ====

NOTE 17 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS

469,300 shares of common stock were issued in 1996 pursuant to the
conversion of bridge financing promissory notes which provided net proceeds of
$1,044,779.

Shares of common stock were issued as partial consideration for toy
business assets acquired totalling $560,000 in 1995. The excess of cost over toy
business assets acquired (goodwill) is reflected in the consolidated statement
of cash flows net of the stock issued.

27,124 shares of stock valued at $8,333 were issued in consideration for
legal services in connection with the Company's organizational start-up during
1995.

NOTE 18 -- RELATED PARTY TRANSACTIONS

A director of the Company is a partner in the law firm that acts as counsel
to the Company. The Company paid legal fees to the law firm in the amounts of
approximately $270,000 in 1996 and $75,000 in 1995. Also see footnotes 5 and 10
for other related party transactions.

NOTE 19 -- RECENT ACCOUNTING PRONOUNCEMENT

The FASB issued a new standard, SFAS No. 123 "Accounting for Stock-Based
Compensation," which contains a fair value-based method for valuing stock-based
compensation that entities may use, which measures compensation cost at the
grant date based on the fair value of the award. Compensation is then recognized
over the service period, which is usually the vesting period. Alternatively, the
standard permits entities to continue accounting for employee stock option and
similar equity instruments under APB Opinion No. 25, " Accounting for Stock
Issued to Employees." Entities that continue to account for stock options using
APB Opinion No. 25 are required to make pro forma disclosures of net income and
earnings per share, as if the fair value-based method of accounting defined in
SFAS No. 123 had been applied. Management accounts for options under APB Opinion
No. 25. If the alternative accounting-related provisions of SFAS No. 123 had
been adopted as of the beginning of 1995, the effect on 1996 and 1995 net income
and earnings per share would have been immaterial. See note 14.

F-15
63

JAKKS PACIFIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of " ("Statement
121"). Statement 121 addresses the accounting for the impairment of long-lived
assets, certain identifiable intangible and goodwill related to those assets to
be held and used. It also addresses the accounting for long-lived assets and
certain identifiable intangibles to be disposed of. Statement 121 establishes
guidance for recognizing and measuring impairment losses and requires that the
carrying amount of impaired assets be reduced to fair value. Statement 121 was
effective for fiscal years beginning after December 15, 1995. The impact of the
adoption of Statement 121 did not have a material adverse effect on the
Company's financial condition or results of operations.

F-16
64

INDEPENDENT AUDITORS' REPORT

To the Stockholders of Road Champs, Inc.
and Subsidiary and Die Cast Associates, Inc.

We have audited the accompanying combined balance sheets of Road Champs,
Inc. and Subsidiary and Die Cast Associates, Inc. as of December 31, 1996 and
1995 and the related combined statements of operations, stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Road
Champs, Inc. and Subsidiary and Die Cast Associates, Inc. as of December 31,
1996 and 1995, and the results of their combined operations and cash flows for
the years then ended, in conformity with generally accepted accounting
principles.

PANNELL KERR FORSTER PC

New York, New York
February 12, 1997

F-17
65

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

COMBINED BALANCE SHEETS

ASSETS

DECEMBER 31,
-------------------------
1996 1995
----------- -----------

Current assets:
Cash and cash equivalents....................................... $ 2,792,336 $ 2,779,649
Investments (notes 1 and 4)..................................... 6,032,816 3,591,664
Accounts receivable, net of allowance for doubtful accounts of
$65,266 and $83,008 at December 31, 1996 and 1995,
respectively................................................. 1,958,344 3,142,352
Loan receivable affiliated entity (notes 1 and 9)............... 1,034,784 695,535
Inventory (note 3).............................................. 1,961,068 2,401,014
Prepaid expenses and other...................................... 158,373 156,992
Deferred tax asset (note 6)..................................... 72,615 --
----------- -----------
Total current assets.................................... 14,010,336 12,767,206
----------- -----------
Property and equipment
Office furniture and equipment.................................. 463,067 712,258
Molds and tooling............................................... 4,749,085 4,771,572
Leasehold improvements.......................................... 81,250 --
----------- -----------
Total................................................... 5,293,402 5,483,830
Less accumulated depreciation and amortization.................. 4,690,231 4,629,009
----------- -----------
Net property and equipment.............................. 603,171 854,821
----------- -----------
Deposits.......................................................... 138,322 156,755
----------- -----------
Total assets............................................ $14,751,829 $13,778,782
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 507,541 $ 662,870
Accrued expenses (note 7)....................................... 1,139,613 253,211
Notes payable -- stockholder (note 8)........................... 375,000 375,000
Income taxes payable............................................ 689,106 37,578
Deferred tax liability (note 6)................................. -- 415,725
----------- -----------
Total current liabilities............................... 2,711,260 1,744,384
Commitments (note 7)
Stockholders' equity:
Common stock (note 5)........................................... 9,750 9,750
Additional paid-in capital...................................... 104,000 104,000
Unrealized holding gain on securities net of deferred taxes of
$3,719 and $713,577 in 1996 and 1995, respectively (note
4)........................................................... 133,157 1,175,472
Retained earnings............................................... 11,793,662 10,745,176
----------- -----------
Total stockholders' equity.............................. 12,040,569 12,034,398
----------- -----------
Total liabilities and stockholders' equity.............. $14,751,829 $13,778,782
=========== ===========

See notes to combined financial statements.

F-18
66

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

COMBINED STATEMENTS OF OPERATIONS

YEAR ENDED
DECEMBER 31,
---------------------------
1996 1995
----------- -----------

Net sales......................................................... $15,510,611 $17,141,445
Cost of sales..................................................... 9,564,332 11,427,162
----------- -----------
Gross profit...................................................... 5,946,279 5,714,283
Selling, general and administrative expenses...................... 4,119,424 5,022,977
----------- -----------
Income from operations............................................ 1,826,855 691,306
Interest expense.................................................. 45,359 48,072
Other income (note 4)............................................. 2,733,020 125,456
Other expenses (note 7)........................................... 923,841 --
----------- -----------
Income before provision for income taxes.......................... 3,590,675 768,690
Provision for income taxes (note 6)............................... 1,615,276 246,417
----------- -----------
Net income........................................................ $ 1,975,399 $ 522,273
=========== ===========

See notes to combined financial statements.

F-19
67

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

UNREALIZED
HOLDING
COMMON COMMON ADDITIONAL GAIN ON TOTAL
SHARES PAR VALUE STOCK PAID-IN RETAINED SECURITIES STOCKHOLDERS'
OUTSTANDING PER SHARE AMOUNT CAPITAL EARNINGS NET OF TAXES EQUITY
----------- --------- ------ ---------- ----------- ------------ -------------

Balance, December 31,
1994...................... 195 $50 $9,750 $104,000 $10,611,152 $ 1,472,351 $12,197,253
Net income.................. -- -- -- -- 522,273 -- 522,273
Dividends paid.............. -- -- -- -- (320,000) -- (320,000)
Unrecoverable advances due
from former subsidiary.... -- -- -- -- (68,249) -- (68,249)
Net change in unrealized
holding gain on
securities, net of taxes
of $237,784............... -- -- -- -- -- (296,879) (296,879)
--- --- ------ -------- ----------- ----------- -----------
Balance, December 31,
1995...................... 195 50 9,750 104,000 10,745,176 1,175,472 12,034,398
Net income.................. -- -- -- -- 1,975,399 -- 1,975,399
Dividends paid.............. -- -- -- -- (817,598) -- (817,598)
Unrecoverable advances due
from former subsidiary.... -- -- -- -- (109,315) -- (109,315)
Net change in unrealized
holding gain on
securities, net of taxes
of $709,858............... -- -- -- -- -- (1,042,315) (1,042,315)
--- --- ------ -------- ----------- ----------- -----------
Balance, December 31,
1996...................... 195 $50 $9,750 $104,000 $11,793,662 $ 133,157 $12,040,569
=== === ====== ======== =========== =========== ===========

See notes to combined financial statements.

F-20
68

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

COMBINED STATEMENTS OF CASH FLOWS

YEAR ENDED
DECEMBER 31,
----------------------------
1996 1995
------------ -----------

Cash flows from operating activities:
Net income..................................................... $ 1,975,399 $ 522,273
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................... 510,316 656,210
Deferred taxes.............................................. 221,518 224,003
Provision for doubtful accounts............................. (17,742) (157,280)
Gain on sale of investments................................. (2,501,857) --
Changes in certain assets and liabilities
Accounts receivable....................................... 1,201,750 225,102
Inventory................................................. 438,946 967,451
Prepaid expenses and other................................ 11,917 (11,532)
Deposits.................................................. 18,433 159,272
Accounts payable.......................................... (155,329) 275,224
Accrued expenses.......................................... 886,402 (23,311)
Income taxes payable...................................... 651,528 10,874
------------ -----------
Net cash provided by operating activities.............. 3,241,281 2,848,286
------------ -----------
Cash flows from investing activities:
Purchase of property and equipment............................. (270,963) (412,997)
Sale of investments............................................ 8,401,624 150,000
Purchase of investments........................................ (10,093,093) (102,536)
Loan receivable affiliated entity.............................. (339,249) (340,530)
Unrecoverable advances due from former subsidiary.............. (109,315) (68,249)
------------ -----------
Net cash (used) by investing activities................ (2,410,996) (774,312)
------------ -----------
Cash flows from financing activities:
Notes payable -- bank.......................................... -- (975,000)
Dividends paid................................................. (817,598) (320,000)
------------ -----------
Net cash (used) by financing activities................ (817,598) (1,295,000)
------------ -----------
Net increase in cash and cash equivalents.............. 12,687 778,974
Cash and cash equivalents -- beginning of year................... 2,779,649 2,000,675
------------ -----------
Cash and cash equivalents -- end of year......................... $ 2,792,336 $ 2,779,649
============ ===========
Supplemental disclosure of cash flow information
Cash paid for interest......................................... $ 45,359 $ 59,020
============ ===========
Cash paid for income taxes..................................... $ 729,850 $ 31,415
============ ===========

See notes to combined financial statements.

F-21
69

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and description of business

The combined financial statements include the accounts of Road Champs, Inc.
(Road Champs) and its wholly-owned subsidiary Road Champs, Ltd. (Limited) and
Die Cast Associates, Inc. (Die Cast). Road Champs, located in New Jersey is a
toy wholesaler principally in the United States. Limited, a Hong Kong
corporation, is a toy wholesaler that sells worldwide principally on an F.O.B.
Hong Kong basis against letters of credit. Die Cast, a Florida corporation, acts
as the sales agent and product development consultant for Road Champs and
Limited. Road Champs and Die Cast (collectively the Company) are owned and/or
controlled by the same stockholder who, on January 21, 1997 agreed to sell the
stock of Road Champs, Inc. and Subsidiary and certain operating assets of Die
Cast for approximately $12,045,000 plus the value of certain defined assets less
defined liabilities. The sale closed on February 6, 1997.

The businesses under common control and which are being sold have been
combined for financial statement purposes. All significant intercompany
transactions and balances have been eliminated. Road Champs Die Casting Factory
(Factory), a Hong Kong corporation, operates a die cast toy manufacturing
facility in China and is the principal supplier of merchandise to Road Champs
and Limited. Factory is under the same common ownership as the Company but was
not part of the aforementioned sales transaction and, accordingly, is excluded
from the combined financial statements. During 1996 and 1995, Road Champs had
net advances of $109,315 and $68,249, respectively, due from Factory which were
deemed unrecoverable and are reflected in stockholders' equity in the combined
financial statements.

Cash and cash equivalents

The Company considers all highly liquid assets, having an original maturity
of three months or less to be cash equivalents. The Company maintains its cash
in bank deposits which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company believes it
is not exposed to any significant credit risk on cash and cash equivalents.

Revenue recognition

Revenue from sales of the Company's products is recognized upon shipment to
its customers.

Inventory

Inventory generally is valued at the moving average cost basis and is
stated at the lower of cost or market.

Investments

Investments consists of equity securities and bonds. These investments are
classified as available-for-sale and are stated at fair value. The Company
computes gains/losses on sales of its investments using the specific
identification method.

F-22
70

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

Property and equipment

Property and equipment are stated at cost and are being depreciated using
accelerated methods over their estimated useful lives as follows:

Office furniture and equipment............................ 5-7 years
Molds and tooling......................................... 3-4 years
Leasehold improvements.................................... 5 years

Income taxes

Road Champs accounts for income taxes using the liability method. Deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using enacted
tax rates and laws expected to be in effect when the differences are expected to
reverse. Valuation allowances are established when necessary to reduce the
carrying amount of deferred tax assets to their net realizable value.

Die Cast has elected to be treated as an "S" Corporation for Federal and
New Jersey income tax purposes. Consequently, it does not record income taxes
(except for capital gains, certain passive investment income, and certain
investment credit recapture). The stockholder is liable for the individual
income taxes of Die Cast's taxable income (even though such income is not
distributed) or include a share of Die Cast's net operating loss in the
individual's income tax return. Die Cast records New Jersey income taxes at the
reduced "S" Corporation rate.

Foreign Currency Translation

Foreign currency financial statements of the Road Champ's Hong Kong
subsidiary are converted into United States dollars by translating balance sheet
accounts at the current exchange rate at year end and statement of operations
accounts at the average exchange rate for the year.

Use of estimates

The preparation of the combined financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the combined
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Fair value of financial instruments

The Company's cash and cash equivalents, accounts and loan receivables and
notes payable -- stockholder represent financial instruments. The carrying value
of these financial instruments is a reasonable approximation of fair value.

Split Dollar Insurance Plan

An insurance trust was created for the Road Champs majority stockholder in
December 1993. The terms of the trust require that it pay premiums equal to the
current term rate for the insured's age multiplied by the excess of the current
death benefit over Road Champs current premium advance. This amount, also
referred

F-23
71

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

to as the "economic value", is a fringe benefit expense of Road Champs. The
remaining amount of the premium is recorded as a loan receivable from the
insurance trust, an affiliated entity.

International operations

Limited operates in Hong Kong. As a result, a significant portion of Road
Champs sales and operations are subject to certain risks, including adverse
developments in the foreign political and economic environment, exchange rates,
tariffs and other trade barriers, staffing and managing foreign operations and
potentially adverse tax consequences. There can be no assurance that any of
these factors will not have a material adverse effect on the Company's financial
condition or results of operations in the future. Net sales of Limited totaled
$10,361,376 and $12,051,301 for the years ended December 31, 1996 and 1995.

NOTE 2 -- RISK CONCENTRATIONS

Accounts receivable and sales

A significant amount of the accounts receivable and sales of Road Champs
are from a limited number of customers. Four customers owed 37%, 17%, 12% and
10%, respectively, of the total accounts receivable at December 31, 1995, and
two customers owed 22% and 21%, respectively, of the total accounts receivable
at December 31, 1996. Two customers had 21% and 26%, respectively of total sales
in 1995, and one customer had 15% of total sales in 1996.

NOTE 3 -- INVENTORY

Inventory consists of the following:

1996 1995
---------- ----------

Packaging........................................... $ 117,817 $ 182,688
Finished goods...................................... 1,843,251 2,218,326
---------- ----------
Total inventory........................... $1,961,068 $2,401,014
========== ==========

NOTE 4 -- INVESTMENTS

The following is a summary of the Company's available-for-sale securities
at December 31, 1996 and 1995.

DECEMBER 31, 1996

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
SECURITIES AVAILABLE-FOR-SALE COST GAINS (LOSSES) FAIR VALUE
- --------------------------------------------------- ---------- ---------- ---------- ----------

Common Stock....................................... $2,362,922 $ 137,505 $ -- $2,500,427
U.S. Government Obligations........................ 179,201 320 -- 179,521
Municipal Bonds.................................... 3,353,817 409 (1,358) 3,352,868
---------- -------- ------- ----------
Total.................................... $5,895,940 $ 138,234 $ (1,358) $6,032,816
========== ======== ======= ==========

Proceeds from the sale of available for sale securities amounted to
$8,401,624 in 1996, while realized gains on the sale of available-for-sale
securities amounted to $2,501,857 during 1996. The change in unrealized holding
gain on available-for-sale securities in 1996 amounted to $1,752,173.

F-24
72

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

DECEMBER 31, 1995

Common Stock..................................... $1,600,079 $1,893,745 $ (6,015) $3,487,809
Municipal Bonds.................................. 102,536 1,319 -- 103,855
---------- ---------- ------- ----------
Total.................................. $1,702,615 $1,895,064 $ (6,015) $3,591,664
========== ========== ======= ==========

Proceeds from the sale of available-for-sale securities amounted to
$150,000. Realized gain on the sale of available-for-sale securities were not
significant during 1995. The change in unrealized holding gains on
available-for-sale securities in 1995 amounted to $534,663.

The amortized cost and estimated fair value of debt securities classified
as available-for-sale at December 31, 1996 and 1995 by contractual maturity are
as follows:

1995
1996 -------------------
----------------------- ESTIMATED
AMORTIZED ESTIMATED AMORTIZED FAIR
MATURITY COST FAIR VALUE COST VALUE
- --------------------------------------------------- ---------- ---------- -------- --------

Less than one year................................. $1,307,442 $1,307,018 $ -- $ --
One to five years.................................. 25,576 25,371 102,536 103,855
Greater than ten years............................. 2,200,000 2,200,000 -- --
---------- ---------- -------- --------
$3,533,018 $3,532,389 $102,536 $103,855
========== ========== ======== ========

NOTE 5 -- COMMON STOCK

Common stock at December 31, 1996 and 1995 consists of:

SHARES
--------------------------
ISSUED AND
PAR VALUE AUTHORIZED OUTSTANDING
--------- ---------- -----------

Road Champs, Inc................................. $50 100 95 $4,750
Die Cast Associates, Inc. ....................... 50 100 100 5,000
--- --- ------
200 195 $9,750
=== === ======

NOTE 6 -- INCOME TAXES

The provision for income taxes consists of:

1996 1995
---------- --------

Current
Federal............................................ $1,045,811 $ 22,414
State.............................................. 347,947 --
---------- --------
1,393,758 22,414
Deferred............................................. 221,518 224,003
---------- --------
$1,615,276 $246,417
========== ========

F-25
73

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

The provision for income taxes generated for year end 1996 and 1995 differ
from amounts which would result from applying the Federal statutory tax rate to
pretax income as follows:

1996 1995
---------- ---------

Income before provision for income taxes............ $3,590,675 $ 768,690
Items not includible/deductible for tax purposes
(income) losses of Die Cast Associates Inc. -- Sub
"S" Corp....................................... 52,511 (147,715)
---------- ---------
Adjusted pretax income......................... 3,643,186 620,975
Federal statutory tax rate.......................... 34% 34%
---------- ---------
Provision for income tax at statutory rate..... 1,238,683 211,131
State income taxes, net of Federal income tax
benefit........................................... 229,645 36,886
Effects of foreign tax rate and other............... 146,948 (1,600)
---------- ---------
Provision for income taxes..................... $1,615,276 $ 246,417
========== =========

The components of the net deferred tax asset (liability) are as follows:

1996 1995
------- ---------

Deferred tax assets
Net operating loss carryforwards................. $76,334 $ 339,227
------- ---------
Deferred tax liabilities
Property and equipment........................... -- (41,375)
Unrealized holding gain on investments........... (3,719) (713,577)
------- ---------
(3,719) (754,952)
------- ---------
Net deferred tax asset (liability)............ $72,615 $(415,725)
======= =========

At December 31, 1996, Limited had available net operating loss
carryforwards of approximately $259,050 which have no expiration date.

NOTE 7 -- COMMITMENTS

a. Leases

Road Champs leases its New Jersey office and warehouse and its New York
showroom under lease agreements which expire May 2000 and April 2001,
respectively. The leases call for additional charges based upon utilities, real
estate taxes and repairs, as defined. The New Jersey building is owned by a
limited partnership controlled by the majority shareholder of Road Champs.

Limited leases its Hong Kong office space under a lease agreement which
expires March 1998.

F-26
74

ROAD CHAMPS, INC. AND SUBSIDIARY
AND
DIE CAST ASSOCIATES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996

The following is a schedule by year of the future minimum rent, exclusive
of escalations, required by the leases:

1997........................................... $ 484,922
1998........................................... 395,169
1999........................................... 371,550
2000........................................... 195,150
2001........................................... 23,050
----------
$1,469,841
==========

Rent expense for the years ended December 31, 1996 and 1995 amounted to
$304,871 and $446,229, respectively.

b. Stock Appreciation Plan

Road Champs had a nonqualified Stock Appreciation Plan (Plan) with two of
its key employees which vest upon the death or retirement of a participant, or
the change in control of Road Champs, as defined.

In contemplation of the sale of the Company, Road Champs and the two key
employees reached a cash settlement to terminate the Plan totalling
approximately $917,000, which was accrued at December 31, 1996 and included in
other expenses in the accompanying combined statement of operations.

c. Line-of-credit

Road Champs has established a line-of-credit with a commercial bank in the
amount of $3,000,000 expiring September 1997. Borrowings against the
line-of-credit bear interest at LIBOR plus 150 basis points and are
collateralized by accounts receivable and inventory and guaranteed by Limited
and Die Cast.

NOTE 8 -- NOTES PAYABLE -- STOCKHOLDER

The notes payable -- stockholder are unsecured, payable on demand, and
bears interest at 10% per annum. Interest paid during each of the years 1996 and
1995 amounted to $37,500.

NOTE 9 -- SPLIT DOLLAR INSURANCE PLAN

The total premiums required to be paid annually under the Plan, (see note
1) aggregate $366,129. The fringe benefit expense to Road Champs included in the
total was $26,879 and $25,599 for 1996 and 1995, respectively. Premiums in
excess of the fringe benefit expense are recorded as a loan receivable from the
insurance trust, an affiliated entity.

F-27
75

======================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OFFERED BY THIS
PROSPECTUS, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY, BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION
IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS
PROSPECTUS.
------------------------

TABLE OF CONTENTS

PAGE
-----

Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Price Range of Common Stock and
Dividend Policy..................... 13
Capitalization........................ 14
Pro Forma Financial Information....... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 22
Management............................ 32
Principal and Selling Stockholders.... 36
Certain Relationships and Related
Transactions........................ 38
Description of Securities............. 39
Shares Eligible for Future Sale....... 42
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Additional Information................ 45
Index to Financial Statements......... F-1

------------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS
IN THE SHARES OF COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================

1,800,000 SHARES

'JAKKS LOGO'
(TM)

COMMON STOCK
------------------------

PROSPECTUS
------------------------
CRUTTENDEN ROTH
INCORPORATED
, 1997
======================================================
76

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that the personal
liability of the directors of the Company shall be limited to the fullest extent
permitted by the provisions of Section 102(b)(7) of the General Corporation Law
of the State of Delaware ("DGCL"). Section 102(b)(7) of the DGCL generally
provides that no director shall be liable personally to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that the Certificate of Incorporation does not eliminate the liability
of a director for (i) any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) acts or
omissions in respect of certain unlawful dividend payments or stock redemptions
or repurchases; or (iv) any transaction from which such director derives
improper personal benefit. The effect of this provision is to eliminate the
rights of the Company and its stockholders to recover monetary damages against a
director for breach of her or his fiduciary duty of care as a director
(including breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i) through (iv) above. The
limitations summarized above, however, do not affect the ability of the Company
or its stockholders to seek nonmonetary remedies, such as an injunction or
rescission, against a director for breach of her or his fiduciary duty.

In addition, the Certificate of Incorporation provides that the Company
shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify all
persons whom it may indemnify pursuant to Section 145 of the DGCL. Section 145
of the DGCL permits a company to indemnify an officer or director who was or is
a party or is threatened to be made a party to any proceeding because of his or
her position, if the officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

The Company maintains a directors' and officers' liability insurance policy
covering certain liabilities that may be incurred by any director or officer in
connection with the performance of his or her duties and certain liabilities
that may be incurred by the Company, including the indemnification paid to any
director or officers. This policy provides for $1 million in maximum aggregate
coverage including defense costs. The entire premium for such insurance is paid
by the Company.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.

Reference is hereby made to Section 8 of the Underwriting Agreement, filed
as Exhibit 1.1, to this Registration Statement, pursuant to which the
Underwriters have agreed to indemnify and hold harmless the Company and its
directors, officers and controlling persons against certain liabilities.

II-1
77

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all estimated costs and expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts. All such expenses will be paid by
the Company; none will be paid by the Selling Stockholders. As underwriting
compensation in connection with the issuance and distribution of the securities
being registered, the Company will pay the Underwriters' legal fees and
expenses.

SEC Registration fee................................................... $ 7,445.69
NASD filing fee........................................................ 2,957.08
*Blue sky fee and expenses (including legal fees)....................... 50,000.00
Nasdaq National Market System listing fee.............................. 31,144.92
*Printing expenses...................................................... 75,000.00
*Accountants' fees and expenses......................................... 25,000.00
*Attorneys' fees and expenses........................................... 175,000.00
*Underwriters' legal fees............................................... 200,000.00
*Miscellaneous.......................................................... 33,452.31
-----------
*TOTAL........................................................ $600,000.00
==========

- ---------------

* Estimated

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth information relating to the sale of all
unregistered securities of the Company since its inception in January 1995:

NUMBER OF SHARES
OF
COMMON STOCK OR
PRINCIPAL AMOUNT
NAME OR CLASS APPROXIMATE DATE OF DEBT
OF PURCHASERS OF ISSUANCE SECURITIES(1) CONSIDERATION
- ------------------------- ---------------- ---------------- -----------------------------------

Jack Friedman Apr.-Oct. 1995 1,627,486 $500,000
Stephen G. Berman May 1, 1995 216,998 $50,000
Murray L. Skala Apr. 1, 1995 27,124 Issued in consideration for
services, in the amount of $8,333
Justin Products Limited Oct. 19, 1995 75,951 Issued in partial consideration
for the Company's acquisition of
certain product lines, in the
amount of $560,000(2)
William Lee Oct. 30, 1995 90,416 $250,000
Robert Johnson Nov. 15, 1995 16,275 $45,000
Justin Products Limited May 1, 1996 13,649 Adjustment to reflect the offering
price in the Initial Public
Offering for the partial
consideration for the acquisition
of certain product lines
Shareholders of Feb. 6, 1997 198,020 $1,500,000
Road Champs, Inc.

- ---------------

(1) Number of shares issued prior to December 29, 1995 reflects a 1.843333-for-1
reverse stock split effected on that date.

(2) The fair market value of stock given in partial consideration for assets
acquired.

On February 14, 1996, the Company conducted a private placement bridge
financing in which 39 investors invested an aggregate of $1,300,000 for
Unsecured Subordinated Promissory Notes (convertible into 469,300 shares of the
Company's Common Stock). Of such 469,300 shares, 223,000 shares were sold as
part

II-2
78

of the Initial Public Offering, and the remaining 246,300 shares were listed as
additional registered shares in the Prospectus relating thereto.

Effective January 8, 1997 the Company issued $6,000,000 in aggregate, of 9%
seven-year convertible debentures to Renaissance Capital Growth Income Fund III,
Inc. and Renaissance US Growth & Income Trust PLC (together "Renaissance"). Net
proceeds to the Company after payment of a 6% brokerage commission to Joseph
Charles & Associates, Inc. and fees to Renaissance and its attorneys were
$5,450,000. The debentures are convertible into 923,077 shares of the Company's
Common Stock based on a conversion price of $6.50 per share. When any shares of
Common Stock are issued by the Company for consideration per share less than the
then existing conversion price of the Convertible Debentures, then in each such
case the conversion price shall be reduced to a new conversion price equal to
the consideration per share received by the Company for such additional shares
of Common Stock; provided however, that prior to such issuance, the Company may
request the holders to waive the right to an adjustment of the conversion price
and in the event such waiver is not granted by the holders, the Company shall
have the right, prior to the issuance of such additional shares, to redeem the
Convertible Debenture at 120% of face value. The number of shares of Common
Stock into which the debentures are convertible are also subject to adjustment
for certain changes in capital structure and other events. The indebtedness must
be repaid in part each month beginning December 1999, in the amount of 1% of the
then unpaid balance and in full at December 31, 2003. The Company has the right
to prepay all or part of such indebtedness in certain events at 120% of their
original $6,000,000 face value.

For its assistance with the Renaissance financing, the Company issued to
Joseph Charles & Associates, Inc. a warrant to purchase an aggregate of 150,000
shares of Common Stock at an exercise price of $8.00 per share. Such warrant
expires on January 8, 2002. Holders of such warrants possess certain demand and
incidental registration rights that may require the Company to register for
public resale the shares of Common Stock issuable thereunder.

Exemption from registration under the Securities Act is claimed for the
sale of all of the securities set forth above in reliance upon the exemption
afforded by Section 4(2) of the Securities Act and, in the case of Promissory
Notes sold on February 14, 1996, Regulation D under the Securities Act, for
transactions not involving a public offering. Each certificate evidencing such
shares of Common Stock, Promissory Notes and Convertible Debentures originally
bore, and some continue to bear, bears an appropriate restrictive legend, and
"stop transfer" orders were originally (and some shares still are) maintained on
the Company's stock transfer records for such shares of Common Stock.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

EXHIBIT
NUMBER
- --------

II-3
79

EXHIBIT
NUMBER
- --------

5.1 Opinion, with consent, of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP,
counsel for the Registrant(1)
10.1 Amended and Restated 1995 Stock Option Plan (3)
10.2 Employment Agreement by and between the Company and Jack Friedman dated January 1,
1997 (3)
10.3 Employment Agreement by and between the Company and Stephen G. Berman dated January
1, 1997 (3)
10.4 Asset Purchase Agreement dated October 19, 1995 (as of July 1, 1995) between the
Company, JP (HK) Limited and Justin (2)
10.5 Convertible Loan Agreement by and between the Company and Renaissance Capital Growth
& Income Fund III, Inc. and Renaissance US Growth & Income Trust PLC dated December
31, 1996 (3)
10.6 Purchase Agreement among JAKKS Pacific, Inc. and JAKKS Acquisition Corp. and Road
Champs, Inc., Road Champs Ltd. and Die Cast Associates, Inc. and the shareholders of
Road Champs, Inc. for the purchase of all of the shares of stock of Road Champs,
Inc. and Road Champs Ltd. and the operating assets of Die Cast Associates, Inc.
dated January 21, 1997 (4)
10.7.1 Lease of the Company's offices at 24955 Pacific Coast Highway, Malibu, California
(2)
10.7.2 Amendment to Lease of Company's offices at 24955 Pacific Coast Highway, Malibu,
California (1)
10.8 Lease of the Company's warehouse space at 7 Patton Drive, West Caldwell, New Jersey
and amendment thereto(4)(P)
10.9 Lease of the Company's showroom at the Toy Center South, 200 Fifth Avenue, New York,
New York (2)
10.10 Lease of the Company's showroom at the Toy Center North, 1107 Broadway, New York,
New York (4)(P)
10.11 Lease of the Company's office space at the Peninsula Center, 67 Mody Road,
Tsimshatsui East, Kowloon, Hong Kong (1)
10.12.1 License Agreement with Titan Sports, Inc. dated October 24, 1995 (2)
10.12.2 Amendments to License Agreement with Titan Sports, Inc. dated April 22, 1996 and
January 21, 1997 (1)
10.12.3 International License Agreement with Titan Sports, Inc. dated February 24, 1997(1)
10.13 License Agreement with Saban Merchandising, Inc. and Saban International N.V. with
amendment dated (1)
10.14 License Agreement with Wow Wee International dated June 1, 1996 (1)
10.15 Agreement with Quantum Toy Concepts Pty, Ltd. dated July 1996 (1)
21 Subsidiaries of the Company (1)
23.1 Consent of Pannell Kerr Forster, Certified Public Accountants, A Professional
Corporation, Los Angeles, California (1)
23.2 Consent of Pannell Kerr Forster PC, New York, New York (1)
23.3 Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP (included in Exhibit
5.1) (1)
24 Power of Attorney (included in Part II to this Registration Statement) (1)
27 Financial Data Schedule (3)

- ---------------

(1) Filed herewith.

(2) Filed previously as an exhibit to the Company's Registration Statement on
Form SB-2 (File no. 333-2048-LA) dated May 1, 1996, and incorporated herein
by reference in its entirety.

II-4
80

(3) Previously filed as part of this Registration Statement on Form SB-2.

(4) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed February 21, 1997 or as schedule 4.2(iii) thereto.

(B) FINANCIAL STATEMENT SCHEDULES

All schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.

ITEM 28. UNDERTAKINGS

The Registrant hereby undertakes:

(1) That for purposes of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(b) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in the volume of securities offered
(or if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in "Calculation
of Registration Fee," table in the effective registration statement; and

(4) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable.

In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

II-5
81

POWER OF ATTORNEY

The Registrant and each person whose signature appears below hereby
appoints Joel M. Bennett as attorney-in-fact with full power of substitution, to
execute in the name and on behalf of the Registrant and each such person,
individually and in each capacity stated below, one or more amendments
(including post-effective amendments) to this Registration Statement as the
attorney-in-fact acting in the premises deems appropriate and to file any such
amendment to this Registration Statement with the Commission.

II-6
82

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Malibu, California, on the 11th day of April 1997.

JAKKS PACIFIC, INC.

By: /s/ JACK FRIEDMAN
------------------------------------
Jack Friedman
President

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated:

SIGNATURE TITLE DATE
- ----------------------------------------------- ----------------------------- ---------------

/s/ JACK FRIEDMAN Chairman, Chief Executive April 11, 1997
- ----------------------------------------------- Officer (Principal Executive
Jack Friedman Officer) and President

/s/ STEPHEN G. BERMAN Chief Operating Officer, April 11, 1997
- ----------------------------------------------- Executive Vice President,
Stephen G. Berman Secretary and Director

/s/ JOEL M. BENNETT Chief Financial Officer April 11, 1997
- ----------------------------------------------- (Principal Financial and
Joel M. Bennett Accounting Officer)

/s/ MICHAEL G. MILLER Director April 11, 1997
- -----------------------------------------------
Michael G. Miller

/s/ MURRAY L. SKALA Director April 11, 1997
- -----------------------------------------------
Murray L. Skala

/s/ ROBERT E. GLICK Director April 11, 1997
- -----------------------------------------------
Robert E. Glick

II-7
83

EXHIBIT INDEX

EXHIBIT
NUMBER
- --------

1.1 Form of Underwriting Agreement (1)
3.1 Restated Certificate of Incorporation of the Company (2)
3.2.1 By-Laws of the Company (2)
3.2.2 Amendment to By-Laws of the Company (3)
4.1 Form of certificate evidencing shares of Common Stock (2)
4.2 JAKKS Pacific, Inc. 9.00% Convertible Debenture issued to Renaissance Capital Growth
& Income Fund III, Inc. dated December 31, 1996 (3)
4.3 JAKKS Pacific, Inc. 9.00% Convertible Debenture issued to Renaissance US Growth &
Income Trust PLC dated December 31, 1996 (3)
4.4 Form of Warrant for 119,000 shares of Common Stock of the Company issuable to the
Representative, to be dated the date of the Prospectus (1)
5.1 Opinion, with consent, of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP,
counsel for the Registrant (1)
10.1 Amended and Restated 1995 Stock Option Plan (3)
10.2 Employment Agreement by and between the Company and Jack Friedman dated January 1,
1997 (3)
10.3 Employment Agreement by and between the Company and Stephen G. Berman dated January
1, 1997 (3)
10.4 Asset Purchase Agreement dated October 19, 1995 (as of July 1, 1995) between the
Company, JP (HK) Limited and Justin (2)
10.5 Convertible Loan Agreement by and between the Company and Renaissance Capital Growth
& Income Fund III, Inc. and Renaissance US Growth & Income Trust PLC dated December
31, 1996 (3)
10.6 Purchase Agreement among JAKKS Pacific, Inc. and JAKKS Acquisition Corp. and Road
Champs, Inc., Road Champs Ltd. and Die Cast Associates, Inc. and the shareholders of
Road Champs, Inc. for the purchase of all of the shares of stock of Road Champs,
Inc. and Road Champs Ltd. and the operating assets of Die Cast Associates, Inc.
dated January 21, 1997 (4)
10.7.1 Lease of the Company's offices at 24955 Pacific Coast Highway, Malibu, California
(2)
10.7.2 Amendment to Lease of Company's offices at 24955 Pacific Coast Highway, Malibu,
California (1)
10.8 Lease of the Company's warehouse space at 7 Patton Drive, West Caldwell, New Jersey
and amendment thereto(4)(P)
10.9 Lease of the Company's showroom at the Toy Center South, 200 Fifth Avenue, New York,
New York (2)
10.10 Lease of the Company's showroom at the Toy Center North, 1107 Broadway, New York,
New York (4)(P)
10.11 Lease of the Company's office space at the Peninsula Center, 67 Mody Road,
Tsimshatsui East, Kowloon, Hong Kong (1)
10.12.1 License Agreement with Titan Sports, Inc. dated October 24, 1995 (2)
10.12.2 Amendments to License Agreement with Titan Sports, Inc. dated April 22, 1996 and
January 21, 1997 (1)

EXHIBIT
NUMBER
- --------

10.12.3 International License Agreement with Titan Sports, Inc. dated February 24, 1997(1)
10.13 License Agreement with Saban Merchandising, Inc. and Saban International N.V. with
amendment dated (1)
10.14 License Agreement with Wow Wee International dated June 1, 1996 (1)
10.15 Agreement with Quantum Toy Concepts Pty, Ltd. dated July 1996 (1)
21 Subsidiaries of the Company (1)
23.1 Consent of Pannell Kerr Forster, Certified Public Accountants, A Professional
Corporation, Los Angeles, California (1)
23.2 Consent of Pannell Kerr Forster PC, New York, New York (1)
23.3 Consent of Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP (included in Exhibit
5.1) (1)
24 Power of Attorney (included in Part II to this Registration Statement) (1)
27 Financial Data Schedule (3)

- ---------------

(1) Filed herewith.

(2) Filed previously as an exhibit to the Company's Registration Statement on
Form SB-2 (File no. 333-2048-LA) dated May 1 1996, and incorporated herein
by reference in its entirety.

(3) Previously filed as part of this Registration Statement on Form SB-2.

(4) Filed previously as an exhibit to the Company's Current Report on Form 8-K,
filed February 21 1997 or as schedule 4.2(iii) thereto.

   1
                                                                    EXHIBIT 1.1


                              JAKKS PACIFIC, INC.
                               1,800,000 Shares1
                                  Common Stock
                                                          UNDERWRITING AGREEMENT
                                                                 April ___, 1997
CRUTTENDEN ROTH INCORPORATED
As Representative of the Several Underwriters
18301 Von Karman, Suite 100
Irvine,  California  92715
Dear Sirs:


         JAKKS Pacific, Inc., a Delaware corporation (the "Company"), the
persons named in Schedule 1-A hereto (the "Management Selling Stockholders")
and the persons named in Schedule 1-B hereto (the "Non-Management Selling
Stockholders") hereby confirm their agreement with the several underwriters
named in Schedule 2 hereto (the "Underwriters"), for whom you have been duly
authorized to act as representative (in such capacity, the "Representative"),
as set forth below.  If you are the only Underwriters, all references herein to
the Representative shall be deemed to be to the Underwriters.  The Management
Selling Stockholders and the Non-Management Selling Stockholder are each
referred to herein as a "Selling Stockholder" and are collectively referred to
herein as the "Selling Stockholders."

                 1.       Securities.  Subject to the terms and conditions
herein contained, the Company and the Selling Stockholders severally propose to
sell to the several Underwriters an aggregate of 1,800,000 shares (the "Firm
Securities") of the Company's Common Stock, $.001 par value per share (the
"Common Stock").  The Firm Securities consist of 1,700,000 shares of Common
Stock to be issued and sold by the Company and 100,000 shares of Common Stock
to be sold by the Selling Stockholders.  The Company and the Selling
Stockholders also severally propose to sell to the several Underwriters not
more than 270,000 additional shares of Common Stock if requested by the
Representative as provided in Section 3 of this Agreement.  Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such option are
referred to herein as the "Option Securities."  The Option Securities, if any,
consist of up to 250,000 shares of Common Stock to be issued and sold by Jack
Friedman and up to 20,000 shares of Common Stock to be sold by Stephen Berman.
The Firm Securities and any Option Securities are collectively referred to
herein as the "Securities."

                 2.       Representations and Warranties of the Company and
                          Selling Stockholders.

                 (a)      The Company and each of the Management Selling
Stockholders jointly and severally represent and warrant to, and agree with,
each of the several Underwriters that:





__________________________________

     (1) Plus an option to purchase up to 270,000 additional shares to cover
over-allotments, if any.
   2

         (i)     registration statement on Form SB-2 (File No. 333-22583) with
respect to the Securities, including a prospectus subject to completion, has
been filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), and one
or more amendments to such registration statement may have been so filed.
After the execution of this Agreement, the Company will file with the
Commission either (A) if such registration statement, as it may have been
amended, has been declared by the Commission to be effective under the Act,
either (1) if the Company relies on Rule 434 under the Act, a Term Sheet (as
hereinafter defined) relating to the Securities, that shall identify the
Preliminary Prospectus (as hereinafter defined) that it supplements containing
such information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (2) if the Company does not rely on Rule 434 under the Act, a
prospectus in the form most recently included in an amendment to such
registration statement (or, if no such amendment shall have been filed, in such
registration statement), with such changes or insertions as are required by
Rule 430A under the Act or permitted by Rule 424(b) under the Act, and in the
case of either clause (A)(1) or (A)(2) of this sentence, as have been provided
to and approved by the Representative prior to the execution of this Agreement,
or (B) if such registration statement, as it may have been amended, has not
been declared by the Commission to be effective under the Act, an amendment to
such registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representative prior to the
execution of this Agreement.  The Company may also file a related registration
statement with the Commission pursuant to Rule 462(b) under the Act for the
purpose of registering certain additional Securities, which registration
statement shall be effective upon filing with the Commission.  As used in this
Agreement, the term "Original Registration Statement" means the registration
statement initially filed relating to the Securities, as amended at the time
when it was or is declared effective, including all financial schedules and
exhibits thereto and including any information omitted therefrom pursuant to
Rule 430A under the Act and included in the Prospectus (as hereinafter
defined); the term "Rule 462(b) Registration Statement" means any registration
statement filed with the Commission pursuant to Rule 462(b) under the Act
(including the Registration Statement and any Preliminary Prospectus or
Prospectus incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the Original
Registration Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus subject to completion filed with
such registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); the term
"Prospectus" means:  (x) if the Company relies on Rule 434 under the Act, the
Term Sheet relating to the Securities that is first filed pursuant to Rule
424(b)(7) under the Act, together with the Preliminary Prospectus identified
therein that such Term Sheet supplements; (y) if the Company does not rely on
Rule 434 under the Act, the prospectus first filed with the Commission pursuant
to Rule 424(b) under the Act; or (z) if the Company does not rely on Rule 434
under the Act and if no prospectus is required to be filed pursuant to Rule
424(b) under the Act, the prospectus included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the requirements
of Rule 434 under the Act.  Any reference herein to the "date" of a Prospectus
that includes a Term Sheet shall mean the date of such Term Sheet.

         (ii)    The Commission has not issued or, to the best knowledge of the
Company, threatened or contemplated any order preventing or suspending the use
of any Preliminary Prospectus; no stop order suspending the sale of the
Securities in any jurisdiction has been issued



                                       2
   3

and no proceedings for that purpose are pending or, to the best knowledge of
the Company, threatened or contemplated, and any request of the Commission for
additional information (to be included in the Registration Statement, any
Preliminary Prospectus or the Prospectus or otherwise) has been complied with.
When any Preliminary Prospectus was filed with the Commission it (A) contained
all statements required to be stated therein in accordance with, and complied
in all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  When the Registration Statement or any
amendment thereto was or is declared effective, it (A) contained or will
contain all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements of, the
Act and the rules and regulations of the Commission thereunder and (B) did not
or will not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.  When
the Prospectus or any Term Sheet that is a part thereof or any amendment or
supplement to the Prospectus is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or any part thereof or such amendment or
supplement is not required to be so filed, when the Registration Statement or
the amendment thereto containing such amendment or supplement to the Prospectus
was or is declared effective) and on the Firm Closing Date and any Option
Closing Date (both as hereinafter defined), the Prospectus, as amended or
supplemented at any such time, (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will comply
in all material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (B) did not or will not include
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  The foregoing
provisions of this paragraph (ii) do not apply to statements or omissions made
in any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representative specifically for use therein.

         (iii)   If the Company has elected to rely on Rule 462(b), (A) the
Company has filed a Rule 462(b) Registration Statement in compliance with Rule
462(b), which is effective upon filing pursuant to Rule 462(b), and has
received confirmation of its receipt and (B) the Company has given irrevocable
instructions for transmission of the applicable filing fee in connection with
the filing of the Rule 462(b) Registration Statement, in compliance with Rule
111 promulgated under the Act or the Commission has received payment of such
filing fee.

         (iv)    The Company and each of its subsidiaries have been duly
organized and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation and are duly qualified
to transact business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified does not result
in a material adverse change in the condition (financial or otherwise),
business, prospects, net worth or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").





                                       3
   4

         (v)     The Company and each of its subsidiaries have full power
(corporate and other) to own or lease their respective properties and conduct
their respective businesses as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus); the Company has full power (corporate and other) and
authority to enter into this Agreement and to carry out all the terms and
Provisions hereof to be carried out by it; and the Company has full power
(corporate and other) and authority to execute and deliver the warrants to
purchase Common Stock to be issued and sold to the Representative under the
terms of the Warrant Agreement (as hereinafter defined) in accordance with
Section 5(o) hereto (the "Representative's Warrants").

         (vi)    The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
nonassessable and are owned beneficially by the Company free and clear of any
security interests, liens, encumbrances, equities or claims.  The Warrant
Agreement and the Representative's Warrants, as of the Closing Date, will have
been duly authorized and validly issued, and when executed and delivered by the
Company will be valid and binding obligations enforceable against the Company
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles.
The Common Stock issuable pursuant to the Representative's Warrants, when
issued in accordance with the terms thereof, will be duly authorized, validly
issued, fully paid and nonassessable.  The Representative's Warrants and the
shares of Common Stock issuable thereunder were not and will not be issued in
violation of any preemptive rights of any security holder of the Company.  The
Company has reserved a sufficient number of shares of Common Stock for issuance
pursuant to the Representative's Warrants.  The holders of the Common Stock
issuable pursuant to the Representative's Warrants will not be subject to
personal liability solely by reason of being such holders.  The issuance and
sale of the Common Stock pursuant to the Representative's Warrants will be made
in conformity with the applicable registration requirements or exemptions
therefrom under federal and applicable state securities law.

         (vii)   The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).  All of the issued shares
of capital stock of the Company have been duly authorized and validly issued
and are fully paid and nonassessable.  The Firm Securities and the Option
Securities have been duly authorized and at the Firm Closing Date or the
related Option Closing Date (as the case may be), after payment therefor in
accordance herewith, will be validly issued, fully paid and nonassessable.  At
the Firm Closing Date or the Option Closing Date, no holders of outstanding
shares of capital stock of the Company will be entitled as such to any
preemptive or other rights to subscribe for any of the Securities, and no
holder of securities of the Company has any right which has not been fully
exercised or waived to require the Company to register the offer or sale of any
securities owned by such holder under the Act in the public offering
contemplated by this Agreement.

         (viii)  The capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), and
this Agreement, the Warrant Agreement and the Representative's Warrants conform
in all material respects to the descriptions thereof contained in





                                       4
   5

the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).



         (ix)    Except as disclosed in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there are no
outstanding (A) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of the
Company or any such subsidiary, (B) warrants, rights or options to subscribe
for or purchase from the Company or any such subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares of
capital stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options.  The information in the Registration
Statement and the Prospectus insofar as it relates to the Representative's
Warrants, in each case as of the date on which the Registration Statement is
declared effective by the Commission, the Closing Date and any Option Closing
Date, is true, correct and complete in all material respects.

         (x)     The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus) fairly present the financial position of
the Company and its consolidated subsidiaries and the results of operations and
cash flows as of the dates and periods therein specified.  The combined
financial statements and schedules of Road Champs, Inc., Die Cast Associates,
Inc. and their consolidated subsidiaries (collectively, "Road Champs") included
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) fairly present the
financial position of Road Champs and the results of operations and cash flows
as of the dates and periods therein specified.  Such financial statements and
schedules have been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved
(except as otherwise noted therein).  The selected financial data set forth
under the captions "Summary Consolidated Financial Data" and "Capitalization"
in the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, in accordance with GAAP, as applicable,
on the basis stated in the Prospectus (or such Preliminary Prospectus), the
information included therein.  No other financial statements or schedules are
required to be included in the Registration Statement.

         (xi)    Pannell Kerr Forster, P.C., which has audited certain
financial statements of the Company and its consolidated subsidiaries and Road
Champs and its consolidated subsidiaries and delivered their report with
respect to the audited consolidated financial statements and audited combined
financial statements included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), are independent public accountants as required by the Act and the
applicable rules and regulations thereunder.

         (xii)   The execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrants have been duly authorized by the
Company; this Agreement, the Warrant Agreement and the Representative's
Warrants have been duly executed and delivered by the Company and are the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by the effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to rights and remedies of creditors or by general
equitable principles.

         (xiii)   No legal or governmental proceedings are pending to which the
Company or





                                       5
   6

any of its subsidiaries is a party or to which the property of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus),
and, to the Company's knowledge, no such proceedings have been threatened
against the Company or any of its subsidiaries or with respect to any of their
respective properties; and no contract or other document is required to be
described in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described therein (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus) or
filed as required.

         (xiv)   The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement and of the
Representative's Warrants to the Representative by the Company pursuant to the
Warrant Agreement; the execution and delivery of this Agreement, the Warrant
Agreement and the Representative's Warrants by the Company; the compliance by
the Company with the provisions of this Agreement, the Warrant Agreement and
the Representative's Warrants; and the consummation of all transactions
contemplated therein do not (A) require the consent, approval, authorization,
registration or qualification of or with any court, government or governmental
authority, domestic or foreign, except such as have been obtained, such as may
be required under state securities or blue sky laws, such as may be required by
the National Association of Securities Dealers, Inc. (the "NASD") and, if the
Registration Statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under the Act,
or (B) conflict with or result in a breach or violation of any of the terms and
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties are bound, or the charter documents or
by-laws of the Company or any of its subsidiaries, or any statute or any
judgment, decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to the Company or any of its
subsidiaries, which would have a Material Adverse Effect.

         (xv)    Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), neither the
Company nor any of its subsidiaries has sustained any loss or interference with
their respective businesses or properties having or resulting in a Material
Adverse Effect from fire, flood, hurricane, accident or other calamity, whether
or not covered by insurance, or from any labor dispute or any legal or
governmental proceeding and there has not been any event, circumstance, or
development that results in, or that the Company believes would result in, a
Material Adverse Effect, except in each case as described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus).

         (xvi)   The Company has not, directly or indirectly (except for the
sale of Securities under this Agreement), (i) taken any action designed to
cause or to result in, or that has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities or
(ii) since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, the
Securities or (B) paid or agreed to pay to any person





                                       6
   7

any compensation for soliciting another to purchase any other securities of the
Company.

         (xvii)  (a) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses except
where the failure to possess any such item would not have a Material Adverse
Effect, and (b) neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit that, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a Material
Adverse Effect, except as described in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus).

         (xviii) The Company is not an investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and this transaction will not
cause the Company to become an investment company subject to registration under
the 1940 Act.

         (xix)   The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a Material
Adverse Effect) and has paid all taxes required to be paid by it and any other
assessment, fine or penalty levied against it, to the extent that any of the
foregoing is due and payable, except for any such assessment, fine or penalty
that is currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).

         (xx)    Except for the shares of capital stock of each of the
subsidiaries owned by the Company, neither the Company nor any such subsidiary
owns any shares of stock or any other equity securities of any corporation or
has any equity interest in any firm, partnership, association or other entity.
All shares of stock or other equity securities of the subsidiaries are
wholly-owned directly or indirectly by the Company.

         (xxi)   The books, records and accounts of the Company and each of its
subsidiaries accurately and fairly reflect, in reasonable detail, the
transactions in and dispositions of the assets of the Company and each of its
subsidiaries, respectively.  The books, records and accounts of Road Champs and
each of its subsidiaries accurately and fairly reflect, in reasonable detail,
the transactions in and dispositions of the assets of Road Champs and each of
its subsidiaries, respectively.  The Company, Road Champs and each of their
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

         (xxii)  Except as described in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), no default exists and no event has occurred that, with
notice or lapse of time or both, would constitute a default, in the due
performance and observance of any term, covenant or condition of any contract,
indenture, mortgage, deed of trust, lease or other agreement or instrument to
which the Company or any of





                                       7
   8

its subsidiaries is a party or by which the Company or any of its subsidiaries
or any of their respective properties is bound or may be affected, in any
respect that would have a Material Adverse Effect.  The agreements to which the
Company or any of its subsidiaries is a party described in the Registration
Statements are valid agreements, enforceable by the Company or such subsidiary,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and,
to the best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements.

         (xxiii) The Company has not distributed and, prior to the later of (A)
the Firm Closing Date or any Option Closing Date and (B) the completion of the
distribution of the Securities, will not distribute any written offering
material in connection with the offering and sale of the Securities other than
the Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or Term Sheet or any amendment or supplement
thereto, or other materials, if any, permitted by the Act.

         (xxiv)  The description of the Company's and its subsidiaries' real
property contained in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus), is
true and complete in all material respects and the Company and its subsidiaries
have good and marketable title to all real and personal property owned by each
of them, in each case free and clear of any security interests, liens,
encumbrances, equities, claims and other defects, except for those relating to
debts of the Company or such subsidiary described in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and those that do not interfere with the use made or
proposed to be made of such property by the Company or such subsidiary, and any
real property and buildings held under lease by the Company or any such
subsidiary are held under valid, subsisting and enforceable leases (except as
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to rights and
remedies of creditors or by general equitable principles), with such exceptions
as are not material and do not interfere with the use made or proposed to be
made of such property and buildings by the Company or such subsidiary, in each
case except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).  The
Company and its subsidiaries own or lease all such properties as are necessary
to its operations as now conducted and as described in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).

         (xxv)   No labor dispute with the employees of the Company or any of
its subsidiaries exists or to the Company's knowledge, is threatened or
imminent that could result in a Material Adverse Effect, except as described in
or contemplated by the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus), and the Company is not aware of an
existing, imminent or threatened labor disturbance by the employees of any
principal suppliers, manufacturers, contractors or others that that could
result in a Material Adverse Effect, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).

         (xxvi)  The Company and its subsidiaries own or possess all material
trademarks,





                                       8
   9

service marks, trade names, licenses, copyrights and proprietary or other
confidential information currently employed by them in connection with their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of infringement of or conflict with asserted rights of any
third party with respect to any of the foregoing which, singly or in the
aggregate, if the subject of unfavorable decisions, rulings or findings, would
have a Material Adverse Effect, except as described in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus).
The description of the Company's licensing and marketing agreements contained
in the Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), is true and complete in
all material respects.  All such licensing and marketing agreements are valid,
binding and in full force and effect and neither the Company nor any subsidiary
is, or has received any notice that it is, in default (or with the giving of
notice or lapse of time or both, would be in default) under any such licensing
or marketing agreements.

         (xxvii) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which
they are engaged; and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in existence, the
most recent Preliminary Prospectus).

         (xxviii)  The Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and is quoted on the Nasdaq Small Cap and, upon completion of the Offering,
will be quoted on the Nasdaq National Market, and the Company has taken no
action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq Small Cap or that could in the future cause the Common
Stock to be delisted from the Nasdaq National Market, nor has the Company
received any notification that the Commission or NASD is contemplating
terminating such registration or listing.  The Company has timely filed all
reports required to be filed by it under the Exchange Act.

         (xxix)  The Company has not at any time during the last five (5) years
(A) made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (B) made any
payment to any federal or state governmental officer or official, or other
person charged with similar public or quasi-public duties, other than payments
required or permitted by the laws of the United States or any jurisdiction
thereof.

         (xxx)   Any pro forma financial or other information and related notes
included in the Registration Statement, each Preliminary Prospectus and the
Prospectus comply (or, if the Prospectus has not been filed with the
Commission, as to the Prospectus, will comply) in all material respects with
the requirements of the Act and the rules and regulations of the Commission
thereunder and present fairly the pro forma information shown, as of the dates
and for the periods covered by such pro forma information.  Such pro forma
information, including any related notes and schedules, has been prepared on a
basis consistent with the historical financial statements and other historical
information, as applicable, included in the Registration





                                       9
   10

Statement, the Preliminary Prospectus and the Prospectus, except for the pro
forma adjustments specified therein, and give effect to assumptions made on a
reasonable basis to give effect to historical and, if applicable, proposed
transactions described in the Registration Statement, each Preliminary
Prospectus and the Prospectus.

         (xxxi)  Except as set forth in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), there are no
outstanding loans, advances or guaranties of indebtedness by the Company or its
subsidiaries to or for the benefit of any of (i) its "affiliates," as such term
is defined in the Act and the rules and regulations thereof or (ii) any of the
members of the families of any of them.

         (xxxii) The Company and its subsidiaries have no liability, absolute
or contingent, relating to:  (A) public health or safety; (B) worker health or
safety; (C) product defect or warranty (except, as to product defect or
warranty, as is disclosed in the Registration Statement and Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary Prospectus));
or (D) pollution, damage to or protection of the environment, including,
without limitation, relating to damage to natural resources, emissions,
discharges, releases or threatened releases of hazardous materials into the
environment (including, further without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, use, treatment, storage, generation, disposal,
transport or handling of any hazardous materials.  As used herein, "hazardous
material" includes chemical substances, wastes, pollutants, contaminants,
hazardous or toxic substances, constituents, materials or wastes, whether
solid, gaseous or liquid in nature.

                 (b)      Each of the Selling Stockholders represents and
warrants to, and agrees with, each Underwriter that:

         (i)      Such Selling Stockholder is the lawful owner of the
         Securities to be sold by such Selling Stockholder hereunder and upon
         sale and delivery of, and payment for, such Securities, as provided
         herein, such Selling Stockholder will convey good and marketable title
         to such Securities, free and clear of all liens, encumbrances, equities
         and claims whatsoever.

         (ii)     Such Selling Stockholder has not taken and will not
         take, directly or indirectly, any action designed to or which has
         constituted or which might reasonably be expected to cause or result,
         under the Exchange Act or otherwise, in stabilization or manipulation
         of the price of any security of the Company to facilitate the sale or
         resale of the Securities and has not effected any sales of shares of
         Common Stock which, if effected by the issuer, would be required to be
         disclosed in response to Item 701 of Regulation S-B.

         (iii)   The execution and delivery of this Agreement have been duly
         authorized by such Selling Stockholder, and this Agreement has been
         duly executed and delivered by such Selling Stockholder and is the
         valid and binding agreement of such Selling Stockholder, enforceable
         against such Selling Stockholder in accordance with its terms, except
         as such enforceability may be limited by the effect of bankruptcy,
         insolvency, reorganization, moratorium and other similar laws relating
         to rights and remedies of creditors or by general equitable
         principles.

         (iv)    Certificates in negotiable form for such Selling Stockholder's
         Securities have





                                       10
   11
         been placed in custody, for delivery pursuant to the terms of this
         Agreement, under a Custody Agreement duly authorized, executed and
         delivered by such Selling Stockholders, in the form heretofore
         furnished to you (the "Custody Agreement") with US Stock Transfer
         Corporation of Glendale, California, as Custodian (the "Custodian");
         the Securities represented by the certificates so held in custody for
         each of the Selling Stockholders are subject to the interests
         hereunder of the Underwriters, the Company and the other Selling
         Stockholders, if any; the arrangements for custody and delivery of
         such certificates, made by such Selling Stockholder hereunder and
         under the Custody Agreement, are not subject to termination by any
         acts of such Selling Stockholder, or by operation of law, whether by
         the death or incapacity of such Selling Stockholder or the occurrence
         of any other event; and if any such death, incapacity or any other
         such event shall occur before the delivery of such Securities
         hereunder, certificates for the Securities will be delivered by the
         Custodian in accordance with the terms and conditions of this
         Agreement and the Custody Agreement as if such death, incapacity or
         other event had not occurred, regardless of whether or not the
         Custodian shall have received notice of such death, incapacity or
         other event.

         (v)     No consent, approval, authorization or order of any court or
         governmental agency or body is required for the consummation by such
         Selling Stockholder of the transactions contemplated herein, except
         such as may have been obtained under the Act and such as may be
         required under the blue sky laws of any jurisdiction in connection
         with the purchase and distribution of the Securities by the
         Underwriters and such other approvals as have been obtained.

         (vi)    Neither the sale of the Securities being sold by such Selling
         Stockholder nor the consummation of any other of the transactions
         herein contemplated by such Selling Stockholder or the fulfillment of
         the terms hereof by such Selling Stockholder will conflict with or
         result in a breach or violation of any of the terms and provisions of,
         or constitute a default under, any indenture, mortgage, deed of trust,
         lease or other agreement or instrument to which such Selling
         Stockholder is a party or by which such Selling Stockholder is bound,
         or the charter documents or by-laws of such Selling Stockholder, or
         any statute or any judgment, decree, order, rule or regulation of any
         court or other governmental authority or any arbitrator applicable to
         such Selling Stockholder.

         (vii)   Such Selling Stockholder has delivered to the Representative
         an agreement to the effect that such person or entity will not, except
         to the extent otherwise specifically permitted by the terms of each
         such person's or entity's agreement, directly or indirectly, without
         the prior written consent of the Representative, offer, sell, offer to
         sell, contract to sell, pledge, grant any option to purchase or
         otherwise sell or dispose (or announce any offer, sale, offer of sale,
         contract of sale, pledge, grant of an option to purchase or other sale
         or disposition) of any shares of Common Stock or any securities
         convertible into, or exchangeable or exercisable for, shares of Common
         Stock for a period of 180 days after the date of this Agreement;
         provided, however, that intra-family transfers or transfers to trust
         for estate planning purposes shall not be so restricted.

                 (c)      Any certificate signed by any officer of the Company
or any Selling Stockholder and delivered to the Representative or to counsel
for the Underwriters shall be deemed a representation and warranty by the
Company or such Selling Stockholder, respectively, to each Underwriter, as to
the matters covered thereby.





                                       11
   12



         3.      Purchase, Sale and Delivery of the Securities.

                 (a)      On the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, (i) the Company agrees to issue and sell 1,800,000
Firm Securities, (ii) each of the Selling Stockholders agrees to sell the
number of Firm Securities set forth opposite the name of such Selling
Stockholder in Schedules 1-A or 1-B hereto, and (iii) each of the Underwriters,
severally and not jointly, agrees to purchase from the Company and the Selling
Stockholders, at a purchase price of [$     ] per share, an aggregate number of
Firm Securities set forth opposite the name of such Underwriter in Schedule 2
hereto.  One or more certificates in definitive form for the Firm Securities
that the several Underwriters have agreed to purchase hereunder from the
Company, in such denomination or denominations and registered in such name or
names as the Representative requests upon notice to the Company at least 48
hours prior to the Firm Closing Date, shall be delivered by or on behalf of the
Company to the Representative for the respective accounts of the Underwriters,
against payment by or on behalf of the Underwriters of the aggregate purchase
price therefor by wire transfer in same day funds (the "Wired Funds") to the
account of the Company.  The certificates for the Firm Securities that the
several Underwriters have agreed to purchase hereunder from the Selling
Stockholders shall be delivered in accordance with the terms of the custody
agreement by or on behalf of the Selling Stockholders to the Representative for
the respective accounts of the Underwriters against payment by or on behalf of
the Underwriters of the aggregate purchase price therefor at closing.  Such
delivery of and payment for the Firm Securities shall be made at the offices of
Gibson, Dunn & Crutcher LLP, 2029 Century Park East, Los Angeles, California
90067, at 6:30 A.M., Pacific time, on April __, 1997, or at such other place,
time or date as the Representative and the Company may agree upon or as the
Representative may determine pursuant to Section 9 hereof, such time and date
of delivery against payment being herein referred to as the "Firm Closing
Date."  The Company and the Selling Shareholders will make such certificate or
certificates for the Firm Securities available for checking and packaging by
the Representative at the offices of the Company's transfer agent or registrar
at least 24 hours prior to the Firm Closing Date or, if available, will
coordinate the transfer of the Firm Securities to the Underwriters through the
facilities of the Depository Trust Company.

                 (b)      For the sole purpose of covering any over-allotments
in connection with the distribution and sale of the Firm Securities as
contemplated by the Prospectus, on the basis of the several (and not joint)
covenants and agreements of the Underwriters contained in this Agreement and
subject to the terms and conditions set forth in this Agreement, Jack Friedman
and Stephen Berman hereby grant to the several Underwriters an option to
purchase, severally and not jointly, so many of the Option Securities set forth
opposite the name of such Management Selling Stockholder in Schedules 1-A.  The
purchase price to be paid for any Option Securities shall be the same price per
share as the price per share for the Firm Securities set forth above in
paragraph (a) of this Section 3.  The option granted hereby may be exercised as
to all or any part of the Option Securities from time to time within forty-five
days after the date of the Prospectus (or, if such 45th day shall be a Saturday
or Sunday or a holiday, on the next business day thereafter when the Nasdaq
National Market is open).  The Underwriters shall not be under any obligation
to purchase any of the Option Securities prior to the exercise of such option.
The Representative may from time to time exercise the option granted hereby by
giving notice in writing or by telephone (confirmed within 24 hours in writing)
to the Company and each of the Management Selling Stockholders setting forth
the aggregate number of Option Securities as to which the several Underwriters
are then exercising the option and the date and time for delivery of and
payment for such Option Securities.  Any such date of delivery shall be





                                       12
   13

determined by the Representative but shall not be earlier than two business
days or later than five business days after such exercise of the option and, in
any event, shall not be earlier than the Firm Closing Date.  The time and date
set forth in such notice, or such other time on such other date as the
Representative and the Company may agree upon or as the Representative may
determine pursuant to Section 9 hereof, is herein called the "Option Closing
Date" with respect to such Option Securities.  Upon exercise of the option as
provided herein, the Company and each of the Management Selling Stockholders
shall become obligated to sell to each of the several Underwriters, and,
subject to the terms and conditions herein set forth, each of the Underwriters
(severally and not jointly) shall become obligated to purchase from each of the
Management Selling Stockholders, the same percentage of the total number of the
Option Securities as to which the several Underwriters are then exercising the
option as such Underwriter is obligated to purchase of the aggregate number of
Firm Securities, as adjusted by the Representative in such manner as it deems
advisable to avoid fractional shares.  If the option is exercised as to all or
any portion of the Option Securities, one or more certificates in definitive
form for such Option Securities, and payment therefor, shall be delivered on
the related Option Closing Date in the manner, and upon the terms and
conditions, set forth in paragraph (a) of this Section 3, except that reference
therein to the Firm Securities and the Firm Closing Date shall be deemed, for
purposes of this paragraph 3(b), to refer to such Option Securities and Option
Closing Date, respectively.

                 (c)      It is understood that you, individually and not as
the Representative, may (but shall not be obligated to) make payment on behalf
of any Underwriter or Underwriters for any of the Securities to be purchased by
such Underwriter or Underwriters.  No such payment shall relieve such
Underwriter or Underwriters from any of its or their obligations hereunder.

                 (d)      The Company and each of the Selling Stockholders
hereby acknowledge that the wire transfer by or on behalf of the Underwriters
of the purchase price for any Securities does not constitute closing of a
purchase and sale of the Securities.  Only execution and delivery of a receipt
(by facsimile or otherwise) for the Securities by the Underwriters indicates
completion of the closing of a purchase of the Securities from the Company or
the Selling Stockholders.  Furthermore, in the event that the Underwriters wire
funds to the Company or the Selling Stockholders prior to the completion of the
closing of a purchase of Securities, the Company and each of the Selling
Stockholders hereby acknowledge that until the Underwriters execute and deliver
a receipt for the Securities, by facsimile or otherwise, the Company and each
of the Selling Stockholders will not be entitled to the wired funds and each
shall return the wired funds received by them to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand.  In the event
that the closing of a purchase of Securities is not completed and the wire
funds are not returned by the Company or the Selling Stockholders to the
Underwriters on the same day the wired funds were received by the Company or
the Selling Stockholders, the Company and each of the Selling Stockholders
agree to pay to the underwriters in respect of each day the wire funds are not
returned by it, in same-day funds, interest at the Prime Rate as stated in the
Wall Street Journal on the date hereof on the amount of such wire funds
received by them.

         4.      Offering by the Underwriters.  Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.

         5.      Covenants of the Company.  The Company covenants and agrees
with each of the





                                       13
   14

Underwriters that:



                 (a)      The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, to become effective as promptly as possible.  If required, the
Company will file the Prospectus or any Term Sheet that constitutes a part
thereof and any amendment or supplement thereto with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under the
Act.  During any time when a prospectus relating to the Securities is required
to be delivered under the Act, the Company (i) will comply with all
requirements imposed upon it by the Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the continuance of
sales of or dealings in the Securities in accordance with the provisions hereof
and of the Prospectus, as then amended or supplemented, and (ii) will not file
with the Commission the Prospectus, Term Sheet or the amendment referred to in
the second sentence of Section 2(a)(i) hereof, any amendment or supplement to
such Prospectus, Term Sheet or any amendment to the Registration Statement or
any Rule 462(b) Registration Statement of which the Representative shall not
previously have been advised and furnished with a copy for a reasonable period
of time prior to the proposed filing and as to which filing the Representative
shall not have given its consent.  The Company will prepare and file with the
Commission, in accordance with the rules and regulations of the Commission,
promptly upon request by the Representative or counsel for the Underwriters,
any amendments to the Registration Statement or amendments or supplements to
the Prospectus that may be deemed necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will use its
best efforts to cause any such amendment to the Registration Statement to be
declared effective by the Commission as promptly as possible.  The Company will
advise the Representative, promptly after receiving notice thereof, of the time
when the Registration Statement or any amendment thereto has been filed or
declared effective or the Prospectus or any amendment or supplement thereto has
been filed and will provide to the Representative copies of each such filing.

                 (b)      The Company will advise the Representative, promptly
after receiving notice or obtaining knowledge thereof, of (i) the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement or any
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, (ii) the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, (iii) the institution, threatening or
contemplation of any proceeding for any such purpose, or (iv) any request made
by the Commission for amending the Original Registration Statement or any Rule
462(b) Registration Statement, for amending or supplementing the Prospectus or
for additional information.  The Company will use its best efforts to prevent
the issuance of any such stop order and, if any such stop order is issued, to
obtain the withdrawal thereof as promptly as possible.

                 (c)      The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws of such
jurisdictions as the Representative may designate and will continue such
qualifications in effect for as long as may be necessary to complete the
distribution of the Securities; provided, however, that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to
execute a general consent to service of process in any jurisdiction.  If, after
the public offering of the Securities by the Underwriters and during such
period, the Underwriters propose to vary the terms of offering thereof by
reason of changes in general market conditions or otherwise, the Representative
will advise the Company in writing of the proposed





                                       14
   15

variation and if, in the opinion either of counsel for the Company or counsel
for the Underwriters, such proposed variation requires that the Prospectus be
supplemented or amended, the Company will forthwith prepare and file with the
Commission a supplement to the Prospectus or an amended Prospectus setting
forth such variation.  The Company authorizes the Underwriters and all dealers
to whom any of the Securities may be sold by the Underwriters to use the
Prospectus, as from time to time so amended or supplemented, in connection with
the sale of the Securities in accordance with the applicable provisions of the
Act and the rules and regulations thereunder for such period.

                 (d)      If, at any time prior to the later of (i) the final
date when a prospectus relating to the Securities is required to be delivered
under the Act or (ii) the Option Closing Date, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Prospectus to comply with the
Act or the rules or regulations of the Commission thereunder, the Company will
promptly notify the Representative thereof and, subject to Section 5(a) hereof,
will prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such compliance.

                 (e)      The Company will, without charge, provide (i) to the
Representative and to counsel for the Underwriters a signed copy of the
registration statement originally filed with respect to the Securities and each
amendment thereto (in each case including exhibits thereto) and any Rule 462(b)
Registration Statement, (ii) to each other Underwriter, a conformed copy of
such registration statement and any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so long as
a prospectus relating to the Securities is required to be delivered under the
Act, as many copies of each Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto as the Representative may reasonably request;
without limiting the application of clause (iii) of this sentence, the Company
shall, as soon as practicable following the determination of the public
offering price, deliver to the Underwriters, without charge, as many copies of
the Prospectus and any amendment or supplement thereto as the Representative
may reasonably request for purposes of confirming orders that are expected to
settle on the Firm Closing Date.  The Company will provide or cause to be
provided to each of the Representative, and to each Underwriter that so
requests in writing, a copy of each report on Form SR filed by the Company as
required by Rule 463 under the Act.

                 (f)      If the Company elects to rely on Rule 462(b), the
Company shall both transmit a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 promulgated under the Act by the earlier of (i) 10:00
P.M., Eastern time on the date of this Agreement and (ii) the time
confirmations are sent or given, as specified by Rule 462(b)(2).

                 (g)      The Company, as soon as practicable, will make
generally available to its security holders and to the Representative a
consolidated earnings statement of the Company and its subsidiaries that
satisfies the provisions of Section 11(a) of the Act and Rule 158 thereunder.

                 (h)      The Company will apply the net proceeds from the sale
of the Securities as set forth under "Use of Proceeds" in the Prospectus.





                                       15
   16

                 (i)      The Company will not, directly or indirectly, without
the prior written consent of the Representative on behalf of the Underwriters,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, contract of sale, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or any securities convertible
into, or exchangeable or exercisable for, shares of Common Stock for a period
of 180 days after the date hereof, except pursuant to this Agreement, issuances
pursuant to warrants, options and convertible debentures outstanding prior to
the date hereof, stock options granted under the company's stock option plan to
officers, employees, directors and consultants at an exercise price equal to
fair market value and any stock issued on exercise thereof or issuances in
connection with an acquisition.  If the Company plans to issue any Common Stock
or other securities in connection with an acquisition, the Company shall
provide the Representative with three days' advance written notice of its
intention to so issue such securities including the terms of any such proposed
transaction.

                 (j)      The Company will not, directly or indirectly, (i)
take any action designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or (ii) for a period of 180 days after the date
hereof (A) sell, bid for, purchase, or pay anyone any compensation for
soliciting purchases of, the Securities or (B) pay or agree to pay to any
person any compensation for soliciting another to purchase any other securities
of the Company.  The Company will not, directly or indirectly, without the
prior written consent of the Representative on behalf of the Underwriters,
offer, purchase, offer to purchase, contract to purchase, grant any option to
sell or otherwise purchase or acquire (or announce any offer, purchase, offer
of purchase, contract to purchase, grant of any option to sell or other
purchase or acquisition of) any shares of Common Stock or any securities
convertible into, or exchangeable or exercisable for, shares of Common Stock
for a period of 180 days after the date hereof.

                 (k)      The Company will obtain the lockup agreements
described in Section 7(g) and Section 7(h) hereof prior to the Firm Closing
Date.

                 (l)      The Company will cause the Securities to be duly
included for quotation on the Nasdaq National Market prior to the Firm Closing
Date.  The Company will use its best efforts to ensure that the Securities
remain included for quotation on the Nasdaq National Market following the Firm
Closing Date.

                 (m)      During a period of five years commencing with the
date of this Agreement, the Company will promptly furnish to the Representative
and to each Underwriter who may so request in writing copies of (i) all
periodic and special reports furnished by it to Stockholders of the Company,
(ii) all information, documents and reports filed by it with the Commission,
Nasdaq National Market, any securities exchange or the NASD, (iii) all press
releases and material news items or articles in respect of the Company, its
products or affairs released or prepared by the Company (other than promotional
and marketing materials disseminated solely to customers and potential
customers of the Company in the ordinary course of business) and (iv) any
additional information concerning the Company or its business which the
Representative may reasonably request.

                 (n)      The Company will use its best efforts to maintain
insurance of the types and in the amounts which it deems adequate for its
business consistent with insurance coverage maintained by companies of similar
size and engaged in similar businesses including, but not limited to, general





                                       16
   17

liability insurance covering all real and personal property owned or leased by
the Company and its subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against.

                 (o)      On the Closing Date, the Company will sell to the
Representative, at a purchase price of $0.001 per warrant, warrants to purchase
119,000 shares of Common Stock.  Such Representative's Warrants will be issued
pursuant to the terms of the Warrant Agreement and will have an exercise price
equal to [$_____], subject to adjustment, will be exercisable during the period
beginning on the first anniversary of the Effective Date and ending on the
fifth anniversary of the Effective Date and will contain customary
anti-dilution and registration rights provisions.

         6.      Expenses.  The Company will pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing or other production of documents with respect to
the transactions, including any costs of printing the Registration Statement
originally filed with respect to the Securities and any amendment thereto, any
Rule 462(b) Registration Statement, any Preliminary Prospectus and the
Prospectus and any amendment or supplement thereto, this Agreement and any blue
sky memoranda, (ii) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (iii) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company and the fees and disbursements of counsel to the
Representative, (iv) preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Securities, including transfer agent's and
registrar's fees, (v) the qualification of the Securities under state
securities and blue sky laws, including filing fees and fees and disbursements
of counsel for the Underwriters relating thereto, (vi) the filing fees of the
Commission and the NASD relating to the Securities; (vii) any quotation of the
Securities on the Nasdaq National Market; (viii)  the Company's travel expenses
in connection with meetings with the brokerage community and institutional
investors and expenses associated with hosting such meetings, including meeting
rooms, meals, facilities and ground transportation expenses; and (ix) the cost
of preparing two bound volumes of the public offering documents for the
Representative and its counsel.  If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 11 hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or satisfied
hereunder other than by reason of a default by any of the Underwriters, the
Company will reimburse the Representative upon demand for all reasonable
out-of-pocket expenses (including counsel fees and disbursements) that shall
have been incurred by it in connection with the proposed purchase and sale of
the Securities.  The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions covered
by this Agreement.  If the sale of the Securities provided for herein is
consummated, the Underwriters shall pay all of their own out-of-pocket expenses
(other than fees and disbursements of counsel) and the Company shall have no
obligation therefor.

         7.      Conditions of the Underwriters' Obligations.  The obligations
of the several Underwriters to purchase and pay for the Firm Securities shall
be subject, in the sole discretion of the Representative, to the accuracy of
the representations and warranties of the Company and the Selling Stockholders
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's officers made pursuant





                                       17
   18

to the provisions hereof, to the performance by the Company and the Selling
Stockholders of their covenants and agreements hereunder and to the following
additional conditions:

                 (a)      If the Original Registration Statement or any
amendment thereto filed prior to the Firm Closing Date has not been declared
effective as of the time of execution hereof, the Registration Statement or
such amendment, and if the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement, shall have been declared effective not
later than the earlier of (i) 11:00 A.M., Eastern time, on the date on which
the amendment to the Registration Statement originally filed with respect to
the Securities or to the Registration Statement, as the case may be, containing
information regarding the offering price of the Securities has been filed with
the Commission, and (ii) the time confirmations are sent or given as specified
by Rule 462(b) or, with respect to the Original Registration Statement, such
later time and date as shall have been consented to by the Representative; if
required, the Prospectus or any Term Sheet that constitutes a part thereof and
any amendment or supplement thereto shall have been filed with the Commission
in the manner and within the time period required by Rules 434 and 424(b) under
the Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or threatened or, to the knowledge
of the Company or the Representative, shall be contemplated by the Commission;
and the Company shall have complied with any request of the Commission for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise).

                 (b)      The Representative shall have received an opinion,
dated the Firm Closing Date, of Feder, Kaszovitz, Isaacson, Weber, Skala and
Bass LLP, counsel for the Company, dated the Closing Date (and stating that it
may be relied on by Gibson, Dunn & Crutcher LLP, Underwriter's Counsel, in
rendering their opinion), to the effect that:

                  (i)     the Company and each of its subsidiaries listed in
     Schedule 3 hereto (the "Subsidiaries") have been duly organized and are
     validly existing as corporations in good standing under the laws of their
     respective jurisdictions of incorporation and are duly qualified to
     transact business as foreign corporations and are in good standing under
     the laws of all other jurisdictions where, to counsel's knowledge, the
     ownership or leasing of their respective properties or the conduct of
     their respective businesses requires such qualification, except where the
     failure to be so qualified does not or would not have a Material Adverse
     Effect;

                 (ii)     the Company and each of the Subsidiaries have
     corporate power to own or lease their respective properties and conduct
     their respective businesses as described in the Registration Statement and
     the Prospectus, and the Company has the corporate power to enter into this
     Agreement and to carry out all the terms and provisions hereof to be
     carried out by it;

                (iii)     the issued and outstanding shares of capital stock of
     each of the Subsidiaries have been duly authorized and validly issued, are
     fully paid and nonassessable and are owned by the Company free and clear
     of any perfected security interests (other than those disclosed in the
     Prospectus) and, to such counsel's knowledge, the Prospectus accurately
     describes, to the extent so described, any material corporation,
     association, or other entity owned or controlled, directly or indirectly,
     by the Company;

                 (iv)     the Company has an authorized, issued and outstanding
     capitalization as set forth in the Prospectus; all of the issued and
     outstanding shares of capital stock of the Company





                                       18
   19

     have been duly authorized and validly issued and are fully paid and
     nonassessable, and were not issued in violation of or subject to any
     preemptive rights or other rights to subscribe for or purchase securities;
     the Firm Securities have been duly authorized by all necessary corporate
     action of the Company and, when issued and delivered to and paid for by
     the Underwriters pursuant to this Agreement, will be validly issued, fully
     paid and nonassessable; to counsel's knowledge, no holders of outstanding
     shares of capital stock of the Company are entitled as such to any
     preemptive or other rights to subscribe for any of the Securities; and, to
     such counsel's knowledge, no holders of securities of the Company are
     entitled to have such securities registered under the Registration
     Statement except for those which have been so registered; the statements
     set forth under the heading "Description of Securities" in the Prospectus,
     insofar as such statements purport to summarize certain provisions of the
     capital stock and registration rights of the Company, provide a fair
     summary of such provisions; and the statements set forth under the heading
     "Business--Licensing and Marketing Agreements," "Business--Government and
     Industry Regulation," "Business--Acquisitions," "Indemnification of
     Officers and Directors," "Amended and Restated 1995 Stock Option Plan,"
     "Certain Relationships and Related Transactions," "Shares Eligible for
     Future Sale," "Risk Factors - Shares Eligible for Future Sale," "Risk
     Factors - Government Regulation" and "Risk Factors - Substantial Number of
     Shares Reserved for Future Issuance" in the Prospectus, insofar as such
     statements constitute a summary of the legal matters, documents or
     proceedings referred to therein, provide a fair summary of such legal
     matters, documents and proceedings in all material respects;

                  (v)     the execution and delivery of this Agreement and the
     Warrant Agreement have been duly authorized by all necessary corporate
     action of the Company, and this Agreement and the Warrant Agreement have
     been duly executed and delivered by the Company and, assuming due
     authorization, execution and delivery by you, are binding agreements
     of the Company, enforceable in accordance with their terms, except insofar
     as indemnification provisions may be limited by applicable law and to
     which counsel need not express any opinion and except as enforceability
     may be limited by bankruptcy, insolvency, reorganization, moratorium or
     similar laws relating to or affecting creditors' rights generally or by
     general equitable principles;

                 (vi)     to counsel's knowledge, (A) no legal or governmental
     proceedings are pending to which the Company or any of the Subsidiaries is
     a party or to which the property of the Company or any of the Subsidiaries
     is subject that are required to be described in the Registration Statement
     or the Prospectus and are not described therein, and no such proceedings
     have been threatened against the Company or any of the Subsidiaries or
     with respect to any of their respective properties and (B) no contract or
     other document is required to be described in the Registration Statement
     or the Prospectus or to be filed as an exhibit to the Registration
     Statement that is not described therein or filed as required;

                (vii)     to counsel's knowledge, subsequent to the respective
     dates as of which information is given in the Registration Statement and
     the Prospectus (or, if the Prospectus is not in existence, the most recent
     Preliminary Prospectus), (A) the Company and its Subsidiaries have not
     incurred any material liability or obligation, direct or contingent, nor
     entered into any material transaction not in the ordinary course of
     business; and (B) the Company has not purchased any of its outstanding
     capital stock, nor declared, paid or otherwise made any dividend or
     distribution of any kind on its capital stock, except in each case as
     described in or contemplated by the Prospectus (or, if the Prospectus is
     not in existence, the most recent Preliminary Prospectus);





                                       19
   20

               (viii)     the issuance, offering and sale of the Securities to
     the Underwriters by the Company pursuant to this Agreement and of warrants
     to the Representative by the Company pursuant to the Warrant Agreement;
     the compliance by the Company with the other provisions of this Agreement
     and the Warrant Agreement; and the consummation of the other transactions
     contemplated in such agreements do not (A) require the consent, approval,
     authorization, registration or qualification of or with any governmental
     authority, except such as have been obtained and such as may be required
     under state securities or blue sky laws and by the NASD, or (B) conflict
     with or result in a breach or violation of any of the terms and provisions
     of, or constitute a default under, any material contract, indenture,
     mortgage, deed of trust, lease or other agreement or instrument known to
     such counsel to which the Company or any of the Subsidiaries is a party or
     by which the Company or any of the Subsidiaries or any of their respective
     properties are bound, or the charter documents or by-laws of the Company
     or any of the Subsidiaries, or, so far as it is known to such counsel, any
     statute or any judgment, decree, order, rule or regulation of any court or
     other governmental authority or any arbitrator having jurisdiction over
     the Company or any of the Subsidiaries; and no further approval or
     authorization of the stockholders or the Board of Directors of the Company
     is required for (Y) the issuance and sale of the Securities to be sold by
     the Company or the transfer and sale of the shares of Common Stock to be
     sold by the Selling Stockholders pursuant to this Agreement or (Z) the
     issuance and sale of the shares of Common Stock issuable upon exercise of
     the Warrant Agreement;

                 (ix)     the Registration Statement is effective under the
     Act; any required filing of the Prospectus, or any Term Sheet that
     constitutes a part thereof, pursuant to Rules 434 and 424(b) has been made
     in the manner and within the time period required by Rules 434 and 424(b);
     and, to such counsel's best knowledge, no stop order suspending the
     effectiveness of the Registration Statement or any amendment thereto has
     been issued, and no proceedings for that purpose have been instituted or
     threatened or are contemplated by the Commission;

                  (x)     the Registration Statement originally filed with
     respect to the Securities and each amendment thereto, any Rule 462(b)
     Registration Statement and the Prospectus (in each case, other than the
     financial statements and other financial and statistical information
     contained therein, as to which such counsel need express no opinion)
     comply as to form in all material respects with the applicable
     requirements of the Act and the rules and regulations of the Commission
     thereunder;

                 (xi)     if the Company elects to rely on Rule 434, the
     Prospectus is not "materially different," as such term is used in Rule
     434, from the prospectus included in the Registration Statement at the
     time of its effectiveness or an effective post-effective amendment thereto
     (including such information that is permitted to be omitted pursuant to
     Rule 430A);

                (xii)     the Company is not, and the transactions contemplated
     by this Agreement will not cause the Company to become, an investment
     company subject to registration under the 1940 Act;

               (xiii)     the specimen stock certificate of the Company filed
     as an exhibit to the Registration Statement is in due and proper form to
     evidence shares of Common Stock, has been duly authorized and approved by
     the Board of Directors of the Company and complies with all legal
     requirements applicable under the Delaware General Corporation Law;





                                       20
   21

                (xiv)     the descriptions in the Registration Statement and
     the Prospectus of the charter and bylaws of the Company and of statutes
     are accurate and fairly present the information required to be presented
     by the Act and the applicable rules and regulations (provided that counsel
     need not express any opinion as to their completeness);

                 (xv)     to such counsel's knowledge, except as described in
     the Prospectus, no holders of Common Stock or other securities of the
     Company have registration rights with respect to securities of the
     Company; and

                (xvi)     counsel has no reason to believe that the offer and
     sale of all securities of the Company made within the last three years as
     set forth in Item 26 of the Registration Statements were not exempt from
     the registration requirements of the Securities Act, pursuant to the
     provisions set forth in such Item, and from the registration or
     qualification requirements of all relevant state securities laws.

Such counsel shall also state that such counsel has participated in conferences
with officers and other representatives of the Company, the independent public
accountants of the Company, the Representative and counsel to the Underwriters,
at which conferences the contents of the Registration Statement and the
Prospectus and related matters were discussed and, they have no reason to
believe that the Registration Statement, as of its effective date, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading or that the Prospectus, as of its date or the date of such opinion,
included or includes any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except such counsel need express no view as to the financial
statements and notes thereto, schedules and reports thereon, and other
financial and statistical data included or incorporated by reference in the
Registration Statement or Prospectus).

In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deem(s) proper, on certificates or opinions of
responsible officers of the Company and public officials, and may limit its
opinions to the laws of the United States of America and the States of New York
and Delaware, as appropriate.

References to the Registration Statement and the Prospectus in this paragraph
(b) shall include any amendment or supplement thereto at the date of such
opinion.

                 (c)      The Representative shall have received an opinion,
dated the Firm Closing Date, of Feder, Kaszovitz, Isaacson, Weber, Skala and
Bass LLP, counsel for the Selling Stockholders, dated the Closing Date (and
stating that it may be relied on by Gibson, Dunn & Crutcher LLP, Underwriter's
Counsel, in rendering their opinion), to the effect that:

                  (i)     this Agreement, the Custody Agreement and the
     Power-of-Attorney have been duly authorized, executed and delivered by the
     Selling Stockholders and constitute the legal, valid and binding agreement
     of such Selling Stockholder, enforceable against such Selling Stockholder
     in accordance with its terms, except as such enforceability may be limited
     by the effect of bankruptcy, insolvency, reorganization, moratorium and
     other similar laws relating to rights and remedies of creditors or by
     general equitable principles; and each of the Selling Stockholders has
     full legal right and authority to sell, transfer and deliver in the manner
     provided in this Agreement





                                       21
   22

     and the Custody Agreement the Securities being sold by such Selling 
     Stockholder hereunder;

                 (ii)     the delivery by each of the Selling Stockholders to
     the several Underwriters of certificates for the Securities being sold
     hereunder by such Selling Stockholder against payment therefor as provided
     herein will pass good and marketable title to such Securities to the
     several Underwriters, free and clear of all liens, encumbrances, equities
     and claims whatsoever;

                (iii)     no consent, approval, authorization or order of any
     governmental agency or body or, to such counsel's knowledge, of any court,
     is required for the consummation by any Selling Stockholder of the
     transactions contemplated herein, except such as may have been obtained
     under the Act and such as may be required under the blue sky laws of any
     jurisdiction in connection with the purchase and distribution of the
     Securities by the Underwriters and such other approvals (specified in such
     opinion) as have been obtained;

                 (iv)     neither the sale of the Securities being sold by any
     Selling Stockholder nor the consummation of any other of the transactions
     herein contemplated by any Selling Stockholder nor the fulfillment of the
     terms hereof by any Selling Stockholder will conflict with, result in a
     breach or violation of, or constitute a default under any law or the terms
     of any indenture or other agreement or instrument known to such counsel
     and to which any Selling Stockholder is a party or bound, or any judgment,
     order or decree known to such counsel to be applicable to any Selling
     Stockholder of any court, regulatory body, administrative agency,
     governmental body or arbitrator having jurisdiction over any Selling
     Stockholder; and

                  (v)     there are no transfer or other taxes (other than
     income taxes) known to such counsel payable in connection with the sale
     and delivery of the Securities.

In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deem(s) proper, on certificates or opinions of the
Selling Stockholders and public officials, and may limit its opinions to the
laws of the United States of America and the States of New York and Delaware,
as appropriate.

References to the Registration Statement and the Prospectus in this paragraph
(c) shall include any amendment or supplement thereto at the date of such
opinion.

                 (d)      The Representative shall have received from Pannell
Kerr Forster, P.C. a letter or letters dated, respectively, the date hereof and
the Firm Closing Date, in form and substance satisfactory to the
Representative, to the effect that:

                  (i)     they are independent accountants with respect to the
     Company and its consolidated subsidiaries and Road Champs within the
     meaning of the Act and the applicable rules and regulations thereunder;

                 (ii)     in their opinion, the audited consolidated financial
     statements, the audited combined financial statements and the pro forma
     financial statements examined by them and included in the Registration
     Statement and the Prospectus comply in form in all material respects with
     the applicable accounting requirements of the Act and the related
     published rules and regulations;





                                       22
   23

                (iii)     on the basis of carrying out certain specified
     procedures (which do not constitute an examination made in accordance with
     generally accepted auditing standards) that would not necessarily reveal
     matters of significance with respect to the comments set forth in this
     paragraph (iii), a reading of the minute books of the stockholders, the
     board of directors and any committees thereof of the Company and each of
     its consolidated subsidiaries and Road Champs, and inquiries of certain
     officials of the Company and its consolidated subsidiaries and Road Champs
     who have responsibility for financial and accounting matters, nothing came
     to their attention that caused them to believe that at a specific date not
     more than five business days prior to the date of such letter, there were
     any changes in the capital stock or total debt of the Company and its
     consolidated subsidiaries and Road Champs or any decreases in total assets
     or stockholders' equity of the Company and its consolidated subsidiaries
     and Road Champs, in each case compared with amounts shown on the December
     31, 1996 consolidated balance sheet and on the December 31, 1996 combined
     balance sheet included in the Registration Statement and the Prospectus,
     or for the period from January 1, 1997 to such specified date there were
     any decreases, as compared with the same period in the prior year, in
     total revenues, net income or net income per share, respectively, of the
     Company and its consolidated subsidiaries and Road Champs, except in all
     instances for changes, decreases or increases set forth in such letter;

                 (iv)     they have carried out certain specified procedures,
     not constituting an audit, with respect to certain amounts, percentages
     and financial information that are derived from the general accounting
     records of the Company and its consolidated subsidiaries and Road Champs
     and are included in the Registration Statement and the Prospectus, and
     have compared such amounts, percentages and financial information with
     such records of the Company and its consolidated subsidiaries and Road
     Champs and with information derived from such records and have found them
     to be in agreement, excluding any questions of legal interpretation; and

                  (v)     their review of the system of internal controls of
     the Company and its consolidated subsidiaries and Road Champs, to the
     extent they deemed necessary in establishing the scope of their
     examination of the Company's financial statements as of December 31, 1996
     and the Road Champs combined financial statements as of December 31, 1996,
     did not disclose any weaknesses in internal controls that they considered
     to be material weaknesses.

                 In the event that the letters referred to above set forth any
such changes, decreases or increases which, in the reasonable discretion of the
Representative, are likely to result in a Material Adverse Effect, it shall be
a further condition to the obligations of the Underwriters that such letters
shall be accompanied by a written explanation of the Company as to the
significance thereof, unless the Representative deem such explanation
unnecessary.

                 References to the Registration Statement and the Prospectus in
this paragraph (d) with respect to either letter referred to above shall
include any amendment or supplement thereto by the date of such letter.

                 (e)      The Representative shall have received a certificate,
dated the Firm Closing Date, of Jack Friedman and Joel M.  Bennett in their
capacities as the Chief Executive Officer and Chief Financial Officer,
respectively, of the Company and as Management Selling Stockholders to the
effect that:

                 (i)     the representations and warranties of the Company in
this Agreement are true





                                       23
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and correct as if made on and as of the Firm Closing Date; the Registration
Statement, as amended as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented as of the Firm Closing Date, does not include any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Firm Closing Date;

                 (ii)     no stop order suspending the effectiveness of the
     Registration Statement or any amendment thereto has been issued, and no
     proceedings for that purpose have been instituted or, to the best of the
     Company's knowledge, threatened or, are contemplated by the Commission;
     and

                (iii)     subsequent to the respective dates as of which
     information is given in the Registration Statement and the Prospectus,
     neither the Company nor any of its subsidiaries has sustained any loss or
     interference with their respective businesses or properties having or
     resulting in a Material Adverse Effect from fire, flood, hurricane,
     accident or other calamity, whether or not covered by insurance, or from
     any labor dispute or any legal or governmental proceeding, and there has
     not been any event, circumstance, or development that results in, or that
     the Company reasonably believes will result in, a Material Adverse Effect,
     except in each case as described in or contemplated by the Prospectus
     (exclusive of any amendment or supplement thereto).

                 (f)      The Representative shall have received a certificate,
dated the Firm Closing Date, of each of the Selling Stockholders, in such
capacity, to the effect that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct as if made on and as of the
Firm Closing Date and that such Selling Stockholder has performed all covenants
and agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to the Firm Closing Date.

                 (g)      The Representative shall have received from each
officer and director of the Company and the persons and entities listed in
Schedule 4 an agreement to the effect that such person or entity will not,
except to the extent otherwise specifically permitted by the terms of each such
person's or entity's agreement, directly or indirectly, without the prior
written consent of the Representative, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of an
option to purchase or other sale or disposition) of any shares of Common Stock
or any securities convertible into, or exchangeable or exercisable for, shares
of Common Stock for a period of 180 days after the date of this Agreement;
provided, however, that intra-family transfers or transfers to trust for estate
planning purposes shall not be so restricted.

                 (h)      The Representative shall have received from each of
the Selling Stockholders an agreement to the effect that such person or entity
will not, except to the extent otherwise specifically permitted by the terms of
each such person's or entity's agreement, directly or indirectly, without the
prior written consent of the Representative, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of an option to purchase or other sale or disposition) of any shares of
Common Stock or any securities convertible into, or exchangeable or exercisable
for, shares of Common Stock for a period of 180 days after the date of this
Agreement; provided, however, that intra-family transfers or transfers to trust
for estate planning purposes shall not be so restricted.





                                       24
   25

                 (i)      On or before the Firm Closing Date, the
Representative and counsel for the Underwriters shall have received such
further certificates, documents or other information as they may have
reasonably requested from the Company.

                 (j)      Upon consummation of the offering of the Securities,
the Securities shall have been included for trading on the Nasdaq National
Market.

                 (k)      The Representative shall have received an opinion,
dated the Firm Closing Date, of Gibson, Dunn & Crutcher LLP, counsel for the
Underwriters, with respect to the issuance and sale of the Firm Securities, the
Registration Statement and Prospectus, and such other related matters as the
Representative may reasonably require, and the Company shall have furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.

                 (l)      The Company shall have executed and delivered a
Warrant Agreement in a form satisfactory to the Representative (the "Warrant
Agreement"), and there shall have been tendered to the Representative all of
the Representative's Warrants described in Section 5(o) hereof to be purchased
by the Representative on the Closing Date.

         All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representative and
counsel for the Underwriters.  The Company shall furnish to the Representative
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representative and counsel for the Underwriters shall
reasonably request.

         The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each of
the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall be deemed to
refer to such Option Securities and the related Option Closing Date,
respectively.

         8.      Indemnification and Contribution.

                 (a)      The Company and the Management Selling Stockholders
jointly and severally agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which such Underwriter or such controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon:

                  (i)     any breach by the Company or any Management Selling
     Stockholder of its representations or warranties set forth in Section 2(a)
     and (b) of this Agreement;

                 (ii)     any untrue statement or alleged untrue statement of
     any material fact contained in (A) the Registration Statement or any
     amendment thereto, any Preliminary Prospectus or the Prospectus or any
     amendment or supplement thereto or (B) any application or other document,
     or any amendment or supplement thereto, executed by the Company or any
     Management Selling Stockholder or based upon written information furnished
     by or on behalf of the Company or any Management Selling Stockholder filed
     in any jurisdiction in order to qualify the Securities under





                                       25
   26

the securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each, an "Application");

                (iii)     the omission or alleged omission to state in the
     Registration Statement or any amendment thereto, any Preliminary
     Prospectus or the Prospectus or any amendment or supplement thereto, or
     any Application, a material fact required to be stated therein or
     necessary to make the statements therein not misleading; or

                 (iv)     any untrue statement or alleged untrue statement of
     any material fact contained in any audio or visual materials produced by
     the Company or any Management Selling Stockholder and used in connection
     with the marketing of the Securities, including without limitation,
     slides, videos, films, tape recordings, and, such party or parties, as the
     case may be, will reimburse, as incurred, each Underwriter and each such
     controlling person for any legal or other expenses reasonably incurred by
     such Underwriter or such controlling person in connection with
     investigating, defending against or appearing as a third-party witness in
     connection with any such loss, claim, damage, liability or action;

provided, however, that the Company or such Management Selling Stockholder will
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement or any amendment thereto, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information furnished to the Company or such
Management Selling Stockholder by any Underwriter through the Representative
specifically for use therein; and provided, further, that the Company or such
Management Selling Stockholder will not be liable to any Underwriter or any
person controlling such Underwriter with respect to any such untrue statement
or omission made in any Preliminary Prospectus that is corrected in the
Prospectus (or any amendment or supplement thereto) if the person asserting any
such loss, claim, damage or liability purchased Securities from such
Underwriter but was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Act, unless such failure to deliver
the Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 5(d) and (e) of this Agreement.  This indemnity
agreement will be in addition to any liability that the Company or any
Management Selling Stockholder may otherwise have.  The Company and the
Management Selling Stockholders shall not, without the prior written consent of
the Representative, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Underwriter or any person who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of all of the Underwriters and such
controlling persons from all liability arising out of such claim, action, suit
or proceeding.

                 Each Non-Management Selling Stockholders severally agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities to
which such Underwriter or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out





                                       26
   27

of or are based upon any breach by such Non-Management Selling Stockholder of
its representations or warranties set forth in Section 2(b) of this Agreement.

                          (b)     Each Underwriter, severally and not jointly,
will indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement, each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act and each of the Selling Stockholders, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer of the Company, controlling person of the Company or Selling
Stockholder may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or any Application or (ii) the omission or the alleged
omission to state therein a material fact required to be stated in the
Registration Statement or any amendment thereto, any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representative specifically for use therein; and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person or Selling
Stockholder in connection with investigating or defending any such loss, claim,
damage, liability or any action in respect thereof.  This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise have.

                 (c)      Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates it has been
irreparably prejudiced by such failure to receive notice.

                 (d)      In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded or shall have been advised by
its counsel that there may be one or more legal defenses available to it and/or
other indemnified parties that conflict with those available to the
indemnifying party, the indemnifying party shall not have the right to direct
the defense of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses, other than reasonable costs of investigation, subsequently
incurred by such indemnified party in connection with the defense





                                       27
   28

thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Representative in the case of
paragraph (a) of this Section 8, representing the indemnified parties under
such paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party.

                 (e)      In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 8 is unavailable or
insufficient, for any reason, to hold harmless an indemnified party in respect
of any losses, claims, damages or liabilities (or actions in respect thereof),
each indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
(i) the relative benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the offering of the
Securities or (ii) if the allocation provided by the foregoing clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
or alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations.  The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters.  The relative fault of
the parties shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances.  The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take into account
the equitable considerations referred to above in this paragraph (d).
Notwithstanding any other provision of this paragraph (e), no Underwriter shall
be obligated to make contributions hereunder that in the aggregate exceed the
total public offering price of the Securities purchased by such Underwriter
under this Agreement, less the aggregate amount of any damages that such
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.  The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and as between themselves, contributions among Underwriters shall be
governed by the provisions of the Representative's Agreement Among
Underwriters.  For the purposes of this paragraph 8(e), each person, if any,
who controls an





                                       28
   29

Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.

         9.      Default of Underwriters.  If one or more Underwriters default
in their obligations to purchase Firm Securities or Option Securities hereunder
and the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, then the other Underwriters may
make arrangements satisfactory to the Representative for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representative), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or
Option Securities that such defaulting Underwriter or Underwriters agreed but
failed to purchase.  If one or more Underwriters so default with respect to an
aggregate number of Securities that is more than ten percent of the aggregate
number of Firm Securities or Option Securities, as the case may be, to be
purchased by all of the Underwriters at such time hereunder, and if
arrangements satisfactory to the Representative are not made within 36 hours
after such default for the purchase by other persons (who may include one or
more of the non-defaulting Underwriters, including the Representative) of the
Securities with respect to which such default occurs, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or
the Company other than as provided in Section 10 hereof.  In the event of any
default by one or more Underwriters as described in this Section 9, the
Representative shall have the right to postpone the Firm Closing Date or the
Option Closing Date, as the case may be, established as provided in Section 3
hereof for not more than seven business days in order that any necessary
changes may be made in the arrangements or documents for the purchase and
delivery of the Firm Securities or Option Securities, as the case may be.  As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section 9.  Nothing herein shall relieve any
defaulting Underwriter from liability for its default.

         10.     Survival.  The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers, the Selling Stockholders and the several Underwriters set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Selling Stockholders, any Underwriter or any controlling person
referred to in Section 8 hereof and (ii) delivery of and payment for the
Securities.  The respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.

         11.     Termination.

                 (a)      This Agreement may be terminated with respect to the
Firm Securities or any Option Securities in the sole discretion of the
Representative by notice to the Company and the Selling Stockholders given
prior to the Firm Closing Date or the related Option Closing Date,
respectively, in





                                       29
   30

the event that the Company or any Selling Stockholders shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at
or prior to the Firm Closing Date or, such Option Closing Date, respectively,

                  (i)     after the respective dates as of which information is
     given in the Registration Statement and the Prospectus, any material
     adverse change or development involving a prospective adverse change in or
     affecting particularly the business, properties, condition (financial or
     otherwise), results of operations or prospects of the Company, whether or
     not arising in the ordinary course of business, occurs which would, in the
     Representative's sole judgment, make the offering or the delivery of the
     Securities impracticable or inadvisable;

                 (ii)     trading in the Common Stock shall have been suspended
     by the Commission or the Nasdaq National Market or minimum or maximum
     prices shall have been established on the Nasdaq National Market;

                 (iii)     a banking moratorium shall have been declared by New
     York or United States authorities; or

                 (iv)     there shall have been (A) an outbreak or escalation
     of hostilities between the United States and any foreign power, (B) an
     outbreak or escalation of any other insurrection or armed conflict
     involving the United States or (C) any other calamity or crisis or material
     adverse change in general economic, political or financial conditions
     having an effect on the U.S. financial markets that, in the sole judgment
     of the Representative, makes it impractical or inadvisable to proceed with
     the public offering or the delivery of the Securities as contemplated by
     the Registration Statement, as amended as of the date hereof.

                 (b)      Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other party except as
provided in Section 10 hereof.

         12.     Information Supplied by Underwriters.  The statements set
forth in (a) the last paragraph on the front cover page of any Preliminary
Prospectus or the Prospectus, (b) under the heading "Underwriting" in any
Preliminary Prospectus or the Prospectus and (c) on page 2 in any Preliminary
Prospectus or the Prospectus pertaining to stabilization (to the extent such
statements relate to the Underwriters) constitute the only information
furnished by any Underwriter through the Representative to the Company for the
purposes of Section 8 hereof.  The Underwriters confirm that such statements
(to such extent) are correct.

         13.     Notices.  All communications hereunder shall be in writing
and, if sent to any of the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission and confirmed in writing to Cruttenden Roth
Incorporated, 18301 Von Karman, Suite 100, Irvine, California  92715; if sent
to the Company, shall be delivered or sent by mail, telex or facsimile
transmission and confirmed in writing to the Company at 24955 Pacific Coast
Highway, #B202 Malibu, California  90265, Attention:  Chief Executive Officer;
and if sent to a Selling Stockholder, shall be delivered or sent by mail, telex
or facsimile transmission and confirmed in writing to such Selling Stockholder
at the address listed opposite such Selling Stockholder's name in Schedules 1-A
or 1-B hereto.

         14.     Successors.  This Agreement shall inure to the benefit of and
shall be binding upon the several Underwriters, the Company, the Selling
Stockholders and their respective successors and legal





                                       30
   31

representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person except that (a) the indemnities of the
Company and the Selling Stockholders contained in Section 8 of this Agreement
shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (b) the indemnities of the Underwriters contained in Section 8
of this Agreement shall also be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration Statement
and any person or persons who control the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and the Selling Stockholders.
No purchaser of Securities from any Underwriter shall be deemed a successor
because of such purchase.

         15.     Applicable Law.  The validity and interpretation of this
Agreement, and the terms and conditions set forth herein, shall be governed by
and construed in accordance with the laws of the State of California, without
giving effect to any provisions relating to conflicts of laws.

         16.     Consent to Jurisdiction and Service of Process.  All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of California,
and by execution and delivery of this Agreement, the Company and the Selling
Stockholders accept for theirself and in connection with their respective
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens and irrevocably
agree to be bound by any judgment rendered thereby in connection with this
Agreement.  The Company designates and appoints Jack Friedman and such other
persons as may hereafter be selected by the Company irrevocably agreeing in
writing to so serve, as its agent to receive on its behalf service of all
process in any such proceedings in any such court, such service being hereby
acknowledged by the Company to be effective and binding service in every
respect.  A copy of any such process so served shall be mailed by registered
mail to the Company at its address provided in Section 13 hereof; provided,
however, that, unless otherwise provided by applicable law, any failure to mail
such copy shall not affect the validity of service of such process.  If any
agent appointed by the Company refuses to accept service, the Company hereby
agrees that service of process sufficient for personal jurisdiction in any
action against the Company in the State of California may be made by registered
or certified mail, return receipt requested, to the Company at its address
provided in Section 13 hereof, and the Company hereby acknowledges that such
service shall be effective and binding in every respect.  Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of any Underwriter to bring proceedings against the Company in
the courts of any other jurisdiction.

         17.     Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.





                                       31
   32
         If the foregoing correctly sets forth our understanding please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, each
of the Selling Stockholders and each of the several Underwriters.



                                        Very truly yours,



                                        JAKKS PACIFIC, INC.

                                        By: _________________________________
                                                    Jack Friedman
                                              Chief Executive Officer



                                            _________________________________
                                                    Jack Friedman


                                            _________________________________
                                                    Stephen Berman


                                             _________________________________
                                                    Murray L. Skala


                                             TRUST FOR BROOKE FRIEDMAN

                                             By: _____________________________
                                                     Murray L. Skala
                                                        Trustee


                                             TRUST FOR TONY FRIEDMAN

                                             By: _____________________________
                                                     Murray L. Skala
                                                        Trustee

                                             EDUCATION TRUST FOR TONY FRIEDMAN

                                             By: ______________________________
                                                     Murray L. Skala
                                                        Trustee





                                       32
   33

The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.




CRUTTENDEN ROTH INCORPORATED





By: _________________________________
    Name: ___________________________
    Title:  _________________________



For itself and as Representative.























                                       33
   34
                                  Schedule 1-A

                        MANAGEMENT SELLING STOCKHOLDERS






                                                 Number of Shares of
                Management                     Underwritten Securities
           Selling  Stockholder                       to be Sold                            Address
- --------------------------------------     -------------------------------   -----------------------------------
                                                                       
 Jack Friedman                             0 Firm Securities                 24955 Pacific Coast Highway, B#202
                                                                             Malibu, California  90265
                                           Up to 250,000 Option Securities

 Stephen Berman                            39,200 Firm Securities            24955 Pacific Coast Highway, B#202
                                                                             Malibu, California  90265
                                           Up to 20,000 Option Securities















   35
                                  Schedule 1-B

                      NON-MANAGEMENT SELLING STOCKHOLDERS







                                                 Number of Shares of
             Management                        Underwritten Securities
         Selling  Stockholder                         to be Sold                        Address
- --------------------------------------     -------------------------------   -----------------------------------
                                                                       
Murray L. Skala                                       5,800                    750 Lexington Avenue
                                                                               New York, NY 10022

Natacha Friedman                                      15,000                   19246 E. Country Club Drive
                                                                               Aventura, FL 33180

Trust for Brooke Friedman                             15,000                   750 Lexington Avenue
                                                                               New York, NY 10022

Trust for Tony Friedman                               15,000                   750 Lexington Avenue
                                                                               New York, NY 10022

Education Trust for Tony Friedman                     10,000                   750 Lexington Avenue
                                                                               New York, NY 10022







   36

                                   Schedule 2

                                  UNDERWRITERS





                                                                                 NUMBER OF 
                                                                              FIRM SECURITIES
                                UNDERWRITERS                                  TO BE PURCHASED
- ------------------------------------------------------------------------      ----------------
                                                                              
Cruttenden Roth Incorporated . . . . . . . . . . . . . . . . . . . . . .         1,800,000
       Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,800,000
                                                                                 =========






   37
                                   Schedule 3

                                  SUBSIDIARIES



       Name                              Jurisdiction of Incorporation
- ----------------------------             --------------------------------------
Road Champs, Inc.                        Pennsylvania corporation

JAXXS (HK) Limited                       Hong Kong corporation

JP (HK) Limited                          Hong Kong corporation

J-X Enterprises, Inc.                    New York corporation

JAKKS Acquisition Corp.                  Delaware corporation

Road Champs Ltd.                         Hong Kong corporation





   38
                                   Schedule 4

              PERSONS AND ENTITIES SUBJECT TO LOCK-UP AGREEMENTS,
                OTHER THAN THE COMPANY'S OFFICERS AND DIRECTORS


                                       Name
                   ---------------------------------------------

                   Natacha Friedman

                   Trust for Brooke Friedman

                   Trust for Tony Friedman

                   Education Trust for Tony Friedman

   1
                                                                     EXHIBIT 4.4


                                WARRANT AGREEMENT

        This WARRANT AGREEMENT ("Agreement") dated as of April ___, 1997 is by
and between JAKKS Pacific, Inc., a Delaware corporation (the "Company"), and
Cruttenden Roth Incorporated ("Cruttenden" or the "Representative").

        WHEREAS, the Representative has agreed pursuant to the Underwriting
Agreement dated April ___, 1997 (the "Underwriting Agreement") to act as the
representative of the several underwriters in connection with the proposed
public offering by the Company and certain selling stockholders of up to
1,800,000 shares in the aggregate of Common Stock, including 270,000 of such
shares covered by an over-allotment option (the "Public Offering"); and

        WHEREAS, pursuant to Section 5(o) of the Underwriting Agreement, the
Company has agreed to issue warrants to the Representative (the "Warrants") to
purchase, at a price of $0.001 per warrant, up to an aggregate of 119,000 shares
(hereinafter, and as the number thereof may be adjusted hereto, the "Warrant
Shares"), of the Company's Common Stock, $.001 par value per share (the "Common
Stock"), each Warrant initially entitling the holder thereof to purchase one
share of Common Stock.

        NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein and in the Underwriting Agreement set forth and for other good
and valuable consideration, the parties hereto agree as follows:

        1. Issuance of Warrants: Form of Warrant. The Company will issue and
deliver to the Representative, Warrants to purchase 119,000 Warrant Shares on
the Closing Date referred to in the Underwriting Agreement in consideration for,
and as part of the Representative's compensation in connection with, the
Representative acting as the representative of the several underwriters for the
Public Offering pursuant to the Underwriting Agreement. The text of the Warrants
and of the form of election to purchase shares shall be substantially as set
forth in Exhibit A attached hereto. The Warrants shall be executed on behalf of
the Company by the manual or facsimile signature of the present or any future
Chairman of the Board, President or Vice President of the Company, under its
corporate seal, affixed or in facsimile, attested by the manual or facsimile
signature of the Secretary or an Assistant Secretary of the Company.

        Warrants bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrants or did not hold such
offices on the date of this Agreement. Warrants shall be dated as of the date of
execution thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.

        2. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company (the "Warrant Register") as they are issued. The
Company shall be entitled to treat the registered holder of any Warrant on the
Warrant Register (the "Holder") as the owner in fact therefor for all purposes
and shall not be bound to recognize any equitable or other claim to 


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or interest in such Warrant on the part of any other person, and shall not be
liable for any registration or transfer of Warrants which are registered or are
to be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with the
knowledge of such facts that its participation therein amounts to bad faith.
Warrants to purchase 119,000 shares shall be registered initially in the name of
"Cruttenden Roth Incorporated," or in such other denominations as Cruttenden may
request in writing to the Company.

        3. Exchange of Warrant Certificates. Subject to any restriction upon
transfer set forth in this Agreement, each Warrant certificate may be exchanged
for another certificate or certificates entitling the Holder thereof to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Holder to purchase. Any Holder desiring to
exchange a Warrant certificate or certificates shall make such request in
writing delivered to the Company, and shall surrender, properly endorsed, the
certificate or certificates to be so exchanged. Thereupon, the Company shall
execute and deliver to the person entitled thereto a new Warrant certificate or
certificates, as the case may be, as so requested.

        4. Transfer of Warrants. Until April ___, 1998, the Warrants will not be
sold, transferred, assigned or hypothecated except to bona fide officers and
partners of the Representative who agree in writing to be bound by the terms
hereof. The Warrants shall be transferable only on the Warrant Register upon
delivery thereof duly endorsed by the Holder or by the Holder's duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
the original power of attorney, duly approved, or an official copy thereof, duly
certified, shall be deposited with the Company. In case of transfer by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced and may be required
to be deposited with the Company in its discretion. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto.

        5.     Term of Warrants; Exercise of Warrants.

        5.1 Each Warrant entitles the registered owner thereof to purchase one
share of Common Stock at any time from 10:00 a.m., Pacific time, on April ___,
1998 (the "Initiation Date") until 6:00 p.m., Pacific time, on April ___, 2002
(the "Expiration Date") at a purchase price of [$_____], subject to adjustment
(the "Warrant Price"). Notwithstanding the foregoing, if at 6:00 p.m., Pacific
time on the Expiration Date, any Holder or Holders of the Warrants have not
exercised their Warrants and the Closing Price (as defined below) for the Common
Stock on the Expiration Date is greater than the Warrant Price, then each such
unexercised Warrant shall be automatically converted into a number of shares of
Common Stock of the Company equal to: (A) the number of shares of Common Stock
then issuable upon exercise of a Warrant multiplied by (B) a fraction (1) the
numerator of which is the difference between the Closing Price for the Common
Stock on the Expiration Date and the Warrant Price and (2) the denominator of
which is the Closing Price for the Warrant Stock on the Expiration Date.

        5.2 The Warrant Price and the number of Warrant Shares issuable upon
exercise of Warrants are subject to adjustment upon the occurrence of certain
events, pursuant to the provisions of Section 11 of this Agreement. Subject to
the provisions of this Agreement, each Holder of Warrants shall have the right,
which may be exercised as expressed in such Warrants, to 

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purchase from the Company (and the Company shall issue and sell to such Holder
of Warrants) the number of fully paid and nonassessable Warrant Shares specified
in such Warrants, upon surrender to the Company, or its duly authorized agent,
of such Warrants, with the form of election to purchase on the reverse thereof
duly filled in and signed, and upon payment to the Company of the Warrant Price,
as adjusted in accordance with the provisions of Section 11 of this Agreement,
for the number of Warrant Shares in respect of which such Warrants are then
exercised. Payment of such Warrant Price shall be made in cash or by certified
or official bank check, or a combination thereof. No adjustment shall be made
for any dividends on any Warrant Shares of stock issuable upon exercise of a
Warrant.

        5.3 Upon such surrender of Warrants, and payment of the Warrant Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Holder of such Warrants and in such
name or names as such registered Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrants, together with cash, as provided in Section 12 of this
Agreement, in respect of any fraction of a share otherwise issuable upon such
surrender and, if the number of Warrants represented by a Warrant Certificate
shall not be exercised in full, a new Warrant Certificate, executed by the
Company for the balance of the number of whole Warrant Shares represented by the
Warrant Certificate.

        5.4 If permitted by applicable law, such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such shares as of
the date of the surrender of such Warrants and payment of the Warrant Price as
aforesaid. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the registered Holders thereof, either as an
entirety or from time to time for only part of the shares specified therein.

        6. Compliance with Government Regulations. The Company covenants that if
any shares of Common Stock required to be reserved for purposes of exercise or
conversion of Warrants require, under any Federal or state law or applicable
governing rule or regulation of any national securities exchange, registration
with or approval of any governmental authority, or listing on any such national
securities exchange before such shares may be issued upon exercise, the Company
will in good faith and as expeditiously as possible endeavor to cause such
shares to be duly registered, approved or listed on the relevant national
securities exchange, as the case may be; provided, however, that (except to the
extent legally permissible with respect to Warrants of which the Representative
is the Holder) in no event shall such shares of Common Stock be issued, and the
Company is hereby authorized to suspend the exercise of all Warrants, for the
period during which such registration, approval or listing is required but not
in effect.

        7. Payment of Taxes. The Company will pay all documentary stamp taxes,
if any, attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any Warrants or certificate for Warrant Shares in a name
other than that of the registered Holder of such Warrants.

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        8. Mutilated or Missing Warrants. In case any of the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and representing an equivalent right or interest; but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction of such Warrant and, if requested, indemnity or bond also
reasonably satisfactory to the Company. An applicant for such substitute
Warrants shall also comply with such other reasonable regulations and pay such
other reasonable charges as the Company may prescribe.

        9. Reservation of Warrant Shares. There have been reserved out of the
authorized and unissued shares of Common Stock a number of shares sufficient to
provide for the exercise of the rights of purchase represented by the Warrants
and the transfer agent for the Common Stock ("Transfer Agent") and every
subsequent Transfer Agent for any shares of the Company's capital stock issuable
upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be required for
such purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company will supply such Transfer Agent with
duly executed stock certificates for such purposes and will itself provide or
otherwise make available any cash which may be issuable as provided in Section
12 of this Agreement. The Company will furnish to such Transfer Agent a copy of
all notices of adjustments, and certificates related thereto, transmitted to
each Holder pursuant to Section 11.2 of this Agreement. All Warrants surrendered
in the exercise of the rights thereby evidenced shall be cancelled.

        10. Obtaining Stock Exchange Listings. The Company will from time to
time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the principal securities exchanges and markets within the United States of
America, if any, on which other shares of Common Stock are then listed.

        11. Adjustment of Warrant Price and Number of Warrant Shares. The number
and kind of securities purchasable upon the exercise of each Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events as hereinafter defined. For purposes of this Section
11, "Common Stock" means shares now or hereafter authorized of any class of
common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.

        11.1   Mechanical Adjustments.  The number of Warrant Shares purchasable
upon the exercise of each Warrant and the Warrant Price shall be subject to
adjustment as follows:

               (a) In case the Company shall (i) pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock or (iv) issue by reclassification of its shares of Common Stock
other securities of the Company (including any such reclassification in
 

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connection with a consolidation or merger in which the Company is the surviving
corporation), the number of Warrant Shares purchasable upon exercise of each
Warrant immediately prior thereto shall be adjusted so that the Holder of each
Warrant shall be entitled to receive the kind and number of Warrant Shares or
other securities of the Company which he would have owned or would have been
entitled to receive after the happening of any of the events described above,
had such Warrants been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant to
this paragraph (a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event. Such
adjustment shall be made successively whenever any event listed above shall
occur.

               (b) In case the Company shall distribute to all holders of its
shares of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation)
evidences of its indebtedness or assets (excluding cash dividends or
distributions payable out of consolidated earnings or earned surplus and
dividends or distributions referred to in paragraph (a) above or in the
paragraph immediately following this paragraph) or rights, options or warrants,
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, then in each case the number of Warrant
Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of each Warrant by a fraction, the numerator of which shall be
the then current market price per share of Common Stock (as defined in paragraph
(c) below) on the date of such distribution, and the denominator of which shall
be the then current market price per share of Common Stock, less the then fair
value (as reasonably determined by the Board of Directors of the Company) of the
portion of the assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective on the
date of distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.

               In the event of a distribution by the Company to all holders of
its shares of Common Stock of a subsidiary or securities convertible into or
exercisable for such stock, then in lieu of an adjustment in the number of
Warrant Shares purchasable upon the exercise of each Warrant, the Holder of each
Warrant, upon the exercise thereof at any time after such distribution, shall be
entitled to receive from the Company, such subsidiary or both, as the Company
shall determine, the stock or other securities to which such Holder would have
been entitled if such Holder had exercised such Warrant immediately prior
thereto, all subject to further adjustment as provided in this Section 11.1;
provided, however, that no adjustment in respect of dividends or interest on
such stock or other securities shall be made during the term of a Warrant or
upon the exercise of a Warrant.

               (c) For the purpose of any computation under paragraph (b) of
this Section, the current market price per share of Common Stock at any date
shall be the average of the daily Closing Prices for 20 consecutive trading days
commencing 30 trading days before the date of such computation. The selling
price for each day (the "Closing Price") shall be the last such reported sales
price regular way or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case on the principal 

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national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading, the average of the
closing bid and asked prices of the Common Stock in the over-the counter market
as reported by the Nasdaq National Market System or Nasdaq SmallCap System or if
not approved for quotation on the Nasdaq National Market System or Nasdaq
SmallCap System, the average of the closing bid and asked prices as furnished by
two members of the National Association of Securities Dealers, Inc. selected
from time to time by the Company for that purpose.

               (d) No adjustment in the number of Warrant Shares purchasable
hereunder shall be required unless such adjustment would require an increase or
decrease of at least one percent (1%) in the number of Warrant Shares
purchasable upon the exercise of each Warrant; provided, however, that any
adjustments which by reason of this paragraph (d) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations shall be made to the nearest one-thousandth of a share.

               (e) Whenever the number of Warrant Shares purchasable upon the
exercise of each Warrant is adjusted, as herein provided, the Warrant Price
payable upon exercise of each Warrant shall be adjusted by multiplying such
Warrant Price immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares purchasable upon the exercise of
each Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares purchasable immediately thereafter.

               (f) No adjustment in the number of Warrant Shares purchasable
upon the exercise of each Warrant need be made under paragraph (b) if the
Company issues or distributes to each Holder of Warrants the rights, options,
warrants or convertible or exchangeable securities, or evidences of indebtedness
or assets referred to in those paragraphs which each Holder of Warrants would
have been entitled to receive had the Warrants been exercised prior to the
happening of such event or the record date with respect thereto. No adjustment
need be made for a change in the par value of the Warrant Shares.

               (g) In the event that at any time, as a result of an adjustment
made pursuant to paragraph (a) above, the Holders shall become entitled to
purchase any securities of the Company other than shares of Common Stock,
thereafter the number of such other shares so purchasable upon exercise of each
Warrant and the Warrant Price of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Section 11, and
the other provisions of this Agreement, with respect to the Warrant and Warrant
Shares, shall apply as nearly equivalent as practicable on like terms to such
other securities.

               (h) Upon the expiration of any rights, options, warrants or
conversion or exchange privileges for which an adjustment was made hereunder, if
any thereof shall not have been exercised, the Warrant Price and the number of
shares of Common Stock purchasable upon the exercise of each Warrant shall, upon
such expiration, be readjusted and shall thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common Stock so
issued were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, 

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warrants or conversion or exchange rights and (ii) such shares of Common Stock,
if any, were issued or sold for the consideration actually received by the
Company upon such exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all such rights,
options, warrants or conversion or exchange rights whether or not exercised;
provided, however, that no such readjustment shall have the effect of increasing
the Warrant Price or decreasing the number of shares of Common Stock purchasable
upon the exercise of each Warrant by an amount in excess of the amount of the
adjustment initially made in respect to the issuance, sale or grant of such
rights, options, warrants or conversion or exchange rights.

        11.2   Notice of Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant or the Warrant Price of such
Warrant Shares is adjusted, as herein provided, the Company shall promptly mail
by first class, postage prepaid, to each Holder notice of such adjustment or
adjustments and a certificate of a firm of independent public accountants
selected by the Board of Directors of the Company (who may be the regular
accountants employed by the Company) setting forth the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Warrant Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made.

        11.3   No Adjustment for Dividends.  Except as provided in Section 11.1,
no adjustments in respect of any dividends shall be made during the term of a
Warrant or upon the exercise of a Warrant.

        11.4   Preservation of Purchase Rights Upon Merger, Consolidation etc. 
In case of any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale, transfer or lease to another
corporation of all or substantially all the property of the Company, the Company
or such successor or purchasing corporation, as the case may be, shall execute
with each Holder an agreement that each Holder shall have the right thereafter
upon payment of the Warrant Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of shares and other
securities, cash and property which he would have owned or would have been
entitled to receive after the happening of such consolidation, merger, sale,
transfer or lease had such Warrant been exercised immediately prior to such
action; provided, however, that no adjustment in respect of dividends, interest
or other income on or from such shares or other securities, cash and property
shall be made during the term of a Warrant or upon the exercise of a Warrant.
Such agreement shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
11. The provisions of this Section 11.4 shall similarly apply to successive
consolidations, mergers, sales transfer or leases.

        11.5   Statements on Warrants. Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon the exercise of
the Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.

        12.    Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for 

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exercise in full at the same time by the same holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 12, be issuable on the exercise of any Warrant
(or specified portion thereof), the Company shall pay an amount in cash equal to
the closing price for one share of the Common Stock, as defined in paragraph (c)
of Section 11.1, on the trading day immediately preceding the date the Warrant
is presented for exercise, multiplied by such faction.

        13.    Registration Under the Securities Act of 1933. The Representative
represents and warrants to the Company that it will not dispose of the Warrants
or the Warrant Shares except pursuant to (i) an effective registration statement
under the Securities Act of 1933, as amended (the "Act"), including a
post-effective amendment to the Registration Statement, (ii) Rule 144 under the
Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) an opinion of counsel, reasonably satisfactory to counsel
of the Company, that an exemption from such registration is available.

        14.    Certificate to Bear Legends.  The Warrant shall be subject to a 
stop-transfer order and the certificate or certificates therefore shall bear the
following legend:

               THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
        SECURITIES LAW. SAID SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
        ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.

        The Warrant Shares or other securities issued upon exercise of the
Warrant shall be subject to a stop-transfer order and the certificate or
certificates evidencing any such Warrant Shares or securities shall bear the
following legend:

               THE SHARES OR OTHER SECURITIES REPRESENTED BY THIS CERTIFICATE
        HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
        OR ANY STATE SECURITIES LAW. SAID SECURITIES MAY NOT BE SOLD OR
        TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
        THEREFROM UNDER SAID ACT.

        15.    Registration Rights.

        15.1   Demand Registration Rights. The Company covenants and agrees with
the Representative and any subsequent Holders of the Warrants and/or Warrants
Shares that, on one occasion, within 60 days after receipt of a written request
from the Representative or from Holders of more than 25% in interest of the
aggregate of Warrants and/or Warrant Shares issued pursuant to this Agreement
that the Representative or such Holders of the Warrants and/or Warrant Shares
desires and intends to transfer more than 25% in interest of the aggregate
number of the Warrants and/or Warrant Shares under such circumstances that a
public offering, within the

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meaning of the Act, will be involved, the Company shall, on that one occasion,
file a registration statement (and use its best efforts to cause such
registration statement to become effective under the Act at the Company's
expense) with respect to the offering and sale or other disposition of the
Warrant Shares (the "Offered Warrant Shares"); provided, however, that the
Company shall have no obligation to comply with the foregoing provisions of this
Section 15.1 if in the opinion of counsel to the Company reasonably acceptable
to the Holder or Holders, from whom such written requests have been received,
registration under the Act is not required for the transfer of the Offered
Warrant Shares in the manner proposed by such person or persons or that a
post-effective amendment to an existing registration statement would be legally
sufficient for such transfer (in which latter event the Company shall promptly
file such post-effective amendment (and use its best efforts to cause such
amendment to become effective under the Act)). Notwithstanding the foregoing,
the Company shall not be obligated to file a registration statement with respect
to the Offered Warrant Shares on more than one occasion.

        The Company may defer the preparation and filing of a registration
statement for up to 90 days after the request for registration is made if the
Board of Directors determines in good faith that such registration or
post-effective amendment would materially adversely affect or otherwise
materially interfere with a proposed or pending transaction by the Company,
including without limitation a material financing or a corporate reorganization,
or during any period of time in which the Company is in possession of material
inside information concerning the Company or its securities, which information
the Company determines in good faith is not ripe for disclosure.

        The Company shall not honor any request to register Warrant Shares
pursuant to this Section 15.1 received later than five (5) years from the
effective date of the Company's Registration Statement on Forth SB-2 (File No.
333-22583) (the "Effective Date"). The Company shall not be required (i) to
maintain the effectiveness of the registration statement beyond the earlier to
occur of 90 days after the effective date of the registration statement or the
date on which all of the Offered Warrant Shares have been sold (the "Termination
Date"); provided, however, that if at the Termination Date the Offered Warrant
Shares are covered by a registration statement which also covers other
securities and which is required to remain in effect beyond the Termination
Date, the Company shall maintain in effect such registration statement as it
relates to Offered Warrant Shares for so long as such registration statement (or
any substitute registration statement) remains or is required to remain in
effect for any such other securities, or (ii) to cause any registration
statement with respect to the Warrant Shares to become effective prior to the
Initiation Date. All expenses of registration pursuant to this Section 15.1
shall be borne by the Company (excluding underwriting discounts and commissions
on Warrant Shares not sold by the Company).

        The Company shall be obligated pursuant to this Section 15.1 to include
in the registration statement Warrant Shares that have not yet been purchased by
a Holder of Warrants so long as such Holder of Warrants submits an undertaking
to the Company that such Holder intends to exercise Warrants representing the
number of Warrant Shares to be included in such registration statement prior to
the consummation of the public offering with respect to such Warrant Shares. In
addition, such Holder of Warrants is permitted to pay the Company the Warrant
Price for such Warrant Shares upon the consummation of the public offering with
respect to such Warrant Shares.

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        15.2 Piggy-back Registration Rights. The Company covenants and agrees
with the Holders and any subsequent Holders of the Warrants and/or Warrant
Shares that in the event the Company proposes to file a registration statement
under the Act with respect to any class of security (other than in connection
with an exchange offer, a non-cash offer or a registration statement on Form S-8
or other unsuitable registration statement form) which becomes or which the
Company believes will become effective at any time after the Initiation Date
then the Company shall in each case give written notice of such proposed filing
to the Holders of Warrants and Warrant Shares at least 30 days before the
proposed filing date and such notice shall offer to such Holders the opportunity
to include in such registration statement such number of Warrant Shares as they
may request, unless, in the opinion of counsel to the Company reasonably
acceptable to any such holder of Warrants or Warrant Shares who wishes to have
Warrant Shares included in such registration statement, registration under the
Act is not required for the transfer of such Warrants and/or Warrant Shares in
the manner proposed by such Holders. The Company shall not honor any such
request to register any such Warrant Shares if the request is received later
than six (6) years from the Effective Date, and the Company shall not be
required to honor any request (a) to register any such Warrant Shares if the
Company is not notified in writing of any such request pursuant to this Section
15.2 within at least 20 days after the Company has given notice to the Holders
of the filing, or (b) to register Warrant Shares that represent in the aggregate
fewer than 25% of the aggregate number of Warrant Shares. The Company shall
permit, or shall cause the managing underwriter of a proposed offering to
permit, the Holders of Warrant Shares requested to be included in the
registration (the "Piggy-back Shares ") to include such Piggy-back Shares in the
proposed offering on the same terms and conditions as applicable to securities
of the Company included therein or as applicable to securities of any person
other than the Company and the Holders of Piggy-back Shares if the securities of
any such person are included therein. Notwithstanding the foregoing, if any such
managing underwriter shall advise the Company in writing that it believes that
the distribution of all or a portion of the Piggy-back Shares requested to be
included in the registration statement concurrently with the securities being
registered by the Company would materially adversely affect the distribution of
such securities by the Company for its own account, then the Holders of such
Piggy-back Shares shall delay their offering and sale of Piggyback Shares (or
the portion thereof so designated by such managing underwriter) for such period,
not to exceed 120 days, as the managing underwriter shall request provided that
no such delay shall be required as to Piggy-back Shares if any securities of the
Company are included in such registration statement for the account of any
person other than the Company and the Holders of Piggy-back Shares. In the event
of such delay, the Company shall file such supplements, post-effective
amendments or separate registration statement, and take any such other steps as
may be necessary to permit such Holders to make their proposed offering and sale
for a period of 90 days immediately following the end of such period of delay
("Piggy-back Termination Date"); provided, however, that if at the Piggy-back
Termination Date the Piggyback Shares are covered by a registration statement
which is, or required to remain, in effect beyond the Piggy-back Termination
Date, the Company shall maintain in effect the registration statement as it
relates to the Piggy-back Shares for so long as such registration statement
remains or is required to remain in effect for any of such other securities. All
expenses of registration pursuant to this Section 15.2 shall be borne by the
Company, except that underwriting commissions and expenses attributable to the
Piggy-back Shares and fees and disbursements of counsel (if any) to the Holders
requesting that such Piggy-


                                       10
   11

back Shares be offered will be borne by such Holders.

        The Company shall be obligated pursuant to this Section 15.2 to include
in the Piggy-back Offering, Warrant Shares that have not yet been purchased by a
holder of Warrants so long as such Holder of Warrants submits an undertaking to
the Company that such Holder intends to exercise Warrants representing the
number of Warrant Shares to be included in such Piggy-back Offering prior to the
consummation of such Piggy-back Offering. In addition, such Holder of Warrants
is permitted to pay the Company the Warrant Price for such Warrant Shares upon
the consummation of the Piggy-back Offering.

        If the Company decides not to proceed with a Piggy-back Offering, the
Company has no obligation to proceed with the offering of the Piggy-back Shares,
unless the Holders of the Warrants and/or Warrant Shares otherwise comply with
the provisions of Section 15.1 hereof (without regard to the 60 days' written
request required thereby). Notwithstanding any of the foregoing contained in
this Section 15.2, the Company's obligation to offer registration rights to the
Piggy-back Shares pursuant to this Section 15.2 shall terminate two (2) years
after the Expiration Date.

        15.3   In connection with the registration of Warrants Shares in
accordance with Section 15.1 and 15.2 above, the Company agrees to:

               (a) Use its best efforts to register or qualify the Warrant
        Shares for offer or sale under the state securities or Blue Sky laws of
        such states which the Holders of such Warrant Shares shall designate,
        until the dates specified in Section 15.1 and 15.2 above in connection
        with registration under the Act; provided, however, that in no event
        shall the Company be obligated to quality to do business in any
        jurisdiction where it is not now so qualified or to take any action
        which would subject it to general service of process in any jurisdiction
        where it is not now so subject or to register or get a license as a
        broker or dealer in securities in any jurisdiction where it is not so
        registered or licensed or to register or qualify the Warrant Shares for
        offer or sale under the state securities or Blue Sky laws of any state
        other than the states in which some or all of the shares offered or sold
        in the Public Offering were registered or qualified for offer and sale.

               (b) (i) In the event of any post-effective amendment or other
        registration with respect to any Warrant Shares pursuant to Section 15.1
        or 15.2 above, the Company will indemnify and hold harmless any Holder
        whose Warrant Shares are being so registered, and each person, if any,
        who controls such Holder within the meaning of the Act, against any
        losses, claims, damages or liabilities, joint or several, to which such
        Holder or such controlling person may be subject, under the Act or
        otherwise, insofar as such losses, claims, damages or liabilities (or
        actions in respect thereof) arise out of or are based upon any untrue
        statement or alleged untrue statement of any material fact contained, on
        the effective date thereof, in any such registration statement, any
        preliminary prospectus or final prospectus contained therein, or any
        amendment or supplement thereto, 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 to make the statements therein not
        misleading; and will reimburse each such Holder and each such
        controlling person for 



                                       11
   12

        any legal or other expenses reasonably incurred by such Holder or such
        controlling person in connection with investigating or defending any
        such loss, claim, damage, liability or action; provided, however, that
        the Company will not be liable in such case to the extent that any such
        loss, claim, damage or liability arises out of or is based upon any
        untrue statement or alleged untrue statement or omission or alleged
        omission made in any such registration statement, any preliminary
        prospectus or final prospectus, or any amendment or supplement thereto,
        in reliance upon and in conformity with written information furnished by
        such Holder expressly for use in the preparation thereof. The Company
        will not be liable to a claimant to the extent of any misstatement
        corrected or remedied in any amended prospectus if the Company timely
        delivers a copy of such amended prospectus to such indemnified person
        and such indemnified person does not timely furnish such amended
        prospectus to such claimant. The Company shall not be required to
        indemnify any Holder or controlling person for any payment made to any
        claimant in settlement of any suit or claim unless such payment is
        approved by the Company.

               (ii) Each Holder of Warrants and/or Warrant Shares who
        participates in a registration pursuant to Section 15.1 or 15.2 will
        indemnify and hold harmless the Company, each of its directors, each of
        its officers who have signed any such registration statement, and each
        person, if any, who controls the Company within the meaning of the Act,
        against any losses, claims, damages or liabilities to which the Company,
        or any such director, officer or controlling person may become subject
        under the Act, or otherwise, insofar as such losses, claims, damages or
        liabilities (or actions in respect thereof) arise out of or are based
        upon any untrue or alleged untrue statement of any material fact
        contained in any such registration statement, any preliminary prospectus
        or final prospectus, or any amendment or supplement thereto, or arise
        out of or are based upon the omission or the alleged omission to state
        therein a material fact required to be stated therein or necessary to
        make the statements therein not misleading, in each case to the extent,
        but only to the extent, that such untrue statement or alleged untrue
        statement or omission or alleged omission was made in any such
        registration statement, any preliminary prospectus or final prospectus,
        or any amendment or supplement thereto, in reliance upon and in
        conformity with written information furnished by such Holder expressly
        for use in the preparation thereof; and will reimburse any legal or
        other expenses reasonably incurred by the Company, or any such director,
        officer or controlling person in connection with investigating or
        defending any such loss, claim, damage, liability or action; provided,
        however, that the indemnity agreement contained in this subparagraph
        (ii) shall not apply to amounts paid to any claimant in settlement of
        any suit or claim unless such payment is first approved by such Holder.

               (iii) In order to provide for just and equitable contribution in
        any action in which a claim for indemnification is made pursuant to this
        clause (b)(iii) of Section 15.3 but is judicially determined (by the
        entry of a final judgment or decree by a court of competent jurisdiction
        and the expiration of time to appeal or the denial of the last right of
        appeal) that such indemnification may not be enforced in such case
        notwithstanding the fact that this clause (b)(iii) of Section 15.3
        provides for indemnification in such case, all the parties hereto shall
        contribute to the aggregate losses, claims, damages or liabilities to
        which they may be subject (after contribution from others) in such
        proportion so that each 



                                       12
   13

        Holder whose Warrant Shares are being registered is responsible pro rata
        for the portion represented by the public offering price received by
        such Holder from the sale of such Holder's Warrant Shares, and the
        Company is responsible for the remaining portion; provided, however,
        that (i) no Holder shall be required to contribute any amount in excess
        of the public offering price received by such Holder from the sale of
        such Holder's Warrant Shares and (ii) no person guilty of a fraudulent
        misrepresentation (within the meaning of Section 11(f) of the Act) shall
        be entitled to contribution from any person who is not guilty of such
        fraudulent misrepresentation. This subsection (b)(iii) shall not be
        operative as to any Holder of Warrant Shares to the extent that the
        Company has received indemnity under this clause (b)(iii) of Section
        15.3.

        16.    No Rights as Stockholder; Notices to Holders. Nothing contained 
in this Agreement or in any of the Warrants shall be construed as conferring
upon the Holders or their transferee(s) the right to vote or to receive
dividends or to consent to or receive notice as stockholders in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter or any rights whatsoever as stockholders of the Company. If,
however, at any time prior to the expiration of the Warrants and prior to their
exercise, any of the following events shall occur:

               (a) the Company shall declare any dividend payable in any
        securities upon its shares of Common Stock or make any distribution
        (other than a cash dividend) to the holders of its shares of Common
        Stock; or

               (b) the Company shall offer to the holders of its shares of
        Common Stock any additional shares of Common Stock or securities
        convertible into or exchangeable for shares of Common Stock or any right
        to subscribe to or purchase any thereof; or

               (c) a dissolution, liquidation or winding up of the Company
        (other than in connection with a consolidation, merger, sale, transfer
        or lease of all or substantially all of its property, assets and
        business as an entirety) shall be proposed,

then in any one or more of said events the Company shall (i) give notice in
writing of such event to the Holders, as provided in Section 17 hereof and (ii)
if there are more than 100 Holders, cause notice of such event to be published
once in The Wall Street Journal (national edition), such giving of notice and
publication to be completed at least 20 days prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution or subscription rights, or
for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
publish, mail or receive such notice or any defect therein or in the publication
or mailing thereof shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up.

        17.    Notices.  Any notice pursuant to this Agreement to be given or 
made by the registered Holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed as follows:

                                       13
   14

JAKKS PACIFIC, INC.
24955 Pacific Coast Highway, #B202
Malibu, California 90265
Attn:  President

Notices or demands authorized by this Agreement to be given or made by the
Company to the registered Holder of any Warrant shall be sufficiently given or
made (except as otherwise provided in this Agreement) if sent by first-class
mail, postage prepaid, addressed to such Holder at the address of such Holder as
shown on the Warrant Register.

        18.    Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of California without giving effect to
principles of conflicts of laws.

        19.    Supplements and Amendments. The Company and the Representative 
may from time to time supplement or amend this Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Representative may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interests of the Holders. This Agreement may also be
supplemented or amended from time to time by a writing executed by or on behalf
of the Company and all of the Holders.

        20.    Successor.  All the covenants and provisions of this Agreement by
or for the benefit of the Company or the Holders shall bind and inure to the
benefit of their respective successors and assigns hereunder. Assignments by the
Holders of their rights hereunder shall be made in accordance with Section 4
hereof.

        21.    Merger or Consolidation of the Company. So long as Warrants 
remain outstanding, the Company will not merge or consolidate with or into, or
sell, transfer or lease all or substantially all of its property to, any other
corporation unless the successor or purchasing corporation, as the case may be
(if not the Company), shall expressly assume, by supplemental agreement executed
and delivered to the Holders, the due and punctual performance and observance of
each and every covenant and condition of this Agreement to be performed and
observed by the Company.

        22.    Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders, any legal or equitable right, remedy or claim under this Agreement, but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders of the Warrants and Warrant Shares.

        23.    Captions.  The captions of the sections and subsections of this 
Agreement have been inserted for convenience only and shall have no substantive
effect.

                                       14
   15

        24.    Counterparts.  This Agreement may be executed in any number of 
counterparts each of which when so executed shall be deemed to be an original;
but such counterparts together shall constitute but one and the same instrument.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.



                                     CRUTTENDEN ROTH INCORPORATED

Attest:

                                     By:
- ------------------------------          ------------------------------
                                     Name:
                                       
                                     Title:
                                       



                                     JAKKS PACIFIC, INC.


Attest:

                                     By:
- ------------------------------          ------------------------------
                                     Name:
                                        
                                     Title:
                                        



                                       15
   16


                                                                       EXHIBIT A
                          [Form of Warrant Certificate]

                    EXERCISABLE ON OR BEFORE APRIL ___, 2002

      No.                                                       119,000 Warrants

                               Warrant Certificate

                               JAKKS PACIFIC, INC.

        This Warrant Certificate certifies that Cruttenden Roth Incorporated, or
registered assigns, is the registered holder of Warrants expiring April __, 2002
(the "Warrants") to purchase Common Stock, $0.001 par value per share (the
"Common Stock"), of JAKKS Pacific, Inc., a Delaware corporation (the "Company").
Each Warrant entitles the holder upon exercise to receive from the Company from
10:00 a.m., Pacific time, on April ___, 1998 through and until 6:00 p.m.,
Pacific time, on April __, 2002, one fully paid and nonassessable share of
Common Stock (a "Warrant Share") at the initial exercise price (the "Warrant
Price") of [$_____] payable in lawful money of the United States of America upon
surrender of this Warrant Certificate and payment of the Warrant Price at the
office of the Company designated for such purpose, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The Warrant Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.

        No Warrant may be exercised after 6:00 p.m., Pacific time, on April ___,
2002 (the "Expiration Date"). Notwithstanding the foregoing, if at 6:00 p.m.,
Pacific time on the Expiration Date, any Holder or Holders of the Warrants have
not exercised their Warrants and the Closing Price (as defined in the Warrant
Agreement) for the Common Stock on the Expiration Date is greater than the
Warrant Price, then each such unexercised Warrant shall be automatically
converted into a number of shares of Common Stock of the Company equal to: (A)
the number of shares of Common Stock then issuable upon exercise of a Warrant
multiplied by (B) a fraction (1) the numerator of which is the difference
between the Closing Price for the Common Stock on the Expiration Date and the
Warrant Price and (2) the demoninator of which is the Closing Price for the
Warrant Stock on the Expiration Date.

        Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

        This Warrant Certificate shall not be valid unless countersigned by the
Company.






                                       16
   17


        IN WITNESS WHEREOF, JAKKS Pacific, Inc. has caused this Warrant 
Certificate to be signed by its President and by its Secretary and has caused
its corporate seal to be affixed hereunto or imprinted hereon.

Dated:  __________, 1997           JAKKS PACIFIC, INC.


                                   By:
                                      ----------------------------------
                                   Title:
                                      ----------------------------------


                                   By:
                                      ----------------------------------
                                   Title:
                                      ----------------------------------



                                       17
   18



                          [Form of Warrant Certificate]

                                    [Reverse]

        The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring April __, 2002 entitling the holder on
exercise to receive shares of Common Stock, $0.001 par value per share, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement, dated as of April __, 1997 (the "Warrant Agreement"), duly
executed and delivered by the Company, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company.

        The Warrants may be exercised at any time on or before April ___, 2002.
The holder of Warrants evidenced by this Warrant Certificate may exercise them
by surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon properly completed and executed, together with payment of the
Warrant Price in cash at the office of the Company designated for such purpose.
In the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new Warrant
Certificate evidencing the number of Warrants not exercised. No adjustment shall
be made for any dividends on any Common Stock issuable upon exercise of this
Warrant.

        The Warrant Agreement provides that upon the occurrence of certain
events the number of shares of Common Stock issuable upon the exercise of each
Warrant shall be adjusted. If the number of shares of Common Stock issuable upon
such exercise is adjusted, the Warrant Agreement provides that the Warrant
Price set forth on the face hereof may, subject to certain conditions, be
adjusted. No fractions of a share of Common Stock will be issued upon the
exercise of any Warrants but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.

        The holders of the Warrants are entitled to certain registration rights
with respect to the Common Stock purchasable upon exercise thereof. Said
registration rights are set forth in full in the Warrant Agreement.

        Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.

        Upon due presentation for registration of transfer of this Warrant
certificate at the office of the Company, a new Warrant certificate or Warrant
certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to other transferee(s) in exchange for this 


                                       18
   19

Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.

        The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a stockholder of the Company.



                                       19


   20
                         [Form of Election to Purchase]

                    (To be Executed upon Exercise of Warrant)

        The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive ___________ shares of Common
Stock and herewith tenders payment for such shares to the order of JAKKS
Pacific, Inc., in the amount of $___________ in accordance with the terms
hereof. The undersigned requests that a certificate for such shares be
registered in the name of _____________________________, whose address is
___________________________________________________ and that such shares be
delivered to ____________________________ whose address is
________________________________. If said number of shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant certificate representing the remaining balance of such shares be
registered in the name of ________________________________, whose address is
_________________________, and that such Warrant certificate be delivered to
_______________________, whose address is
_______________________________________.

                                            Signature:

Date:

                                            Signature Guaranteed:



                                       20

   1
                                                                    EXHIBIT 5.1

       [FEDER, KASZOVITZ, ISAACSON, WEBER, SKALA & BASS, LLP LETTERHEAD]

                                 April 11, 1997
JAKKS Pacific, Inc.
24955 Pacific Coast Highway
Suite B202
Malibu, CA 90265

                    Re: Registration Statement on Form SB-2

Gentlemen:

        We have acted as counsel for JAKKS Pacific, Inc., a Delaware corporation
(the "Company") in connection with the preparation and filing by the Company of
a registration statement (the "Registration Statement") on Form SB-2, File No.
333-22583, under the Securities Act of 1933, relating to the public offering of
2,070,000 shares of Common Stock, par value $.001 per share (the "Registered
Shares"), including 270,000 shares which the underwriters have an option to
purchase solely for the purpose of covering over-allotments. Of the 2,070,000
Registered Shares, 1,700,000 are to be sold by the Company (the "Company
Shares"), 100,000 are to be sold by certain Selling Stockholders and 270,000 may
be sold by certain Selling Stockholders pursuant to the over-allotment option
(such shares sold by the Selling Stockholders are collectively referred to
herein as the "Selling Stockholder Shares") to underwriters ("the Underwriters")
of which Cruttenden Roth Incorporated is the representatives (the
"Representatives"). The offering also involves the sale to the Representative of
the Underwriters of a warrant to purchase up to 119,000 shares of the Company's
Common Stock (the "Representative's Warrant").

        We have examined the Certificate of Incorporation and the By-Laws of
the Company, the minutes of the various meetings and consents of the Board of
Directors of the Company, drafts of the Underwriting Agreement relating to the
offering of the Common Stock, drafts of the Representative's Warrant and such
other documents, certificates, records, authorizations, proceedings, statutes
and judicial decisions as we have deemed necessary to form the basis of the
opinion expressed below. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals and the conformity to originals of all documents submitted to us as
copies thereof.

        As to various questions of fact material to such opinion, we have
relied upon statements and certificates of officers and representatives of the
Company and others.

        Based on the foregoing, we are of the opinion that: 

        1.      When the Underwriting Agreement between the Underwriters and the
Company is completed (including the insertion therein of pricing terms) and
executed by the Company and the Underwriters, and the Company Shares are sold to
the underwriters and paid for pursuant to the terms of such Underwriting
Agreement, the Company Shares will be duly authorized, legally issued, fully
paid and non-assessable by the Company. 

        2.      The Selling Stockholder Shares are duly authorized, legally
issued, fully paid and non-assessable by the Company.

        3.      The shares of common stock issuable upon exercise of the
Representative's Warrant have been duly authorized and reserved for issuance
and when issued, in accordance with the terms of the Representative's Warrant,
will be duly authorized, validly issued, fully paid and nonassessable.

        We hereby consent to be named in the Registration Statement and the
Prospectus as attorneys who have passed upon legal matters in connection with
the offering of the securities offered thereby under the caption "Legal
Matters."

        We further consent to your filing a copy of this opinion as an exhibit
to the Registration Statement.


                       /s/ Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP
                       --------------------------------------------------------
                       Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP

   1
EXHIBIT 10.7.2

                           ADDENDUM TO JAXXS(1) LEASE

        1.      Upon completion of tenant improvements in Suite 304
                (approximately May 1-10, 1996), Jaxxs will assume the lease for 
                B201 (613 sq. ft.) at the current rent of $1,632.00 per month, 
                plus pro-rata CAM charges per month of $39.24, through June 30, 
                1996.

        2.      Beginning July 1, 1996, Jaxxs will assume the scheduled rental
                increase for B201 (5%) which will bring the monthly rental to 
                $1,714.00 per month plus CAM, through August 31, 1997 (i.e. the 
                expiration date of Jaxxs' current lease for B202).

                                         /s/ Jack Friedman
                                         -----------------------------
                                         Jack Friedman
                                         JAXXS, Inc.

                                         /s/ Jack Friedman
                                         -----------------------------
                                         Jack Friedman, as an individual

                                         date: -----------------------

                                         signature: /s/ Ron Goldman
                                                    ------------------
                                                        Ron Goldman
                                                        Lessor

                                         date: 5/27/96
                                               -----------------------

- ------------------------------
(1) also JAKKS Pacific, Inc.

   1


EXHIBIT 10.11

THIS AGREEMENT                 made the 18th day of Jan., one thousand nine
hundred and ninety-six

BETWEEN

ASTORIA INVESTMENT COMPANY LIMITED whose registered office is situate at Room
2703, Wing On House, No. 71 Des Voeux Road Central, Hong Kong (hereinafter
called "the "Landlord") of the one part and

ROAD CHAMPS LIMITED whose registered office is situate at Room 713, Chinachem
Golden Plaza, 77 Mody Road, Tsimshatui East, Kowloon, Hong Kong (hereinafter
called "the Tenant") of the other part.

WHEREBY IT IS AGREED by and between the parties hereto as follows:

1. The Landlord hereby lets to the Tenant and the Tenant takes from the Landlord
the premises known as Unit 1008-9 on 10th Floor, Peninsula Centre, No. 67 Mody
Road, Kowloon, Hong Kong (hereinafter called "the said premises") Together with
the right in common with the Landlord and others having the like right to use go
pass and repass up down over and upon the common parts including inter alia
entrance passages halls staircases and lifts so far as the same are necessary
for the proper enjoyment of the said premises subject to the term and conditions
hereinafter contained TO HOLD the same unto the Tenant for the term of TWO YEARS
commencing from the 15th day of March 1996 and expiring on the 14th day of March
1998 at a rent of HONG KONG DOLLARS SEVENTY THREE THOUSAND SIX HUNDRED AND
NINETY TWO ONLY (HK$73,692.00) Hong Kong Currency per calendar month payable in
advance on the 1st day of each and every calendar month without deduction
Provided that the rent payable by the Tenant for the period from the expiration
of the rent-free period mentioned in Clause 12 hereof to the end of the Calendar
month shall be apportioned (if appropriate) accordingly and the rent for the
last calendar month of the tenancy shall be apportioned (if appropriate) and be
payable in advance on the 1st day of the last calendar month, last of such
payment shall be made pro-rata according to the number of days then unexpired in
the month on which such payment is made.

2. It is hereby  agreed and declared  that the said premises are let for the use
of an office by the Tenant only.

3. The tenant hereby agrees with the Landlord as follows:

     (a)  To pay the said rent at the times and in the manner aforesaid.

     (b)  To pay and discharge all rates taxes assessments duties charges
          impositions and other outgoings now or at any time hereafter to be
          imposed or charged by the Government of Hong Kong or other lawful
          authority in respect of the said premises upon the owner or occupier
          in respect


                                        1

   2



          thereof (Crown Rent, Property Tax and all other outgoings of a capital
          or non-recurring nature excepted).

     (c)  To pay all charges for electricity, water and gas consumed by the
          Tenant in the said premises and all service, maintenance charges and
          management fees payable in respect of the said premises, including the
          deposits for the meters therefor.

     (d)  To well and sufficiently paid maintain and keep in good repair and
          condition the interior of the said premises, the repair and condition
          the interior of the said premises, the furniture and filling (if any)
          and all the Landlord's fixtures and additions thereto (fair wear and
          tear excepted). In particular, the Tenant will at its own expense
          replace any broken or damaged window panes, fan-coil, pipes, wires,
          drains, taps, wash-basins and cisterns on the said premises save and
          except damage caused by the agent or servant of the Landlord.

     (e)  To take all diligent precautions and due care to protect the interior
          of the said premises against damage by fire storm typhoon or the like.

     (f)  To permit the Landlord and its agents with or without workmen or
          others at all reasonable times and upon reasonable notice being given
          to the Tenant to enter upon the said premises and to view the
          condition thereof and upon notice being given by the Landlord
          forthwith to repair in accordance therewith. Upon the Tenant failing
          to comply with the said notice the Landlord or its agents shall be
          entitled with or without workmen or others at all reasonable times and
          upon reasonable notice being given to the Tenant to enter upon the
          said premises to carry out any repair and the Tenant shall be liable
          to pay the Landlord's costs of carrying out any such repair and
          incidental charges provided that in the event of any emergency the
          Landlord its servants or agents may enter without notice and forcibly
          if necessary, provided that the Landlord shall keep the Tenant
          indemnified for any loss and damages caused by the negligence of the
          landlord or its agents in gaining such entry.

     (g)  Not without the previous written consent of the Landlord (which
          consent shall not be unreasonably withheld or delayed) to erect
          install or alter any fixtures partitioning or other erection or
          installation in the said premises or any part thereof or without the
          like consent to make or permit or suffer to be made alteration in or
          additions to the electrical/gas wiring/piping and installations or to
          install or permit or suffer to be installed any equipment apparatus or
          machinery which imposes a weight on any part of the flooring in excess
          of that for which it is designed or which requires any additional
          electrical/gas main wiring/piping or which consumes electricity/gas
          not metered through the Tenant's


                                        2

   3



          separate meter. The Landlord shall be entitled to prescribe the
          maximum weight and permitted locations of safes and other heavy
          equipment and to require that the same stand on supports of such
          dimensions and material to distribute the weight as the Landlord may
          deem necessary.

     (h)  Not to transfer assign underlet or otherwise part with the possession
          of the said premises or any part thereof either by way of subletting
          lending sharing or other means whereby any person or persons not party
          to this Agreement obtains the use or possession of the said premises
          or any part thereof irrespective of whether any rental or other
          consideration is given for such use or possession and in the event of
          any such transfer subletting sharing assignment or parting with the
          possession of the said premises (whether for monetary consideration or
          not) this Agreement shall at the discretion of the Landlord determine
          and the Tenant shall forthwith surrender the said premises to the
          Landlord. The tenancy shall be personal to the Tenant named in this
          Agreement and without in any way limiting the generality of the
          foregoing, the following acts and events shall, unless previously
          approved in writing by the Landlord (which approval the Landlord shall
          not be unreasonably withheld) be deemed to be breaches of this
          subclause:-

          (1)  in the case of the Tenant which is a partnership, the taking in
               of one or more new partners whether on the death or retirement of
               an existing partner or otherwise.

          (2)  in the case of a tenant who is an individual (including a sole
               surviving partner of a partnership tenant) the death, insanity or
               other disability of that individual to the intent that no right
               to use, possess, occupy or enjoy the said premises or any part
               thereof shall vest in the executors, administrators, personal
               representatives, next of kin, trustee or committee of any such
               individual.

          (3)  in the case of a tenant which is a corporation any take-over
               reconstruction, amalgamation, merger, voluntary liquidation or
               change in the person or persons who owns or own a majority of its
               voting shares or who otherwise has or have effective control
               thereof.

          (4)  the giving by the Tenant of a Power of Attorney or similar
               authority whereby the donee of the Power obtains the right to
               use, possess, occupy or enjoy the said premises or any part
               thereof or does in fact use, occupy or enjoy the same.

          (5)  the change of the Tenant's business name without the previous
               consent of the Landlord which consent shall not be withheld or
               delayed.

     (i)  Not to do or permit or suffer to be done in or upon the


                                        3

   4



          said premises or any part thereof any act or thing which may be or
          become or cause a nuisance annoyance damage or disturbance to the
          Landlord or to any of the tenants or occupiers of the other parts of
          the said building or of the neighbouring premises or which shall
          amount to the breach or non-observance of any of the covenants and
          conditions contained in the Crown Lease of the said premises, the
          Occupation Permit and the Deed of Mutual Covenant of which shall be in
          anywise against the laws of regulations of the said Colony of Hong
          Kong.

     (j)  Not to keep or store or cause or permit or suffer to be kept or stored
          any arms, ammunition, gunpowder, salt-petre, or other explosives or
          inflammable substance in the said premises.

     (k)  Not to use or permit or suffer to be used the said premises or any
          part thereof for any illegal or immoral purposes.

     (l)  To observe and comply with all houserules and regulations made by the
          appropriate management authorities relating to the use and management
          of the common parts of the said building.

     (m)  Not to do or permit or suffer to be done anything in or upon the said
          building and the said premises which may infringe any laws,
          regulations, bye-lays and rules and all notices and requirements of
          the Governmental Departments and other competent authorities in
          connection with or in relation to the use and occupation of the said
          premises and the said building.

     (n)  Not to do or cause or permit or suffer to be done anything whereby the
          policy or policies of insurance on the said premises and/or the said
          building against damage by fire or against other damage howsoever
          caused may be rendered void or voidable or whereby the premium for
          such insurance may be liable to be increased and the Tenant shall
          indemnify the Landlord against such increased or additional premium as
          shall have been brought about or caused by its acts or default.

     (o)  Not to obstruct or permit any employee or agent to obstruct any
          passageway lift staircase entrance exit or other common parts of the
          said building, and it is hereby expressly agreed that if any such
          obstruction shall happen and the Tenant shall fail to remove the same
          immediately upon request either to the Tenant or to the person then in
          charge of the said premises on the Tenant's behalf, the Landlord shall
          be entitled to dispose of the same in whatever manner the Landlord
          shall deem fit including inter alia destroying and disposing of the
          same as rubbish and selling the same on such terms and conditions as
          the Landlord may deem fit.

     (p)  Not to use the verandah of the said premises for the purpose of drying
          or hanging any clothing and not to exhibit or display anything on or
          near the verandah of


                                        4

   5



          the said premises or any part thereof in such a manner which will
          affect the appearance of the said building.

     (q)  Not to erect or permit to be erected outside the said premises any
          wireless or television aerial nor do to permit to be done anything to
          the external walls of the said premises which will affect the
          appearance of the said building.

     (r)  Not to place or allow to be placed any showboard name-bill placard
          advertisement or notice of any description upon the external walls and
          the window of the said premises.

     (s)  Not to keep in the said premises any animal or domestic pet without
          the prior consent of the Landlord.

     (t)  To pay and make good to the Landlord all and every loss and damage
          whatsoever incurred or sustained by the Landlord as a consequence of
          every breach or non-observance of the Tenant's obligations and
          stipulations herein contained and to indemnify the Landlord from and
          against all actions claims liability costs and expenses thereby
          arising.

     (u)  At the expiration or sooner determination of this Agreement to deliver
          up to the Landlord the said premises in particular the furniture and
          fittings (if any) in good clean and tenantable repair and condition
          (fair wear and tear excepted) as aforesaid together with any
          additional erections alterations or improvements which the Tenant may
          with the consent of the Landlord as aforesaid have made upon or in the
          said premises without payment of any compensation for such additional
          erections alterations or improvements.

     (v)  To allow at all reasonable times by appointment within three calendar
          months immediately preceding the expiration of the said term
          prospective Tenants or occupiers to inspect the said premises.

4.   The Landlord hereby agrees with the Tenant as follows: -

     (a)  That the Tenant paying the rent hereby reserved and performing and
          observing the terms and conditions herein contained and on the part of
          the Tenant to be performed and observed may peaceable hold and enjoy
          the said premises during the said term without any interruption by the
          Landlord or any person lawfully claiming through or under it.

     (b)  To pay Crown rent, property tax and all outgoings of a capital or
          non-recurring nature which are now or may hereafter during the said
          term be imposed by the Government upon the said premises.

     (c)  To use its best endeavour at the Landlord's expense to procure the
          manager of the said building to maintain the main walls, main drains
          and main pipes, main structures, roof, lifts, electricity cables and
          all common areas and


                                        5

   6



          facilities of the said building and/or the said premises in good and
          substantial repair and condition throughout the said term.

5.   PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED AND DECLARED as 
     follows: -

     (a)  If the rent reserved or any part thereof shall be unpaid for seven (7)
          days after becoming payable (whether legally or formally demanded or
          not) or if the Tenant shall fail or neglect to perform or observe any
          term or condition herein contained and on the Tenant's part to be
          performed or observed or if the Tenant shall become bankrupt or in the
          case of a limited company shall go into liquidation or if a petition
          for the Tenant's bankruptcy or winding up, as the case may be, shall
          have been filed or if the Tenant shall enter into any composition or
          arrangement with creditors or shall suffer the Tenant's goods or other
          property to be levied on execution then and in any of the said cases
          it shall be lawful for the Landlord at any time thereafter to
          determine this Agreement and to re-enter the said premises or any part
          thereof in the name of the whole but without prejudice to any right of
          action of the Landlord in respect of any breach of the Tenant's terms
          and conditions herein contained and the deposit paid hereunder shall
          be forfeited to the Landlord but without prejudice to the Landlord's
          rights to claim any further damages which the Landlord shall have
          sustained or may sustain and a written notice served by the Landlord
          on the Tenant to the effect that the Landlord thereby exercises the
          power of re-entry and determination hereinbefore contained shall be a
          full and sufficient exercise of such power.

     (b)  In the event of any breach of any term or condition on the part of the
          Tenant herein contained, the Landlord shall not by acceptance of rent
          or by any other act whatsoever or by any omission be deemed to have
          waived any such breach of term or condition notwithstanding any rule
          of law or equity to the contrary and that no consent to or waiver of
          any breach shall be binding on the Landlord unless the same is in
          writing of the Landlord.

     (bb) Notwithstanding anything hereinbefore contained in the event of
          default in payment by the Tenant in respect of any payments to be made
          hereunder for a period of seven days from the date of which the same
          falls due for payments, the Tenant shall further pay to the Landlord
          on demand interest on the amount in arrears at the rate of 1.5% per
          month calculated from the date on which the same becomes due for
          payment until the date of payment as liquidated damages and not as
          penalty provided that the demand and/or receipt by the Landlord of
          interest


                                        6

   7



          pursuant to this provision shall be without prejudice to and shall not
          affect the right of the Landlord to exercise any other right or remedy
          hereof (including the right of re-entry) exercisable under the terms
          of this Agreement.

     (c)  For the purpose of this Agreement any act default neglect or omission
          of any servant, agent, licensee, visitor and invitee of the Tenant
          shall be deemed to be the act default neglect or omission of the
          Tenant.

     (d)  In the event of the said premises or any part thereof at any time
          during the said term being damaged or destroyed by acts of war fire
          typhoon earthquake flood white ants or subsidence of the soil so as to
          render the same unfit for occupation and use and the cause of which is
          not attributable to the acts or omission of the Tenant then the rent
          hereby reserved or a fair proportion thereof according to the nature
          and extent of the damage sustained shall cease to be payable until the
          said premises shall have been again rendered fit for occupation and
          use PROVIDED ALWAYS that should the whole of the said premises or the
          greater part thereof be so destroyed or damaged by the happening of
          any of the above events as to be unfit for use and occupation the
          Landlord shall not be required to rebuild or reinstate the said
          premises or the said building if by reason of the condition of the
          same or any local Regulations or other circumstances beyond the
          control of the Landlord it is not practicable or reasonable to do so
          Provided that if the Landlord shall fail to reinstate or cause to be
          reinstated the said premises or the said building within one month of
          receiving a written notice to reinstate the same from the Tenant or if
          the said premises or the greater part thereof or the said building
          remain uninhabitable or inaccessible for a period of one month the
          Tenant may forthwith or within a reasonable time thereafter by a
          written notice terminate this Agreement and thereupon the same and
          everything herein contained shall be void as from the date of
          occurrence of such damage or destruction and the Landlord shall
          forthwith refund to the Tenant the said deposit or the balance thereof
          but without prejudice to the rights and remedies of either party
          against the other in respect of any antecedent claim or breach of
          covenant.

     (e)  Any notice required to be served hereunder shall be sufficiently
          served on the Tenant if delivered or sent by post or left addressed to
          it at the said premises or at its registered office in Hong Kong and
          any notice to the Landlord shall be sufficiently served if sent to the
          Landlord by post at the Landlord's registered office in Hong Kong. A
          notice sent by post shall be deemed to have been received at the time
          when in due course of post it would be delivered at the address to
          which it is sent.


                                        7

   8



     (f)  For the purpose of distress for rent in terms of Part III of the
          Landlord and Tenant (Consolidation) Ordinance (Cap.7) and for the
          purpose of this Agreement the rent in respect of the said premises
          shall be deemed to be in arrears if not paid in advance at the time
          and in the manner hereinbefore provided for payment thereof.

     (g)  The Tenant shall not be entitled to any compensation or abatement of
          rent in respect of any failure howsoever caused in respect of the
          lifts, electricity supply or other services provided to the said
          building.

     (h)  The Landlord does not warrant that the light and air to the premises
          would not be obstructed.

     (i)  The Landlord shall not be in any way liable to the Tenant or to any
          person or persons claiming any right title or interest under the
          Tenant or any person expressly or impliedly authorized by the Tenant
          to enter leave or remain on the said building or any part thereof for
          any damage to property or injury to person which may be sustained by
          the Tenant or any such person or persons as aforesaid on account of
          the defective or damaged condition of the said premises the said
          building and the Landlord's fixtures or fittings therein and any part
          thereof and in particular the person or persons as aforesaid for any
          damage to property or injury to person caused by or through or in any
          way owing to the overflow of water or water leakage from any floor
          flat or premises or any part of the said building any typhoon electric
          current water pipes electric wiring or cables situated upon under or
          in any way connected with the said premises and/or the said building
          or dropping of cigarette ends broken pieces of glass or other articles
          from any floor flat premises or any part of the said building or
          neighbourhood and the Tenant hereby agrees to indemnify the Landlord
          against all claims demands actions costs expenses whatsoever made upon
          the Landlord by any person or persons in respect of the matters
          aforesaid and further the Tenant shall be responsible for any damage
          which may be done to any part of the said premises or to the
          Landlord's fixtures and fittings therein.

6.   (a)  The Tenant shall on or before the signing hereof deposit with the
          Landlord the sum specified in the Schedule hereto to secure the due
          observance and performance by the Tenant of the agreements
          stipulations and conditions herein contained and on the Tenant's part
          to be observed and performed. The said deposit shall be retained by
          the Landlord throughout the said term free of any interest to the
          Tenant and in the event of any breach or non- observance or
          non-performance by the Tenant or any of the agreements stipulations or
          conditions aforesaid the Landlord shall be entitled to terminate this
          Agreement in which event the said deposit may be forfeited to the


                                        8

   9



          Landlord without prejudice to the Landlord's right of action to claim
          for any monetary loss or damage which the Landlord may sustain by
          reasons of the aforesaid breach non-observance or non-performance.
          Notwithstanding the foregoing the Landlord may in any such event at
          its option elect not to terminate this Agreement but to deduct from
          the deposit the amount of any monetary loss incurred by the Landlord
          in consequence of the breach non-observance or non-performance by the
          Tenant in which event the Tenant shall as a condition precedent to the
          continuation of the tenancy deposit with the Landlord the amount so
          deducted and if the Tenant shall fail so to do the Landlord shall
          forthwith be entitled to re-enter on the said premises or any part
          thereof in the name of the whole and to determine this Agreement in
          which event the deposit may be forfeited to the Landlord as
          hereinbefore provided.

     (b)  Subject as aforesaid the said deposit shall be refunded to the Tenant
          by the Landlord without interest within thirty days after the
          expiration or sooner determination of this Agreement and delivery of
          vacant possession to the Landlord against the Tenant for any arrears
          of rent rates and other charges and for any breach non-observance or
          non-performance of any of the covenants agreements stipulations terms
          and conditions herein contained and on the part of the Tenant to be
          observed or performed whichever shall be the later.

7. AND IT IS HEREBY AGREED that the Tenant paying the rent hereby reserved and
duly performing and observing the terms and conditions herein contained on the
part of the Tenant to be performed and observed shall upon giving at least six
calendar months' previous notice in writing to the Landlord prior to the
expiration of the said term hereby created have the option of renewing the
tenancy of the said premises for one further term of 1 YEAR at the new monthly
rental of fair market rent at the time of renewal which shall be agreed between
both parties and failing agreement three months before the expiry of the term
such rent shall be determined by a chartered surveyor as an expert appointed by
the then President of the Royal Institution of Chartered Surveyors (Hong Kong
Branch) whose determination shall be conclusive and binding on the parties (the
express for the said appointment shall be borne and paid by the Tenant and the
Landlord in equal shares) such new rent to be exclusive of rates and management
fees and upon and subject to the same terms and conditions herein save and
except that such renewed agreement shall not contain this clause of renewal and
subject to the payment of the balance of the new deposit under the renewed
agreement.

8. It is hereby expressly declared that no key or construction money or other
premium of a similar nature has been paid by the Tenant or any person or persons
for and on behalf of


                                        9

   10



the Tenant to the Landlord or any other person for the grant of this tenancy. 

9. Where more than one person is a party hereto as Landlord or Tenant, the
expression "the Landlord" and "the Tenant" shall where the context admits
include all either or any of such persons and their liability contained or
implied herein shall be joint and several.

10. In this Agreement unless inconsistent with the context, words denoting
persons include corporations and firms; works denoting masculine gender include
feminine gender and neuter gender, and words denoting the singular number
include the plural number and vice versa.

11. Each party shall bear his own solicitors' costs charges and expenses of and
incidental to this Agreement and the stamp duty (including the counterpart) and
registration fee, if any, on this agreement shall be borne equally by the
parties hereto.

12. Notwithstanding anything herein contained, the Landlord hereby agrees to
grant a rent free period to the Tenant from 15th March 1996 to 1st May 1996 for
decoration purpose only. The management fee, government rates and all outgoings
payable in respect of the said premises for the said rent-free period shall be
borne and paid by the Tenant solely.

13. The Landlord hereby agrees to carry out and complete the following works
before handing over the said premises to the Tenant:-

     (a)  to provide the false ceiling and a standard entrance door (which
          should be facing the lift lobby); and

     (b)  to build a brick wall in accordance with the prescription and standard
          as agreed by the Landlord and the Tenant as partitioning wall between
          Unit No. 1007-1008; and

     (c)  to demolish all the partitions of the said premises.

     AS WITNESS the hands of the parties hereto the day and year first above
written.


                                  THE SCHEDULE
                                  ------------

     The deposits in the sum of HK$248,928.00 the breakdown of which are as
follows:-

                                                                       
     (a)  Rental deposits                                         HK$221,076.00

     (b)  Air-conditioning charges and
            Management fee deposit                                HK$ 27,852.00
                                                                  -------------




                                       10

   11



                                                                  HK$248,928.00
                                                                  =============


SIGNED by Lauw Siang Liong             )
                                       )
for and on behalf of the Landlord      )
                                       )
whose signature is verified by:-       )                  ______________________
                                                           Authorized Signature




SIGNED by its director, Mr Lai Sai     )
                                       )
Kit for and on behalf of the           )
                                       )
Tenant in the presence of:-            )                  _____________________
                                                           Authorized Signature




                                       11

   12



            RECEIVED the day and year first       )
                                                  )
above written of and from the Tenant HONG         )
                                                  )
KONG DOLLARS TWO HUNDRED FORTY EIGHT              )
                                                  )
THOUSAND NINE HUNDRED AND TWENTY EIGHT ONLY       )           HK$248,928.00
                                                  )
being the rental deposits, management and         )
                                                  )
air-conditioning charges deposit above            )
                                                  )
expressed to be paid by the Tenants to the        )
                                                  )
Landlord in respect of the said premises.         )




                                                           --------------------
                                                               the Landlord


                                       12

   13






                    Dated the _____ day of ___________, 1996



                       ASTORIA INVESTMENT COMPANY LIMITED


                                       AND


                               ROAD CHAMPS LIMITED


                    *****************************************

                                TENANCY AGREEMENT

                    *****************************************




                               TANG, LAI & LEUNG,
                                   SOLICITORS,
                          ROOMS 2706-8, WING ON HOUSE,
                           71 DES VOEUX ROAD CENTRAL,
                                   HONG KONG.









                                       13

   14

                           
EXHIBIT 10.12.2                  AMENDMENT TO
                           WORLD WRESTLING FEDERATION
                               LICENSE AGREEMENT
                                WITH JAKKS, INC.
                            Dated: October 24, 1995



     Pursuant to Section L(3) of the Standard Terms and Conditions of the above
License Agreement, Titan and Licensee agree that said License Agreement shall be
and is amended, effective as of _______________________________ as follows:

     1. Paragraph 1(e) which defines the "Licensed Products" is amended to add:
disposable cameras, photo albums and thumb-operated wrestling figures.

     2. All other provisions of said License Agreement remain unamended and in
full force and effect according to their terms.

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Amendment to License Agreement as of this 22nd day of April,
1996.


                                         JAKKS, INC.
                                                 
                                                 /s/ Stephen G. Berman
                                         By:     _______________________________
                                                 Senior Vice President


                                         TITAN

                                                 /s/
                                         By:     _______________________________
                                                              (Title)

   1



                               SECOND AMENDMENT TO
                           WORLD WRESTLING FEDERATION
                                LICENSE AGREEMENT
                            WITH JAKKS PACIFIC, INC.



     Pursuant to Section L(3) of the Standard Terms and Conditions of the above
License Agreement dated October 24, 1995, Titan and Licensee agree that said
License Agreement shall be and is amended, effective as of January 1, 1997, as
follows:

     1. Paragraph 1(c) shall now read: The term "Events" shall mean the
professional wrestling exhibitions produced, promoted, and performed by Titan,
before a live audience and/or broadcast via pay, cable, or free television.

     2. Paragraph 1(e) shall now read: The term "Licensed Products" shall mean
the following items: articulated and non-articulated molded plastic six inch
(6") figures, articulated molded plastic three inch (3") figure sets inclusive
of wrestling ring, articulated seven inch (7") figure with special features,
figure finger rings, and wrestling ring scaled to the figures.

     3. Paragraph 3 shall now read in full: Period of Agreement. The period of
this Agreement shall be extended through December 31, 1999.

     4. Paragraph 4(c) shall now read in full: Guaranteed Royalties. If total of
all royalties payable to Titan under the foregoing subparagraphs 4(a) and 4(b)
is less than the Guaranteed Royalty Amount set forth below, the licensee shall
pay Titan, on or before December 31st of each year the difference between the
Guaranteed Royalty amount due for each one year period as set forth below and
the total of all royalties paid to Titan under subparagraphs 4(a) and 4(b):

        Guaranteed Royalty Amount for the year ending December 31, 1997:
     $666,667 (to be paid in quarterly installments of $166,667.00, commencing
     March 31, 1997).

        Guaranteed Royalty Amount for the year ending December 31, 1998:
     $666,667 (to be paid in quarterly installments of $166,667.00, commencing
     March 31, 1998). 

        Guaranteed Royalty Amount for the year ending December 31, 1999:
     $666,667 (to be paid in quarterly installments of $166,667.00, commencing
     March 31, 1999).

        Total Guaranteed Royalty Amount for the period January 1, 1997 to
     December 31, 1999: US$2,000,000.


   2



     5. All other provisions of said License Agreement remain unamended and in
full force and effect according to their terms.

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have executed this Amendment to License Agreement as of this 30 day of December,
1996.


                                          Titan Sports, Inc.


Date: January 21, 1997                    By:  /s/ Linda E. McMahon
      ----------------                         ---------------------------------
                                               Co-CEO     (Title)


                                          Jakks Pacific, Inc.


                                          By:  Joel M. Bennett
                                               ---------------------------------
                                               Chief Financial Officer   (Title)

   1

EXHIBIT 10.12.3           WORLD WRESTLING FEDERATION
                               LICENSE AGREEMENT



     THIS AGREEMENT, dated as of 2/10/97, 1997, between TITAN SPORTS, INC., a
Delaware corporation with its principal office at Titan Tower, 1241 East Main
Street, Stamford, Connecticut 06902 ("Titan"), and JAKKS PACIFIC, INC. a
corporation with its principal office at 24955 Pacific Coast Highway, Suite
B202, Malibu, CA 90265 (the "Licensee"), is to evidence:

     1. Definitions. For purposes of this Agreement the following definitions
shall apply:

     (a) The term "Advertising Materials" shall mean all advertising and
promotional materials and all packaging, wrapping, and labeling materials for
the Licensed Products (including, by way of illustration but not limitation,
catalogs, trade advertisements, flyers, sales sheets, labels, package inserts,
hangtags and displays) which are produced by or for the Licensee and which make
use of the Intellectual Property.

     (b) The term "Copyrights" shall mean all copyrights now or hereafter owned
by Titan relating to the Events or the Talent.

     (c) The term "Events" shall mean the professional wrestling exhibition
produced, promoted, and performed by Titan, before a live audience and/or
broadcast via pay, cable, or free television.

     (d) The term "Intellectual Property" shall mean the Rights of Publicity,
the Trademarks, the Copyrights, and all other proprietary rights relating to the
Events.

     (e) The term "Licensed Products" shall mean the following items:
articulated and non-articulated molded plastic six inch (6") figures,
articulated molded plastic three inch (3") figure sets inclusive of wrestling
ring, articulated seven inch (7") figures with special features (first special
feature will be Lenticular), figure finger rings, wrestling ring scaled to
figures and action figures with sound and microphone which may utilize infrared
technology.

     (f) The term "Net Sales Price" shall mean the Licensee's invoiced billing
price to its customers or distributors for the Licensed Products, less returns
for damaged goods, discounts and allowances.

     (g) The term "Rights of Publicity" shall mean the likenesses, physical
characteristics, personalities, characters, and personas of the Talent.

     (h) The term "Talent" shall mean all individuals who perform in the Events,
including, but not limited to, the professional wrestlers who perform in the
Events.

     (i) The term "Territory" shall mean Australia, Bahrain, Cyprus, Egypt,
France, Germany, Israel, Italy, Kuwait, Lebanon, Jordan, Morocco, New Zealand,
Oman, Qatar, Saudi Arabia, South Africa, Spain, Syria, Tunisia, United Arab
Emirates, United Kingdom.

     (j) The term "Trademarks" shall mean all symbols, designs, styles, emblems,
logos and marks used in connection with the Events, including, but not limited
to, the name WORLD WRESTLING FEDERATION, the WWF logo or logos, the mark WORLD
WRESTLING FEDERATION SUPERSTARS, and the names of the Talent, but excluding the
initials WWF in block letters.


   2


     2. Grant of License; Channels of Distribution Reserved to Titan.

     (a) Grant of License. Titan grants to the Licensee, upon the terms and
conditions set forth in this Agreement, the exclusive right and license to use
the Intellectual Property in connection with the manufacture, distribution,
sale, and advertising of the Licensed Products in the Territory through all
channels of distribution except those reserved to Titan under subparagraph 2(b).

     (b) Titan's Channels of Distribution. The rights granted to the Licensee by
Titan under subparagraph 2(a) shall not include the right to distribute the
Licensed Products through the following Titan channels of distribution: (i)
at-Event sales; (ii) catalog sales; (iii) direct mail sales; (iv) sales via
television or other electronic media; and (v) vending machine sales.

     3. Period of Agreement. The period of this Agreement shall commence on
January 1, 1997 and end on December 31, 1999 unless terminated earlier pursuant
to the terms hereof. Thereafter, if the Licensee wishes to renew this, it shall
provide written notice of such intent to Titan no less than sixty (60) days
prior to the commencement of the renewal period in question. In that event,
provided the Licensee is not in default of any term under this Agreement, and
further provided that Licensee has paid to Titan all royalties during the then
current period, Titan will discuss with Licensee such potential renewal, and the
terms thereof. No renewal period will be effective unless and until the parties
reach a mutual agreement as to the terms applicable to such renewal. This
paragraph is in no way to be construed so as to obligate Titan to renew this
Agreement, or to renew this Agreement with any particular terms.

     4. Royalties. In consideration for the rights granted to it under this
Agreement, the Licensee agrees to pay Titan the following royalties:

     (a) Advance Royalties. On execution of this Agreement the Licensee agrees
to pay to Titan the following non-refundable Advance Royalty Amount, which shall
be set off as a credit against the royalties due to Titan under subparagraph
4(b):

        Advance Royalty Amount          US$150,000.00 
        ----------------------          


If Titan has not received the Advance Royalty Amount due on execution of this
Agreement by the date 15 days from the date of Titan's execution of this
Agreement, Titan shall have the right to terminate this Agreement, with
immediate effect, by providing the Licensee with written notice of termination
at any time prior to Titan's receipt of said Advance Royalty Amount payment.

     (b) Percentage Royalties. Percentage Royalties shall be computed as
follows:

          (i) The Licensee shall pay Titan a percentage royalty of 10% of the
     Net Sales Price on all sales of the Licensed Products by the Licensee to
     its customers or distributors. If the Licensee sells any Licensed Products
     to a customer or distributor in the Territory on an F.O.B. basis from a
     manufacturing source outside the Territory (for example, a shipment of
     Licensed Products F.O.B. Hong Kong to a customer in the


                                        2

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     Territory), the royalty rate on such sales shall be computed on the basis
     of the average Net Sales Price of all non-F.O.B. sales of the same Licensed
     Products by the Licensee during the accounting period in which such F.O.B.
     sale occurs.

          (ii) All royalty computations under this subparagraph 4(b) shall be
     made on the basis of the Net Sales Price charged by the Licensee, or, if
     the Licensee sells a Licensed Product to a subsidiary or other party
     controlled by the Licensee, on the basis of the Net Sales Price for such
     Licensed Product charged by such subsidiary or controlled party on resale
     of the Licensed Product.

     (c) Guaranteed Royalties. If the total of all royalties payable to Titan
under the foregoing subparagraphs 4(a) and 4(b) is less than the Guaranteed
Royalty Amount set forth below, the Licensee shall pay Titan, on or before
December 31, 1999, the difference between the Guaranteed Royalty Amount and the
total of all royalties paid to Titan under subparagraphs 4(a) and 4(b):


         Guaranteed Royalty Amount           US$375,000.00
         -------------------------            
                                             
                           (Payment Schedule Attached)

     5. Non-Competition. The Licensee agrees that it shall not, while this
Agreement remains in effect and for six months thereafter, produce any products
or provide any services using the name or other trademarks or service marks
associated with any professional wrestling organization other than the WORLD
WRESTLING FEDERATION or its affiliates, or the name and/or likeness of any
professional wrestler not associated with Titan.

     6. Marketing Plans. Within 90 days of the execution of this Agreement, and
on or before each one-year anniversary of the commencement date of this
Agreement, the Licensee shall provide Titan with a written marketing plan with
respect to the Licensed Products. Each such marketing plan shall include, on a
Licensed Product-by-Licensed Product basis, a marketing timetable, sales
projections, channels and methods of distribution, nature and amount of
advertising and advertising expenditures, and any other information which Titan
may ask the Licensee to include. Each marketing plan shall contain specific
information for the one-year period immediately succeeding its submission and
general estimates or projections for subsequent periods during which this
agreement remains in effect.

     7. Licensee Acknowledgment. The Licensee by executing this Agreement
acknowledges that it has reviewed and understands all provisions of this
Agreement, including the attached Standard Terms and Conditions.

     8. Standard Terms and Conditions. This Agreement is subject to all of the
provisions of the Standard Terms and Conditions which are attached to and made a
part of this Agreement.




                                        3

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.


                                          TITAN SPORTS, INC.


Date 2/24/97                              By:  /s/ Linda E. McMahon
                                               ---------------------------------
                                               Pres. - Co-CEO     (Title)


                                          JAKKS PACIFIC, INC.


                                          By:  Joel M. Bennett
                                               ---------------------------------
                                               Chief Financial Officer   (Title)




                                        4

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                                   APPENDIX A

                       MINIMUM GUARANTEE PAYMENT SCHEDULE



1997

January 1, 1997 to March 31, 1997                 $31,250
April 1, 1997 to June 30, 1997                     31,250
July 1, 1997 to September 30, 1997                 31,250
October 1, 1997 to December 31, 1997               31,250


1998

January 1, 1998 to March 31, 1998                 $31,250
April 1, 1998 to June 30, 1998                     31,250
July 1, 1998 to September 30, 1998                 31,250
October 1, 1998 to December 31, 1998               31,250


1998

January 1, 1999 to March 31, 1999                 $31,250
April 1, 1999 to June 30, 1999                     31,250
July 1, 1999 to September 30, 1999                 31,250
October 1, 1999 to December 31, 1999               31,250



TOTAL PAYMENT                                  US$375,000
   6



                  WORLD WRESTLING FEDERATION LICENSE AGREEMENT
                          STANDARD TERMS AND CONDITIONS



     SECTION A. QUALITY CONTROLS AND APPROVAL PROCEDURES FOR LICENSED PRODUCTS
AND ADVERTISING MATERIALS.

     A(1) Warranty of Quality. The Licensee warrants that the Licensed Products
will be of good quality in design, material and workmanship and suitable for
their intended purpose; that no injurious, deleterious, or toxic substances will
be used in or on the Licensed Products; that the Licensed Products will not
cause harm when used as instructed and with ordinary care for their intended
purpose; and that the Licensed Products will be manufactured, sold, and
distributed in strict compliance with all applicable laws and regulations.

     A(2) Approval Procedures for Licensed Products and Advertising Materials;
Approval Standards; Time for Approval by Titan.

     (a) General. the Licensee shall comply with all reasonable procedures which
Titan may from time to time adopt regarding its approval of Licensed Products
and Advertising Materials which the Licensee proposes to manufacture, sell, or
use under this Agreement. These approval procedures shall be implemented using
prescribed forms to be supplied to the Licensee by Titan, and shall incorporate
the basic approval requirements and steps outlined in the following sections.
the Licensee agrees to retain all materials relating to approvals in its files
while this Agreement remains in effect and for one year thereafter.

     (b) Approval of Licensed Products. With respect to each different Licensed
Product which the Licensee proposes to manufacture and sell under this
Agreement, the Licensee shall submit to Titan for its review and approval the
following materials in the order stated:

     (i) generic sample of the type of Licensed Product in question (that is, a
sample of the kind of merchandise article to which the Licensee proposes to add
the Intellectual Property in producing the Licensed Product, showing the general
quality standard which will be met by the Licensed Product);

     (ii) finished art for the Licensed Product, showing the exact use of the
Intellectual Property on or in connection with the proposed Licensed Product;

     (iii) a preproduction prototype sample of the Licensed Product, where
appropriate, or a preproduction final sample of the Licensed Product, showing in
either case the exact form, finish, and quality the Licensed Product will have
when manufactured in production quantities; and

     (iv) forty-eight identical production samples of the Licensed Product, to
be submitted immediately upon commencement of production.

The Licensee shall comply with all of the foregoing approval steps for each
Licensed Product, obtaining Titan's written approval at each step of the
procedure, unless by prior written notice from Titan it is exempted from any
such step with respect to a specific Licensed Product.


                                        5

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     (c) Approval of Advertising Materials. With respect to each different item
of Advertising Material which the Licensee (or any party acting on its behalf)
proposes to produce and use under this Agreement, the Licensee shall submit to
Titan for its review and approval the following materials, in the order stated:

     (i) proposed written copy for the item of Advertising Material, with
attached rough art showing how the Intellectual Property will be used in
connection with the copy;

     (ii) a final printed sample of the item, where feasible (as, for example,
in the case of labels, hangtags, printed brochures, catalogs, and the like).

The Licensee shall comply with all of the foregoing approval steps for each item
of Advertising Material, obtaining Titan's written approval at each step of the
procedure, unless by prior written notice from Titan it is exempted from any
such step with respect to a specific item of Advertising Material.

     (d) Approval Standards. Titan shall have the right to disapprove any
materials submitted to it under Sections A(2)(b) or A(2)(c) if it determines, in
its sole and unfettered discretion, that the materials in question would impair
the value and goodwill associated with the Events or Titan's licensing program
for the Intellectual Property, by reason of (i) their failure to satisfy the
general quality standards including those set forth in Section A(1); (ii) their
use of artwork, designs, or concepts which fail to depict accurately the Talent
or the Intellectual Property; (iii) their use of materials which are unethical,
immoral, or offensive to good taste; (iv) their failure to carry proper
copyright or trademark notices; or (v) any other reasonable cause.

     (e) Time for Approval by Titan. Titan agrees to use reasonable efforts to
notify the Licensee in writing of its approval or disapproval of any materials
submitted to it under Section A(2)(b) and A(2)(c) within 15 business days after
its receipt of such materials, and agrees, in the case of its disapproval, to
notify the Licensee in writing of its reasons for disapproval.

     A(3) Maintenance of Quality of Licensed Products; Inspection of Production
Facilities. The Licensee agrees to maintain the quality of each Licensed Product
manufactured under this Agreement up to the specifications, quality, and finish
of the production sample of such Licensed Product approved by Titan under
Section A(2)(b), and agrees not to change the Licensed Product in any respect or
to make any change in the artwork for the Licensed Product without first
submitting to Titan samples showing such proposed changes and obtaining Titan's
written approval of such samples. From time to time after it has commenced
manufacturing the Licensed Products, the Licensee, upon request, shall furnish
free of charge to Titan a reasonable number of random production samples of any
Licensed Product specified by Titan. The Licensee shall also furnish to Titan
upon request the addresses of the production facilities used by the Licensee for
manufacturing the Licensed Products, and shall make arrangements for Titan or
its representatives to inspect such production facilities during reasonable
business hours.

     A(4) Miscellaneous.

     (a) Artwork for Licensed Products. If the Licensee requests Titan to
furnish it with any photographs or special artwork incorporating the
Intellectual Property, the Licensee agrees to reimburse Titan for its costs of
supplying such materials to the Licensee.

     (b) Translations. All translations of written material used on or in
connection with the Licensed Products or Advertising Materials shall be
accurate, and the Licensee, when submitting the Licensed Products


                                        6

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and the Advertising Materials for approval, shall provide Titan with English
translations of all such written materials in a language other than English.

     (c) Use of Talent in Licensed Products and Advertising Materials. With
prior written consent of Titan Licensee shall be allowed to use any Talent for
purposes of explicit endorsement in any Licensed Product or items as
contemplated by the definition of Intellectual Property set forth above.

     (d) Transactions with Other Licensee. The Licensee shall not, without
Titan's prior written consent, (i) sell or deliver to another Titan licensee the
films or other devices used by the Licensee to produce the Licensed Products; or
(ii) print or otherwise produce any items using the Intellectual Property for
another Titan licensee.

     (e) Duplicate Films. If the Licensee in connection with the manufacture of
the Licensed Products develops film or other reproductive media incorporating
the Intellectual Property, the Licensee, when requested by Titan to do so, shall
supply duplicates of such films or other reproductive media to other licensees
of Titan outside the Territory, at cost of duplication plus 10%.

     (f) Titan's Right to Purchase Licensed Products. In addition to the random
production samples of the Licensed Products to be supplied by the Licensee to
Titan free of charge under Section A(3), Titan shall be entitled at any time
while this Agreement remains in effect to purchase from the Licensee, at the
Licensee's cost of manufacture plus 13.5% of cost any available quantity of the
Licensed Products. Any such Licensed Products purchased by Titan shall be
royalty-free.

     SECTION B. EFFORTS TO SELL LICENSED PRODUCTS; RESTRICTIONS ON SALE

     B(1) Manufacture and Sale of Licensed Products. The Licensee agrees to
manufacture the Licensed Products at the Licensee's own expense in sufficient
quantities to meet the reasonably anticipated demand. The Licensee also agrees
to exercise reasonable efforts to advertise and promote the Licensed Products at
its own expense and to use its best efforts to sell the licensed Products in the
Territory.

     B(2) Good Faith Effort to Exploit Rights. If within three months of the
execution of this Agreement the Licensee has failed to take any good faith steps
to exploit the rights granted to it (for example, by seeking to obtain Titan's
approval of a proposed Licensed Product, or commencing to manufacture and sell
an approved Licensed Product), Titan shall have the right to terminate this
Agreement immediately by giving written notice of termination to the Licensee.
If within three months of the execution of this Agreement the Licensee has
failed to submit to Titan a prototype of a particular Licensed Product, such
Licensed Product shall be automatically deleted from the definition of "Licensed
Products" under subparagraph 1(e) of this Agreement, and all rights to such
Licensed Product shall revert to Titan.

     B(3) Titan's Right to Eliminate Country from Territory. If at any time
during the period of this Agreement the Licensee is not making regular sales of
more than a nominal nature of any of the Licensed Products in a country of the
Territory, Titan shall have the right, upon giving 30 days prior written notice
to the Licensee, to terminate the Licensee's rights for all Licensed Products of
such country.

     B(4) Titan's Right to Terminate License for Specific Licensed Product. If
at any time during the period of this Agreement the Licensee is not making
regular sales of more than a nominal nature of a particular Licensed Product in
a country of the Territory, Titan shall have the right, upon giving 30 days
prior written notice to the Licensee, to terminate the Licensee's rights for
such Licensed Product for such country. In order


                                        7

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to assist Titan in reviewing its marketing activities, the Licensee agrees to
furnish Titan upon request complete information evidencing on a
country-by-country basis the Licensee's efforts to market the Licensed Products
in such countries.

     B(5) Restrictions on Sale of Licensed Products. The Licensed Products shall
be sold to the public only in the manner in which merchandise articles of the
same general description are customarily merchandised to the public. the
Licensee shall not use or sell the Licensed Products as premiums, or distribute
the Licensed Products to parties which the Licensee has reason to believe intend
to use or sell the Licensed Products as premiums. Use or sale of the Licensed
Products as "premiums," for purposes of the foregoing provisions, shall mean use
or sale of the Licensed Products in connection with the following kinds of
promotional activities: self-liquidator programs; joint merchandising programs;
giveaways; sales incentive programs; door openers; traffic builders; and any
other kinds of promotional programs designed to promote the sale of the Licensed
Products or other goods or services of the Licensee or a third party.

     SECTION C ROYALTIES; STATEMENTS.

     C(1) Computation of Royalties. All royalties due to Titan shall accrue upon
the sale of the Licensed Products, regardless of the time of collection by the
Licensee. For purposes of this agreement, a Licensed Product shall be considered
"sold" as of the date on which such Licensed Product is billed, invoiced,
shipped, or paid for, whichever event occurs first. If any Licensed Products are
consigned to a distributor by the Licensee, the Licensed Products shall be
considered "sold" by the Licensee upon the date on which such distributor bills,
invoices, ships, or receives payment for any of the Licensed Products, whichever
event occurs first.

     C(2) Time of Payment. The Licensee shall pay all royalties owing to Titan
under this Agreement for any calendar quarter within 30 days following the end
of the calendar quarter in question. All royalty amounts in this Agreement are
stated in U.S. Dollars, and all royalty payments shall be made in U.S. Dollars.
All royalty statements required to be submitted by the Licensee shall be
submitted within 30 days following the end of the calendar quarter to which they
relate and shall accompany the royalty payments made to Titan.

     C(3) Titan Approval of Discounted Sales. If the Licensee proposes to sell
any Licensed Product at a price which is less than 10% above the Licensee's
manufactured cost of such Licensed Product, Titan shall have a right of prior
approval over the terms of such sale and the percentage royalty to be payable by
the Licensee under paragraph 4 with respect to such sale.

     C(4) Deductions; Taxes.

     (a) There shall be no deduction from the royalties owed to Titan for
uncollectible accounts, or for taxes, fees, assessments, or other expenses of
any kind which may be incurred or paid by the Licensee in connection with: (i)
royalty payments to Titan; (ii) the manufacture, sale, distribution, or
advertising of the Licensed Products in the Territory; or (iii) the transfer of
funds or royalties or the conversion of any currency into U.S. Dollars. It shall
be the Licensee's sole responsibility at its expense to obtain the approval of
any foreign authorities; to take whatever steps may be required to effect the
payment of funds from abroad; to minimize or eliminate the incidence of foreign
taxes, fees, or assessments which may be imposed; to protect its investments in
foreign territories; to enable it to commence or continue doing business in any
foreign territory; and to comply in any and all respects with all applicable
laws and regulations.


                                        8

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     (b) Notwithstanding the provisions of the preceding Section C(4)(a), if (i)
any country imposes a withholding tax against Titan, as licensor, with respect
to the royalties payable to Titan by the Licensee on sales of the Licensed
Products in such country, (ii) such tax is paid by the Licensee on behalf of
Titan, and (iii) such tax is an income tax as to which a foreign tax credit is
allowable to Titan under Section 901 of the Internal Revenue Code of 1986, as
amended, the Licensee may deduct the amount of such withholding tax from the
royalties owing to Titan on the condition that the Licensee furnishes to Titan
such information as Titan requires to evidence Titan's right to credit such
withholding tax against its federal income tax liability in the United States.

     C(5) Royalty Statements. The Licensee shall furnish to Titan, at the same
time it makes payment of royalties, a full and complete statement, duly
certified by an officer of the Licensee to be true and accurate, showing the
number of each type of Licensed Product sold during the calendar quarter in
question, the total gross sales revenues for each such Licensed Product, an
itemization of all allowable deductions, if any, the Net Sales Price for each
Licensed Product sold, the amount of royalties due with respect to such sales,
and the quantities of each Licensed Product on hand and in transit as of the end
of such quarter, together with such other pertinent information as Titan may
reasonably request from time to time. The Licensee's royalty accountings shall
identify with specificity the types of Intellectual Property used on or in
connection with each Licensed Product sold, including the identities of all
Talent appearing on each Licensed Product. there shall be a breakdown of sales
of Licensed Products by country, and all figures and monetary amounts shall
first be stated in the currency in which the sales were actually made. If
several currencies are involved in any reporting category, that category shall
be broken down by each such currency. Next to each currency amount shall be set
forth the equivalent amount stated in U.S. Dollars, and the rate of exchange
used in making the required conversion calculation. The rate of exchange shall
be the actual rate of exchange obtained by the Licensee on the date of payment.

     C(6) Royalty Adjustments. The receipt or acceptance by Titan of any royalty
statements furnished pursuant to this Agreement, or the receipt or acceptance of
any royalty payments made, shall not preclude Titan from questioning their
accuracy at any time. If any inconsistencies or mistakes are discovered in such
statements or payments, appropriate adjustments shall be made immediately by the
parties. The Licensee shall pay Titan interest on a late royalty payments at an
annual rate of 2% over the prevailing prime interest rate in effect at New York,
New York, on the date on which such late royalty payments should have been
received by Titan.

     SECTION D BOOKS OF ACCOUNT AND OTHER RECORDS; AUDITS

     D(a) Retention of Records. While this Agreement remains in effect and for
two years thereafter, the Licensee shall keep full and accurate books of account
and copies of all documents and other material relating to this Agreement at the
Licensee's principal office. Titan, by its duly authorized agents and
representatives, and by giving licensee five days advance notice, shall have the
right to audit such books, documents, and other material, shall have access
thereto during ordinary business hours, and shall be at liberty to make copies
of such books, documents, and other material. Audits by Titan will be limited to
one per year. At Titan's request, the Licensee shall provide an authorized
employee to assist in the examination of the Licensee's records.

     D(2) Audits by Titan. If any audit of the Licensee's books and records
reveals that the Licensee has failed properly to account for and pay royalties
owing to Titan, and the amount of any royalties which the Licensee has failed
properly to account for an pay for any quarterly accounting period exceeds, by
5% or more, the royalties actually accounted for and paid to Titan for such
period, the Licensee shall, in addition to paying Titan such past due royalties,
reimburse Titan for its direct out-of-pocket expenses incurred in conducting
such audit, together with interest on the overdue royalty amount at an annual
rate of 2% over the prevailing prime


                                        9

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interest rate in effect at New York, New York, on the date on which such overdue
royalty amount should have been paid to Titan.

     SECTION E TRADEMARK PROTECTION.

     E(1) Trademark Uses Inure to Titan's Benefit. All trademark uses of the
Trademarks and other Intellectual Property by the Licensee shall inure to the
benefit of Titan, which shall own all trademarks and trademark rights created by
such uses. the Licensee hereby assigns and transfers to Titan all trademarks and
trademark rights created by such uses of the Trademarks and other Intellectual
Property, together with the goodwill of the business in connection with which
such trademarks are sued.

     E(2) Trademark Registrations. Titan shall have the right, but not the
obligation, to file in the appropriate offices of countries of the Territory, at
its own expense, trademark applications relating to the use or proposed use by
the Licensee of any of the Trademarks and any other Intellectual Property in
connection with the Licensed Products, such filings to be made in the name of
Titan.

     E(3) Records Relative to Trademark Uses. The Licensee shall keep
appropriate records (including copies of pertinent invoices and correspondence)
relating to the dates when each of the Licensed Products is first placed on sale
or sold in each country of the Territory, and the dates of first use in each
country of each different element of the Intellectual Property on the Licensed
Products and Advertising Materials, If requested to do so by Titan, the Licensee
agrees to supply Titan with samples of the trademark usages in question and
other information which will enable Titan to complete and obtain trademark
applications or registrations, or to valuable or oppose any trademark
applications, registrations, or uses of other parties.

     E(4) Registered User Laws. As to those countries which require applications
to register the Licensee as a registered user of a Trademark or Trademarks or
other element of the Intellectual Property used on or in connection with the
Licensed Products or which require the recordation of this Agreement, the
Licensee agrees to execute and deliver to Titan such documents as may be
necessary and as are furnished by Titan for such purposes.

     E(5) Trademark Notices. The Licensee agrees to affix or to cause its
authorized manufacturing sources to affix to the Licensed Products and to the
Advertising Materials such trademark notice as may be supplied by Titan.

     E(6) No Use of Initials WWF. The Licensee agrees that it will not use the
initials WWF in block letters on or in connection with any Advertising Materials
or Licensed Products.

     SECTION F COPYRIGHT PROVISIONS

     F(1) Copyright Notices. The authorization of Titan to the Licensee to make
public distribution of the Licensed Products and Advertising Materials is
expressly conditioned upon the following agreement of the Licensee. The Licensee
agrees to place on all Licensed Products and on all Advertising Materials the
copyright notice or notices in the name of Titan specified in writing by Titan.

     F(2) Assignment by Licensee. The Licensee hereby sells, assigns, and
transfers to Titan its entire, worldwide right, title, and interest in and to
all "new works" or "derivative works" heretofore or hereafter created using the
Intellectual Property, including, but not limited to, the copyrights thereon. If
parties who are not


                                       10

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employees of the Licensee living in the United States make or have made any
contribution to the creation of a "new work", so that such parties might be
deemed to be "authors" of such "new work" as that term is used in present or
future United States copyright statutes, the Licensee agrees to obtain from such
parties a comparable full assignment of rights so that the foregoing assignment
by the Licensee vests in Titan full rights in the "new work", free of any
claims, interests, or rights of other parties. The Licensee agrees not to permit
any of its employees to obtain or reserve by oral or written employment
agreements any rights as "authors" of such "new works". At Titan's request, the
Licensee agrees to furnish Titan with full information concerning the creation
of "new works" and with copies of assignments of rights obtained form other
parties.

     SECTION G INDEMNIFICATIONS; PRODUCT LIABILITY INSURANCE

     G(1) Licensee's Indemnification. The Licensee agrees to indemnify and hold
Titan harmless from any and all claims (and liabilities, judgments, penalties,
losses, costs, damages, and expenses resulting therefrom, including reasonable
attorneys' fees but excluding lost profits) made by third parties against Titan
arising by reason of or in connection with any act under or in violation of this
Agreement by the Licensee, its subsidiaries, manufacturers, distributors, or
other persons, or the employees or agents of any of the foregoing or of the
Licensee, including, but not limited to, the manufacture, distribution,
exploitation, advertising, sale, or use of the Licensed Products by any of them,
but excluding any claims based solely upon the use of the Intellectual Property
by the Licensee in strict accordance with the terms of this Agreement.

     G(2) Titan's Indemnification. Titan agrees to indemnify and hold the
Licensee, its directors, officers, employees and agents harmless from any and
all claims (and liabilities, judgments, penalties, losses, costs, damages, and
expenses resulting therefrom, including reasonable attorneys' fees, but
excluding lost profits) made by third parties against the Licensee asserting
rights in one or more elements of the Intellectual Property and based solely
upon the use of the Intellectual Property by the Licensee in strict accordance
with the terms of this Agreement.

     G(3) Claims Procedures. With respect to any claims falling within the scope
of the foregoing indemnifications: (a) each party agrees promptly to notify the
other of and keep the other fully advised with respect to such claims and the
progress of any suits in which the other party is not participating; (b) each
party shall have the right to assume, at its sole expense, the defense of a
claim or suit made or filed against the other party; (c) each party shall have
the right to participate, at its sole expense, in any suit instituted against it
and to approve any attorneys selected by the other party to defend it, which
approval shall not be unreasonably withheld or delayed; and (d) a party assuming
the defense of a claim or suit against the other party shall not settle such
claim or suit without the prior written approval of the other party, which
approval shall not be unreasonably withheld or delayed.

     G(4) Product Liability Insurance. the Licensee agrees to obtain and
maintain during the term of this Agreement, at its own expense, product
liability insurance providing protection (at a minimum, in the amount of
$1,000,000 per occurrence/$2,000,000 annual aggregate) applicable to any claims,
liabilities, damages, costs or expenses arising out of any defects or alleged
defects in the Licensed Products. Such insurance shall include coverage of
Titan, its directors, officers, agents, employees, assignees, and successors.
Within 30 days after execution of this Agreement by Titan, the Licensee shall
cause the insurance company issuing such policy to issue a certificate to Titan
confirming that such policy has been issued and is in full force and effect and
provides coverage of Titan as required by this Section G(4), and also confirming
that before any cancellation, modification, or reduction in coverage of such
policy, the insurance company shall give Titan 30 days prior written notice of
such proposed cancellation, modification, or reduction.


                                       11

   13



     SECTION H RESERVATION OF RIGHTS.

     All rights in and to the Intellectual Property (including premium rights in
the Licensed Products) are retained by Titan for its own use, except for the
specific rights which are granted to the Licensee under this Agreement. Titan
reserves the right to use, and to license other parties to use, the Intellectual
Property in the Territory for any purpose Titan may determinate.

     SECTION I INFRINGEMENTS; CLAIMS.

     I(1) Infringements. When the Licensee learns that a party is making
unauthorized uses of the Intellectual Property, the Licensee agrees promptly to
give Titan written notice giving full information with respect to the actions of
such party. The Licensee agrees not to make any demands or claims, bring suit,
effect any settlements, or take any other action against such party without the
prior written consent of Titan. The Licensee agrees to cooperate with Titan, at
no out-of-pocket expense to the Licensee, in connection with any action taken by
Titan to terminate infringements.

     I(2) Claims. If claims or suits are made against Titan or the Licensee by a
party asserting the ownership of rights in a name or design which is the same as
or similar to one of the elements of the Intellectual Property, and asserting
further that the use of a particular element of the Intellectual Property by the
Licensee infringes the right of such party, or if the parties learn that another
party has or claims rights in a trademark, name, or design which would or might
conflict with the proposed or actual use of an element of the Intellectual
Property by the Licensee, Titan and the Licensee agree in any such cast to
consult with each other on a suitable course of action. In no event shall the
Licensee have the right, without the prior written consent of Titan, to
acknowledge the validity of the claim of such party, to obtain or seek a license
from such party, or to take any other action which might impair the ability of
Titan to contest the claim of such party if Titan so elects. The Licensee agrees
at the request of Titan to make reasonable modifications requested by Titan in
the Licensee's use of the element of the Intellectual Property in question or to
discontinue use of such element in the country of the Territory in question on
the particular Licensed Product or Licensed Products which are involved, if
Titan, in its sole discretion, reasonably exercised, determines that such action
is necessary or desirable to resolve or settle the claim or suit or eliminate or
reduce the threat of a claim or suit by such party. If this event should occur,
the Licensee will have the right to negotiate a reduction in the Guaranteed
Royalty Amount due under paragraph 4(c) of this Agreement. Titan shall have the
right to participate fully at its own expense in the defense of any claim or
suit instituted against the Licensee with respect to the use by the Licensee of
an element of the Intellectual Property.

     SECTION J NO SUBLICENSING OR RIGHTS; AGREEMENTS WITH MANUFACTURERS.

     J(1) Sublicensing. The Licensee shall not have the right to sublicense any
of the rights granted to it under this Agreement except to a wholly owned
subsidiary with the written approval of Titan.

     J(2) Agreements with Manufacturers. The Licensee shall have the right to
arrange with another party to manufacture the Licensed Products or components of
the Licensed Products for exclusive sale, use, and distribution by the Licensee.
the Licensee agrees to enter into a written agreement with all such
manufacturers, and agrees to incorporate into such written agreements all of the
provisions, for the protection of the rights of Titan, which are contained in
the form manufacturer agreement which is available from Titan. The Licensee
further agrees to furnish Titan within 30 days of their execution copies of all
agreement with such manufacturers.


                                       12

   14



     J(3) Enforcement of Manufacturer Agreements. The Licensee agrees strictly
to enforce against its manufacturers all of the provisions which are required to
be included in such agreements for the protection of Titan, as provided in
Section J(2); to advise Titan of any violations thereof by manufacturers, and of
corrective actions taken by the Licensee and the results thereof; and at the
request of Titan to terminate such an agreement with any manufacturer which
violates any of such provisions for the protection of Titan. If the Licensee
fails to exercise such termination rights by giving written notice to the
manufacturer within 20 days after being requested to do so in writing by Titan,
the Licensee appoints Titan its irrevocable attorney-in-fact to send a notice of
termination in the name of the Licensee to the manufacturer for the purpose of
terminating the agreement or any specific rights of the party under such
agreement.

     SECTION K BREACH AND TERMINATION.

     K(1) Immediate Right of Termination. Titan shall have the right to
terminate this Agreement immediately, by giving written notice to the Licensee,
in any of the following situations:

     (a) If the Licensee make, sells, offers for sale, or distributes or uses
any Licensed Product or Advertising Material without having the prior written
approval of Titan, as required by Section A, or makes any use of the
Intellectual Property not authorized under this Agreement.

     (b) If the Licensee Fails to make any Advance Royalty Amount payment or
Guaranteed Royalty Amount payment by the date such payment is required under the
provisions of paragraph 4, or if the Licensee fails to submit royalty statements
and/or royalty payments to Titan during the time period specified in Section
C(2).

     (c) If the Licensee becomes subject to any voluntary or involuntary order
of any governmental agency involving the recall of any of the Licensed Products
because of safety, health, or other hazards or risks to the public.

     (d) If, other than under Title 11 of the United States Code, the Licensee
becomes subject to any voluntary or involuntary insolvency, cession, bankruptcy,
or similar proceedings, or an assignment for the benefit of creditors is made by
the Licensee, or an agreement between the Licensee and its creditors generally
is entered into providing for extension or composition of debt, or a receiver is
appointed to administer the assets of the Licensee, or the assets of the
Licensee are liquidated, or any distress, execution, or attachment is levied on
such of its manufacturing or other equipment as is used in the production and
distribution of the Licensed Products and remains undischarged for a period of
30 days.

     (e) If the Licensee breaches any of the provisions of Section J.

     (f) If the Licensee breaches any of the provisions of Section L(1).

     K(2) Assumption and Rejection Pursuant to United States Bankruptcy Code.
After any order for relief under the Bankruptcy Code is entered against the
Licensee, the Licensee must assume or reject this Agreement within 60 days after
the order for relief is entered. If the Licensee does not assume this Agreement
within such 60-day period, Titan may, at its sole option, terminate this
Agreement immediately by giving written notice to the Licensee, without further
liability on the part of Titan.


                                       13

   15



     K(3) Curable Breaches. If either party breaches any of the terms and
provisions of this Agreement, other than those specified in Section K(1), and
the party involved fails to cure the breach within 30 days after receiving
written notice by certified or registered mail from the other party specifying
the particulars of the breach, the nondefaulting party shall have the right to
terminate this Agreement by giving written notice to the defaulting party by
registered or certified mail.

     K(4) Effect of Termination. Termination of this Agreement under the
provisions of this Section K or the provisions set forth elsewhere in this
Agreement shall be without prejudice to any rights or claims which either party
may otherwise have against the other party. Upon the termination of this
Agreement, all royalties on sales previously made shall become immediately due
and payable to Titan. Upon the termination of this Agreement under the
provisions of Section K(1)(d) or K(2) of this Agreement, the Licensee, its
receivers, trustees, assignees, or other representatives shall have no right to
sell, exploit, or in any way deal with the Licensed Products, the Advertising
Materials, or the Intellectual Property, except with the special written consent
and instructions of Titan.

     K(5) Discontinuance of Use of Intellectual Property, Etc. Subject to the
provisions of Section K(6), upon the expiration or earlier termination of this
Agreement, the Licensee agrees immediately and permanently to discontinue
manufacturing, selling, advertising, distributing, and using the Licensed
Products and Advertising Materials; immediately and permanently to discontinue
using the Intellectual Property: immediately to destroy any films, molds, dies,
patterns, or similar items from which the Licensed Products and Advertising
Materials were made, where any element of the Intellectual Property is an
integral part thereof; and immediately to terminate all agreements with
manufacturers, distributors, and others which related to the manufacture, sale,
distribution, and use of the Licensed Products.

     K(6) Disposition of Inventory upon Expiration. Notwithstanding the
provisions of Section K(5), if this Agreement expires in accordance with its
terms, and is not terminated for cause by Titan, the provisions of this Section
K(6) shall apply. If the Licensee delivers to Titan on or before the date 30
days prior to the expiration of this Agreement a written inventory listing, on a
Licensed Product-by-Licensed Product basis, all Licensed Products in the
Licensee's possession, custody, or control as of the date of such inventory, the
Licensee shall have the non-exclusive right to sell any Licensed Products listed
on such inventory for a period of 120 days immediately following such
expiration, subject to the payment of royalties to Titan on any such sales in
accordance with the terms of this Agreement. Titan shall have the right (but not
the obligation) to buy any or all of the Licensed Products listed on such
inventory at the Licensee's cost of manufacture. The sell-off right granted the
Licensee under this Section K(6) shall in no event apply to a quantity of any
Licensed Product exceeding 50% of the Licensee's average quarterly unit sales of
such Licensed Product during the one-year period immediately preceding the
expiration of this Agreement.

     SECTION L MISCELLANEOUS PROVISIONS.

     L(1) Restriction on Assignments. Without the prior written consent of
Titan, the Licensee shall not directly or indirectly assign, transfer,
sublicense, or encumber any of its rights under this Agreement. This Agreement
shall be binding upon and inure to the benefit of the successors and assigns of
Titan.

     L(2) Parties Not Joint Venturers. Nothing contained in this Agreement shall
be construed so as to make the parties partners or joint venturers or to permit
the Licensee to bind Titan to any agreement or purport to act on behalf of Titan
in any respect.


                                       14

   16


     L(3) Modifications of Agreement; Remedies. No waiver or modification of any
of the terms of this Agreement shall be valid unless in writing, signed by both
parties. Failure by either party to enforce any rights under this Agreement
shall not be construed as a waiver of such rights, and a waiver by either party
of a default in one or more instances shall not be construed as a continuing
waiver or as a waiver in other instances.

     L(4) Invalidity of Separable Provisions. If any term or provision of this
Agreement is for any reason held to be invalid, such invalidity shall not affect
any other term or provision, and this Agreement shall be interpreted as if such
term or provision has never been contained in this Agreement.

     L(5) Notices. All notices to be given under this Agreement (which shall be
in writing) shall be given at the respective addresses of the parties as set
forth on page 1, unless notification of a change of address is given in writing.
The date of mailing shall be deemed to be the date the notice is given.

     L(6) Headings. the paragraph and section headings of this Agreement are
inserted only for convenience and shall not be construed as a part of this
Agreement.

     L(7) Entire Understanding. This Agreement contains the entire understanding
of the parties with respect to its subject matter. Any and all representations
or agreements by any agent or representative of either party to the contrary
shall be of no effect.

     L(8) Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of Connecticut, regardless of the place or
places of its physical execution and performance.



                                       15

   1


EXHIBIT 10.13

                               LICENSE AGREEMENT


This License Agreement ("Agreement") is made between Licensor and Licensee as of
the Contract Date set forth herein. No rights of any kind in or to the Licensed
Property shall vest in Licensee and Licensor shall have no obligations to
Licensee hereunder, unless and until (i) this Agreement has been executed by an
authorized signatory of Licensee and accepted and executed by an officer of
Licensor, (ii) the Advance has been paid in full; and (iii) the appropriate
insurance coverage as defined herein has been provided to Licensor. This
Agreement and any oral negotiations are deemed to be a proposal by Licensee to
acquire a license from Licensor which Licensor is not obligated to consider or
accept until the above conditions are met. No employee, agent, or representative
of Licensor has authority to enter into any oral agreement, revision, or
amendment with respect to the subject matter hereof. If accepted by Licensor,
this Agreement consists of the Terms and Conditions as set forth herein, and all
Exhibits and Schedules attached hereto are made a part of this Agreement.



1. Contract Number:  95179

2. Contract Date:  April 23, 1996

3. Licensor(s):  SABAN MERCHANDISING, INC.
                 (SMI)
                 10960 Wilshire Boulevard
                 Los Angeles, California 90024

                 SABAN INTERNATIONAL, N.V.
                   (SINV)
                 Plaza JoJo Correa 1-5
                 Curacao, Netherlands Antilles

4. Licensee:          JAXXS, INC.
                      24955 Pacific Coast Hwy.,
                      #B202
                      Malibu, CA 90265

5. Licensed Property: Mighty Morphin Power
Rangers(TM)/Power Rangers Zeo(TM), the children's
episodic live-action television program, and as
further defined in attached Schedule A and Exhibit
1.

6. Total Guarantee: $25,000.00
       Guarantee Due Date(s)
Date
                          Amount
                          ------
Upon Signing            $10,000.00 (Advance)
12/31/96                $ 7,500.00
03/31/97                $ 7,500.00
Ninety-five percent (95%) payable to SMI and five
percent (5%) payable to SINV.



page 1 of 6 



   2


7. Royalty Rate(s): 10%

Royalties earned for the United States, its territories and possessions are
payable to SMI and Royalties earned for Canada are payable to SINV.

8. Promotional Commitment: not applicable.

9. Licensed Term: The licensed term commences as
of August 1, 1996 and terminates on July 31, 1998.

10. Licensed Article(s): See attached Schedule B

11. Licensed Territory: United States, its territories
and possessions; Canada.

12. Licensed Channels of Distribution: See attached
Schedule D

The following attached Exhibit and Schedules are incorporated and made a part of
this Agreement.
 X  Exhibit 1 (Style Guide and Product Approval)
 X  Schedule A (Copyrights and Trademarks)
 X  Schedule B (Licensed Articles)
___ Schedule C (Licensed Territory) 
 X  Schedule D (Licensed Channels of Distribution) 
 X  Schedule E (Insurance Requirements) 
 X  Schedule F (Accounting Statement Form) 
 X  Schedule G (Approval of Manufacturer)








page 2 of 6 



   3

                          Standard Terms and Conditions

S-1. GRANT OF LIMITED LICENSE

Licensor grants to Licensee and Licensee accepts the nontransferable,
nonassignable grant (without the right to grant sublicenses) to utilize the
Licensed Property on or in connection solely (i) with Licensed Articles sold,
offered for sale or use (ii) in the Licensed Territory (iii) during the Term and
(iv) in the Licensed Channels of Distribution, each as set forth herein or
attached hereto, and subject to all the terms and conditions set forth herein.
Nothing contained in this Agreement shall be deemed to imply any restriction on
Licensee (or its customers) as to pricing policy.

S-2. LICENSED TERM

The "Term" begins on the date all conditions precedent set forth herein have
been satisfied and ends on the Date set forth above, unless sooner terminated as
provided herein. Licensee is prohibited from advertising or promoting in any
manner any Licensed Article prior to receiving written approval with respect to
all promotional materials as required herein.

S-3. LICENSED TERRITORY

Licensee is prohibited from making or contributing to, any direct or indirect
use of the Licensed Property in any location outside the defined Licensed
Territory or approved in Schedule G; Licensee represents and warrants that it
will not knowingly sell any Licensed Articles to third parties who intend or are
likely to resell them outside the Licensed Territory; and Licensee will take all
reasonable precautions against such resale.

S-4. ROYALTIES AND PAYMENTS

S-4.1 Computation of Royalties

Licensee will pay Licensor "Royalties" equal to the applicable Royalty Rate set
forth above as a percentage of Net Invoiced Billings made to retailers (or to
wholesaler or other distributors) for Licensed Articles shipped by Licensee from
a location in the Licensed Territory for delivery to a customer located in the
Licensed Territory. If the customer in the Licensed Territory bears the costs of
obtaining delivery (e.g. shipping, duties, and the like) Licensee shall pay the
F.O.B. Royalty Rate. The full applicable Royalty Rate shall be payable on
closeout or other deep discount sales, including sales to employees. With
Licensor's prior written permission, no Royalty shall be payable on Licensed
Articles sold at or below Licensee's acquisition cost or cost of manufacture,
excluding overheads.

S-4.2 Payment of Royalties and Point of Sale

Royalties shall be computed, reported, and paid within thirty (30) days after
the close of each calendar quarter and quarterly thereafter as long as Licensee
continues to have Net Invoiced Billings on account of the Licensed Articles. As
part of Licensee's obligation to compute, report, and pay Royalties to Licensor
hereunder, Licensee shall furnish to Licensor complete and accurate statements
signed by an officer of Licensee in a form and containing information
substantially as set forth in Schedule F hereto. Payments received later than
the due date shall bear interest at the maximum rate permissible by law.
Payments should be sent to Licensor, Attention: Business Affairs, Licensing and
Merchandising. Point of Sale shall mean the quantity of Licensed Articles sold
at retail or in any particular channel of distribution. Licensee shall furnish
to Licensor correct and accurate Point of Sale information on a monthly basis.
The information should be sent to the address above.

S-4.3 Definition of Net Invoiced Billings 

Net Invoiced Billings shall mean the date of actual invoiced billings or the
shipment date, whichever occurs first, defined as sales quantity of Licensed
Articles shipped multiplied by Licensee's selling price. Payment may be less any
Allowable Deductions or Returns as hereinafter defined.

S-4.4 Allowable Deductions, Actual Returns 

Allowable Deductions shall mean any volume discounts and other trade discounts
separately identified on Licensee's sales invoice (not to exceed 5%) as being
applicable to sales of Licensed Articles licensed hereunder or to the combined
sales of such Licensed Articles and other product(s) not licensed by Licensor
("Combined Sales"), and post-invoice credits granted and properly documented as
applicable to sales of Licensed Articles hereunder or to Combined Sales. Actual
Returns (not to exceed 3% of Net Invoiced Billings) should be reflected on the
quarterly statement following the Actual Return, in no event shall any Actual
Returns be allowed more than two calendar quarters following the Net Invoiced
Billing date for the particular Licensed Articles. In the event that a
post-invoice credit is issued for Combined Sales and Licensee cannot document
the portion of the credit applicable to Licensed Articles, Licensee may apply
only a pro rata portion of the credit to the Licensed Articles. The following
are not Allowable Deductions, whether granted on sales invoices or as
post-invoice credits: cash discounts granted as terms of payment; early payment
discounts; allowances or discounts relating to advertising; mark down
allowances; costs incurred in manufacturing, importing, selling or advertising
Licensed Articles; freight costs incorporated in the selling price; anticipated
returns; and uncollectible accounts.

S-4.5 Application of Royalties Against Advance and Guarantee

page 3 of 6 

   4
Any Advance and Guarantee set forth above is non-refundable and due on the
date(s) set forth. The Advance and any Guarantee(s) paid by the appropriate Due
Date(s) are applicable against Royalties that may be due. Licensee will have the
right to apply the Advance and any Guarantee due against Royalties otherwise
payable to Licensor, until such point in time that Licensee has fully paid the
Advance and Guarantee.

S-4.6 Sales by Affiliates

The Royalties paid to Licensor on any Net Invoice Billings to Affiliates shall
be no less than the Royalties paid to Licensor for Net Invoiced Billings to
customers not affiliated with Licensee. If such Affiliate is a resaler of the
Licensed Articles, the sale to such customer shall not be counted as a sale for
Royalty calculation purposes in such case, the relevant sale for Royalty
calculation purposes shall be that of such Affiliate. Affiliate is defined as
any entity which directly or indirectly controls, is controlled by, or is under
common control with Licensee. Control is defined as the possession, directly or
indirectly, of power to direct or cause the direction of management or policies
of such entity.

S-5. PROMOTIONAL COMMITMENT
     [not applicable]
S-6. BOOKS AND RECORDS

Licensee will keep accurate and complete books and records as they relate hereto
(specifically including information as to quantities of Licensed Articles
manufactured by or for and sold and shipped by Licensee or Manufacturer and
remaining inventory on hand at the end of the Term) for two (2) years after
termination or expiration of the Term. On reasonable notice, Licensor will have
the right to examine said books and records and those of any manufacturer
supplying Licensee. If in an audit of Licensee's records it is determined that
there is a short fall of 3% or more in Royalties reported for any Royalty
Payment Period, Licensee shall reimburse Licensor for the full out-of-pocket
costs of the audit including any costs of Licensor's employee(s) calculated at
$60 per hour inclusive of travel time.

S-7. COPYRIGHTS AND TRADEMARKS
S-7.1 Ownership

Licensee recognizes the unique value of the Licensed Property and the good will
and secondary meaning associated therewith in the mind of the public. Licensee
acknowledges that Licensee's use of the Licensed Property does not confer or
imply a grant of rights, title, or interest in the Licensed Property or good
will associated therewith and that all ownership of copyrights, trademarks,
service marks, design patents, and other rights in the Licensed Property and
Licensed Articles and in all photographs, derivations, adaptations,
compilations, collective works, artwork, packaging, text, advertising and
promotional materials, and trade dress of any kind using the Licensed Property,
including all such materials, designs, and names developed by Licensee and the
good will pertaining thereto ("Proprietary Materials") will be, and at all times
will remain, in the name of Licensor.

S-7.2 Employees for Hire

All Proprietary Materials will be "works made for hire" within the meaning of
the U.S. Copyright Act of 1976, as amended, and Licensee agrees that all
Proprietary Materials will be prepared by Licensee's employee (or contractor) as
a work-for-hire under Licensee's sole supervision, responsibility, and monetary
obligation. If third parties who are not employees of Licensee contribute to the
creation of any Proprietary Material, Licensee will obtain from such third
parties, prior to commencement of work, a full written assignment by which all
rights, title, and interest in the Proprietary Materials, throughout the
universe in perpetuity, will vest in Licensor. Nothing contained herein will be
deemed or construed to convey to Licensor any rights or proprietary interest in
or to any of the designated trademarks, trade names, copyrights, or other
indicia of Licensee.

S-7.3 Delivery of Proprietary Materials to Licensor

Promptly at the end of the Term, or from time to time as Licensor may elect,
Licensee will deliver all originals or duplicates (cost for duplication to be
borne by Licensor at Licensor's cost) of all Proprietary Materials, whether
supplied by Licensor or created by or on behalf of Licensee, to Licensor.

S-7.4 Copyright and Trademark Notices

Licensee will comply fully with applicable federal and state trademark and
copyright notice provisions of the Licensed Territory including but not limited
to those set forth in Schedule A, and any other legal notices which Licensor may
from time to time require. Licensee, subject to Licensor's reasonable right to
approve the content, size, and placement thereof, will have the right to place
its own copyright and trademark notices on any materials it owns or creates
hereunder which are separate and apart from the Licensed Property and
Proprietary Material and to which it retains all ownership rights thereto.

S-7.5 Protection of Copyrights, Trademarks, and Good Will

Licensee agrees to assist Licensor, at Licensor's request and expense, in
procuring and maintaining Licensor's rights in the Licensed Property and
Proprietary Material (including trademark and copyright therein). In connection
therewith, Licensee agrees to execute and deliver to Licensor in such form as
Licensor
                                  page 4 of 6
   5
reasonably may request all instruments necessary to effectuate copyright and
trademark protection or to record Licensee as a registered user of any
trademarks or to cancel such registration. If Licensee fails to execute any such
instruments, Licensee appoints Licensor as its attorney-in-fact to do so on
Licensee's behalf, and Licensee acknowledges that such appointment is coupled
with an interest. Licensor makes no representation or warranty that copyright or
trademark protection will be secured in the Licensed Property. Licensor will
control absolutely all infringement litigation brought against third parties
involving or affecting the Licensed Property, and Licensor may join Licensee as
a party thereto at Licensor's expense.

S-8. LICENSOR'S REPRESENTATIONS AND WARRANTIES

Licensor represents and warrants that (i) Licensor has the right to license the
Licensed Property to Licensee in accordance with the terms and conditions of
this Agreement, and (ii) the Licensed Property does not and, during the Term,
will not infringe any copyright, trademark, or other intellectual property right
of any third party.

S-9. INDEMNIFICATIONS
S-9.1 By Licensor

Licensor agrees to indemnify and hold harmless Licensee during and after the
term hereof against all claims, (including settlements entered into in good
faith with Licensor's consent), liabilities, and expenses (including reasonable
attorneys' fees) arising solely out of the use of the Licensed Property as
authorized hereunder. Licensee must give Licensor prompt notice of all claims or
suits relating to such use of which it is aware. Licensor will have the option
to undertake and control the defense and settlement of any such claim or suit.
Licensor has the sole right to determine whether or not any action will be taken
on account of any such infringements or imitations. Licensee will not be
entitled to recover for lost profits. If Licensee is precluded from selling any
stock of Licensed Articles or utilizing materials in its possession, Licensor
shall be obligated to purchase such Licensed Articles and material from Licensee
at cost, excluding overheads, and shall have no other responsibility or
liability with respect to such Licensed Articles or materials.

S-9.2 By Licensee

Licensee agrees to indemnify and hold harmless Licensor and its successors,
assigns, parent, subsidiaries, affiliates, and co-venturers, and all other
parties associated with the Licensed Property, and their respective directors,
officers, employees, and agents from and against all claims, (including
settlements entered into in good faith with Licensee's consent), liabilities and
expenses (including reasonable attorneys' fees) arising out of or in connection
with Licensee's activities hereunder, out of any defect (whether obvious or
hidden and whether or not present in any sample approved by Licensor) in a
Licensed Article whether or not licensed by this Agreement, or arising from
personal injury or any infringement of any rights of any person by the
manufacturer, sale, possession or use of Licensed Articles; or their failure to
comply with applicable laws, regulations and standards.

S-10. PRODUCT LIABILITY AND ADVERTISER'S LIABILITY INSURANCE

Licensee will obtain and maintain at its own expense commercial general
liability insurance including broad form coverage for contractual liability,
products liability and personal injury liability (including bodily and death),
and advertiser's liability insurance as set forth in Schedule E.

S-11. ARTWORK; APPROVALS; PRODUCT SAFETY
S-11.1 Artwork.

Any materials (other than two (2) Style Guides) supplied to Licensee by Licensor
will be purchased at Licensor's invoiced cost.

S-11.2 Concept Approval

Licensee agrees to furnish Licensor within thirty (30) days of the contract
date, for review and written approval in Licensor's sole discretion, all
concepts, preliminary and proposed artwork, storyline, mock-up, format and size,
title, layout, packaging, concept design and other materials Licensor may deem
necessary to approve the concept of the use of the Licensed Property on the
Licensed Article and as noted in Licensor's Product Approval Form included in
Exhibit 1. Licensee acknowledges that Licensor may not approve concepts within
ninety (90) days of the termination date of this Agreement.

S-11.3 Pre-Production Approval

No later than sixty (60) days following concept approval, Licensee shall furnish
to Licensor for written approval which Licensor shall endeavor to respond to
within a reasonable time, a mock-up, prototype or pre-production sample
including, but not limited to, paper stock, fabric, final artwork and
photographs, text, copy, cover notices, dust jacket, slip case, layouts, black
line sketches, color proofs, packaging, promotional material, advertising,
catalogues, etc., of each Licensed Article in connection with which the Licensed
Property is used. Licensee acknowledges that no Article may be produced,
manufactured, published and/or distributed without Licensor's prior written
approval. Any such Article not approved will be deemed as unlicensed and will
cause immediate termination of this Agreement and/or withdrawal of the Article
from this Agreement. Any modification of a Licensed Article must be submitted in
advance for Licensor's written approval. Approval

                                  page 5 of 6
 



   6
of any materials including, but not limited to, design, artwork, copy, or text
on a particular Licensed Article does not imply approval of same for use with a
different Article.
S-11.4 Approval of Production Samples
Prior to shipment of Licensed Articles to any customer, wholesaler, retailer,
etc., Licensee agrees to furnish from the first and any subsequent production
run or print run for Licensor's written approval, twelve (12) samples with
packaging, if applicable, which should conform to the approved pre-production
sample. Approval or disapproval of the production sample or print run shall lie
in Licensor's sole discretion. Any Article not so approved shall be deemed
unlicensed, shall not be sold and, unless otherwise agreed in writing, certified
destroyed by an officer of Licensee. Licensee agrees to furnish Licensor, at no
charge, additional samples of each Licensed Article which Licensor may deem
reasonably necessary from time to time for purposes of comparison with earlier
samples, or to test for compliance with applicable laws, regulations and
standards, and to permit upon reasonable request, inspection of Licensee's
manufacturing operations and testing records (and those of any approved supplier
or third party manufacturer). Licensee agrees to provide Licensor at Licensee's
cost plus ten percent (10%) any quantity over this amount. The rights granted
herein do not permit sale of "seconds" or "irregulars" and any such Licensed
Articles not meeting the standard of approval samples should be destroyed, or as
otherwise agreed to in writing by Licensor.
S-11.5 Product Safety & Inspection
Licensor shall rely primarily on Licensee for the consistent quality and safety
of the Licensed Article and their compliance with applicable laws and standards.
Licensor and Licensee will not unreasonably object to any change in design of a
Licensed Article or in materials used in the manufacturing of the Licensed
Article or in the process of manufacturing the Licensed Article. Licensee or
Licensor shall advise Licensee or Licensor in writing if either intends to make
any modification to the Licensed Article to make it safer or more durable.
Licensed Articles not complying with applicable laws, regulations or standards
shall be deemed unapproved even if previously approved by Licensor and shall not
be shipped.
S-12. EXCLUSIVITY; RESTRICTIONS ON AND MANNER OF EXPLOITATION; WITHDRAWAL
S-12.1 Exclusivity
Licensor reserves the right to use and grant third parties the right to use the
Licensed Property in any manner whatsoever.
S-12.2 Restrictions on and Manner of Exploitation
The Licensed Property will not be used in conjunction with or commingled with
any other name, character, symbol, design, likeness, or literary or artistic
material, unless any such use is expressly permitted in writing by Licensor. In
no event will the Licensed Articles be packaged for sale or distribution with
other articles (other than articles approved in writing by Licensor).
S-12.3 No Warranty of Exploitation by Licensor
Licensor does not warrant or represent to Licensee that the Licensed Property
will continue to appear in or as part of any program, motion picture, or other
work or that any such work will continue to be exploited. Licensor may from time
to time, at any time, delay, discontinue, resume, or change any present or
future use of the Licensed Property.
S-12.4 Withdrawal
Licensor will have the right, by giving written notice to Licensee, to withdraw
from the license granted herein any element of the Licensed Property if Licensor
determines that the use or continued use of such element will violate or
infringe the rights of any third party, violate any law or regulation, or
subject Licensor to any legal liability. Licensor's obligations to Licensee
shall be limited to the purchase at cost of Licensed Article and other material
utilizing such withdrawn Licensed Article which cannot be sold or used. In this
event, the Advance and Guarantee shall be adjusted to correspond to the time
remaining in the Term, or the number of Licensed Articles remaining under the
Agreement at the time of withdrawal.
S-13. RIGHTS AND OBLIGATION UPON EXPIRATION OR TERMINATION
S-13.1 Licensor's Rights
Upon expiration or termination of this Agreement, all rights granted herein
revert to Licensor and Licensor shall be entitled to retain all Royalties.
Licensee agrees Licensed Articles shall be manufactured in quantities consistent
with anticipated demand so as not to result in inventory build up prior to
expiration. Licensee agrees that from the date of termination or expiration,
Licensee shall neither manufacture nor have manufactured any Licensed Articles
and shall deliver all Proprietary Materials which may have been used in
connection with this Agreement or at Licensor's option, sell to us at Licensee's
cost or destroy or efface any molds, plates, or other items used to reproduce
Licensed Articles and that as except as hereinafter provided, Licensee will
cease any Net Invoiced Billing as defined herein of any Licensed Articles.
S-13.2 Licensee's Rights
If Licensee has any Licensed Articles in inventory on the expiration or
termination date, Licensee shall provide Licensor with a full accounting
statement of such Licensed Articles. When such statement has been provided to
Licensor and Licensee has
                                  page 6 of 6



   7
otherwise fully complied with the terms of this Agreement, Licensee shall have
the right for a limited period of ninety (90) days from such date, to sell off
and deliver such Licensed Articles. Licensee shall furnish to Licensor
statements covering such shipments and pay Royalties to such sales. Licensee
agrees not to "dump" Licensed Articles during any sell off period. Any inventory
of Licensed Articles remaining in possession after such sell off period shall be
destroyed or all Licensed Property removed or obliterated therefrom.

S-14. EVENTS OF DEFAULT LEADING TO IMMEDIATE TERMINATION

Licensee will have no right to cure any of the following defaults:

S-14.1 Bankruptcy

If Licensee's liabilities exceed its assets, or if Licensee becomes unable to
pay its debts as they become due, or if Licensee files or has filed against it a
petition in bankruptcy, reorganization, or for the adoption of an arrangement
under any present or future bankruptcy, reorganization, or similar law (which
petition if filed against Licensee is not dismissed within 30 days after the
filing date), or if Licensee makes an assignment for the benefit of its
creditors or is adjudicated bankrupt, or if a receiver or trustee of all or
substantially all of Licensee's property is appointed, or if Licensee
discontinues its business, the license granted herein will automatically
terminate forthwith without notice to Licensee.

S-14.2 Transfer or Change of Control

If a substantial portion of the assets or controlling stock or ownership in
Licensee's business is sold or transferred, or if there is a substantial change
in Licensee's management, or if Licensee's property is expropriated,
confiscated, or nationalized by any government or if any government assumes de
facto control of Licensee's business, in whole or in part, Licensor may
terminate this Agreement upon ten (10) days' notice to Licensee.

S-14.3 Other Defaults

This Agreement will automatically terminate forthwith without notice to Licensee
if Licensee: (i) manufactures, offers for sale, sells, or distributes articles
which are not approved as defined herein; (ii) sells, or knowingly sells to any
third party who intends to sell, any articles incorporating elements of the
Licensed Property outside the Licensed Territory or Channels of Distribution;
(iii) purchases materials, products, or services from, or acts as a broker,
reseller, distributor, or retailer for, any third party whom Licensor has given
Licensee notice is an infringer of Licensor's proprietary rights; (iv) registers
or attempts to register any claim to copyright, trademark, service mark, or
design patent in any element of the Licensed Property; (v) assigns or attempts
to assign this Agreement, or sublicenses or attempts to sublicense any of
Licensee's rights under this Agreement, to any third party without Licensor's
prior written consent; or (vi) fails to obtain or maintain the insurance
coverage as required hereunder.

S-15. EVENTS OF DEFAULT FOR WHICH LICENSEE WILL HAVE A RIGHT TO CURE BEFORE
TERMINATION

Licensee will have the right to cure each of the following defaults before
Licensor may terminate this Agreement.

S-15.1 Failure to Exploit

If Licensee fails to commence exploitation of any Licensed Article(s) by the
applicable "Market Date" as set forth in Schedule B hereto, and continues to
fail to commence exploitation or distribution of the Licensed Article(s) during
the twenty (20) business days immediately following Licensor's notice of such
default, Licensor may terminate this Agreement in whole or only with respect to
such Licensed Article upon ten (10) days' written notice to Licensee.

S-15.2 Failure to Render Statements or Make Royalty Payments When Due

If Licensee fails to render any statement accompanied by payment of Royalties
then due as required pursuant to section S- 4.2, and continues to fail to render
such statement and/or make payment of Royalties then due during the five (5)
business days immediately following Licensor's notice of such default, Licensor
may terminate this Agreement upon five (5) days' written notice to Licensee.

S-15.3 Breach of Other Agreements

If Licensee breaches without curing within the applicable time period, any
material term of any other agreement between Licensee and Licensor, Licensor may
terminate this Agreement upon five (5) days written notice to Licensee.

S-16. MISCELLANEOUS

S-16.1 Equitable Relief

Licensee acknowledges that its failure to comply with any of the terms herein
including, but not limited to, its obligation to cease the manufacture, sale, or
distribution of Licensed Articles at the termination or expiration of this
Agreement will cause immediate and irreparable damage to Licensor. Licensee
acknowledges that, in addition to any and all other remedies, Licensor shall
have the right to equitable relief for any breach, including but not limited to,
temporary restraining order, preliminary injunction or other alternative relief
without the necessity of posting any bond or proving any damages.

S-16.2 Notices                 page 7 of 6 



   8


Legal Notices to and from Licensor and Licensee shall be in writing, addressed
to the parties at the address set forth herein and served either personally, by
depositing postage prepaid in the U.S. mail, or by confirmed facsimile
transmission. Notices to Licensor should be sent, attention: Legal Affairs,
Licensing.

S-16.3 Relationship

This Agreement does not create an agency, partnership, or joint venture
relationship between Licensor and Licensee.

S-16.4 Construction

This Agreement shall be construed pursuant to the laws of the State of
California applicable to agreements entered into and fully performed therein.
California state or federal courts, as applicable, located in Los Angeles County
will have exclusive jurisdiction.

S-16.5 Partial Invalidity

The invalidity of any provision of this Agreement shall not impair or affect the
validity of the remaining portions hereof, and this Agreement shall be construed
as if such invalid provision had not been included herein.

S-16.6 Confidentiality

Licensee and Licensor are prohibited from making disclosure of the financial
terms of this Agreement to any third party without prior written consent,
provided, however, that disclosure may be made: (i) to the extent necessary to
comply with governmental disclosure requirements; (ii) to any financial or legal
representatives, owners, parents, and partners; and (iii) as may be necessary
and appropriate in connection with the performance and enforcement of this
Agreement. Any party to whom disclosure is made hereunder will likewise be bound
by the terms of this paragraph.

All terms and conditions set forth above are agreed to and accepted as of the
"Contract Date" set forth on page 1 hereof:

LICENSOR(S):  SABAN MERCHANDISING, INC.

/s/
- --------------------------------------------
Print:
      ---------------  ---------------
Title:
      ------------

SABAN INTERNATIONAL, N.V.

/s/
- --------------------------------------------
Print:
      ---------------  ---------------
Title:
      ------------


LICENSEE:  JAXXS, INC.

/s/
- --------------------------------------------
Print:
                       ---------------
Title: 
       -------------------------------------


page 8 of 6 



   9


                                    EXHIBIT 1
                      STYLE GUIDE AND PRODUCT APPROVAL FORM

A Style Guide is incorporated into the Agreement by this reference. Licensee
acknowledges receipt of a Style Guide upon execution of this Agreement.

Only those characters, and any and all trademarks, tradenames, service marks,
devices, symbols, signs, patents, copyrights and other similar items, whether
registered or not, owned or controlled and approved by Licensor regarding the
property, as applicable, identified in a Style Guide are included as the
Licensed Property. The name and/or likeness of any performer connected with the
Licensed Property will not be included within the definition of the Licensed
Property and the use thereof is not licensed herein unless otherwise
specifically provided or approved in writing by Licensor(s).



                                   SCHEDULE A
                            COPYRIGHTS AND TRADEMARKS

Licensee is required to use at least one of the following marks as appropriate
on the Licensed Articles as defined in Schedule B. All copyright and trademark
notices must be of a sufficient size to be read clearly. All uses of the
Licensed Property logo(s) must include (TM) immediately adjacent to the logo
(until such time as Saban's registered trademarks issue, at which time the logos
on new materials must shift from (TM) to (R)).


                                   Full Notice

(TM) and (C) (year of publication*) Saban. All Rights Reserved. MIGHTY MORPHIN
POWER RANGERS(TM)/POWER RANGERS ZEO(TM) and all logos, characters, names, and
distinctive likenesses thereof are the exclusive property of Saban
Entertainment, Inc., and Saban International N.V.


                               Abbreviated Notice

(TM) & (C) (year of publication*) Saban Entertainment, Inc. & Saban
International N.V. All Rights Reserved.


                                  Short Notice
                        (for extremely small items only)

                    (TM) & (C) (year of publication*) Saban.


   *NOTE: YEAR OF PUBLICATION = YEAR ITEM IS FIRST MARKETED/SHOWN TO RETAILERS




   10



                                   SCHEDULE B
                        LICENSED ARTICLES SPECIFICATIONS

Licensee is licensed to manufacture, distribute, and sell the Licensed Articles
as described below. Any manufacture or sale by Licensee of products other than
those described below is a material breach of the Agreement as described
therein. All Licensed Articles are subject to the approvals as described in the
Agreement. Licensee agrees that the Market Date is the date(s) by which the
Licensed Article(s) will be available for the purchase by the public at retail
outlets.




- --------------------------------------------------------------------------------
Licensed Article(s)                                               Market Date(s)
- --------------------------------------------------------------------------------
                                                               
Micro (less than 3") Power Rangers Zeo bikes and                  9/1/96
carrying case
- --------------------------------------------------------------------------------
Plastic battery-operated motor bike with sound chip               9/1/96
(without race track) with permanently attached non-
articulated figurine
- --------------------------------------------------------------------------------
"Glow Zone" luminous removable vinyl stickers and                 9/1/96
zone maps (glow stickers are attached to the map
creating a world map)
- --------------------------------------------------------------------------------



                                   SCHEDULE D
                        LICENSED CHANNELS OF DISTRIBUTION

Licensee is solely licensed to distribute and sell the Licensed Articles in the
Channels of Distribution marked below in the Licensed Territory as described in
the Agreement. Any sale of the Licensed Article(s) in channels of distribution
other than those marked or described below is a material breach of the Agreement
as described therein. Licensor(s) reserves the rights to any Channels of
Distribution not specifically included herein.



- --------------------------------------------------------------------------------
                                         
X    Mass Market - Retail                         Souvenir Stores
- --------------------------------------------------------------------------------
     Mid-Tier - Retail                            Drug Stores
- --------------------------------------------------------------------------------
     Department Stores              X             Specialty Stores
- --------------------------------------------------------------------------------
     Direct Response                              Catalog/Mail Order
- --------------------------------------------------------------------------------
     Promotion/Premium                            Tour/Special Venues
- --------------------------------------------------------------------------------
     Gift Market                                  Restaurants
- --------------------------------------------------------------------------------




   11



- --------------------------------------------------------------------------------
                                         
     Supermarkets                                 Vending Machines
- --------------------------------------------------------------------------------
     Fan Club                       X             Other: (Toy Stores)
- --------------------------------------------------------------------------------



                                   SCHEDULE E
                             INSURANCE REQUIREMENTS

Licensee, at its sole cost, will obtain and maintain throughout the Term, and
will provide Licensor(s) written evidence from the insurance carrier of, (i)
standard Product Liability Insurance and (ii) standard Advertiser's Liability
Insurance, each from a legally-qualified insurance company reasonably acceptable
to Licensor(s): 

(1) in an amount, with respect to the Product Liability Insurance, not less than
$2,000,000 combined single limit for each single occurrence and with a
deductible no greater than $10,000;

(2) in an amount, with respect to the Advertiser's Liability Insurance, not less
than $500,000/$1,000,000 with a deductible no greater than $10,000;

(3) naming Licensor(s) and its subsidiaries as additional named insured; and,

(4) non-cancelable and non-modifiable except on 30 days' prior written notice to
Licensor(s) and only if replaced so that there is no lapse in coverage as
required herein.

Only an endorsement to the policy for the insurance carrier is acceptable
evidence of coverage as required hereunder.




   12


                                   SCHEDULE G
                            APPROVAL OF MANUFACTURER


Licensee must obtain and submit this executed approval form to Licensor(s) of
any third party manufacturer of any of the Licensed Articles as described in
Schedule B.

TERRITORY OF MANUFACTURE:

AUTHORIZED ARTICLE(S):

The undersigned ("Manufacturer") understands that Licensor(s) has licensed
Licensee to manufacture or have manufactured for Licensee the Authorized
Article(s) utilizing certain designs and names related to the Licensed Property.
To induce Licensor(s) to consent to the manufacture of the Authorized Article(s)
by Manufacturer, Manufacturer agrees, for the benefit of Licensor(s), that it
will not manufacture the Authorized Article(s) using the Licensed Property for
anyone but Licensee or its wholly-owned subsidiaries; that Manufacturer will not
manufacture the Authorized Article(s) in any territory other than the
above-named Territory; that Manufacturer will not (unless Licensor(s) consents
in writing) manufacture any other merchandise utilizing any of the Licensed
Property; and that when Licensee ceases to require Manufacturer to manufacture
the Authorized Article(s), Manufacturer will deliver to Licensor(s) or Licensee
any molds, plates, engravings or other devices used to reproduce the Licensed
Property or will give satisfactory evidence of the destruction thereof.
Licensor(s) shall be entitled to invoke any remedy permitted by law for
violation of this Manufacturer's Agreement by Manufacturer.

MANUFACTURER:

Address:___________________                            By:______________________

___________________________                            Its:_____________________

___________________________                            Date:____________________




   13


                                   SCHEDULE H
                                ADDITIONAL TERMS



   14


                                   SCHEDULE F
                            ACCOUNTING STATEMENT FORM

                                                    
Licensee:   JAXXS, INC.                            Mail to:  SABAN MERCHANDISING, INC.
            24955 Pasific Coast Hwy., #B202                  10960 Wilshire Boulevard
            Malibu, CA 90265                                 Los Angeles, California 90024
            _______________                                  Attn: Business Affairs, Licensing & Merchandising



Date Reported:  ___/___/___

FOR THE CALENDAR QUARTER:  From__________To____________

INSTRUCTIONS FOR THE LICENSED ELEMENT COLUMN BELOW: Please identify in the
Licensed Element Column the Character Used and or Title and if sold embellished
with (1) Characters only; (2) Character(s) with Title, and (3) Title only.




- ------------------------------------------------------------------------------------------------------------------------------------
Territory   Lot/    Authorized   Licensed  Unit       Qty          Invoiced     (Allowable  (Actual   Royalty     Royalty    Total
            Style   Article      Element   Price ($)  Shipped (#)  Billing ($)  Deds)       Returns)  Base   ($)  Rate  (%)   ($)
                                                                                            
- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------------------


We have examined this report and we certify it to 
be a true and correct statement as                               1.  Total
Payment                 $____________
reflected by our books for the above period.                     2.
Guarantee Balance                   $____________


   15




                                                                 3.
PAYMENT DUE   $____________

By:    _______________________________

Title:  _______________________________
                                                  Entered:  __/__/__
Date: ____/____/_____

         Entered: ___/___/___



   16


                                    AMENDMENT


Reference is made to that certain License Agreement dated April 23, 1996,
contract number 95179 (the "Agreement") between Saban Merchandising, Inc. (SMI),
Saban International N.V. (collectively "Licensor") and Jakks Pacific, Inc. (as
amended "Licensee"), in connection with the Licensed Property entitled

The Agreement is amended as of October 9, 1996 whereby:

     1.   Licensee is clarified as Jakks Pacific, Inc.

     2.   Total Guarantee shall be $125,000.00 with Guarantee due dates as
          follows:



          Date                                 Amount
          ----                                 ------
                                                           
          Upon Signing                        $40,000.00 (Advance)
          03/31/97                            $42,500.00
          06/30/97                            $42,500.00


     Licensor acknowledges the partial receipt of the Advance payment in the
amount of $10,000.00.

     3. Upon receipt of the remaining Advance ($30,000), Schedule B, Licensed
Articles Specifications, shall be amended in its entirety to read as follows:




- ------------------------------------------------------------------------------------------------------------------------------------
Licensed Article(s)                                                                                                 Market Date(s)
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  
minature figures and/or vehicles less than 2" in height and/or length                                               2/97
with any or all of the following: optional wrist carrying case; playset
carrying case with optional mini track with motorized launcher (Stunt
Stadium) or performance speedway and morotized accelerator
- ------------------------------------------------------------------------------------------------------------------------------------
Plastic battery-operated motorized vehicles with sound chip (without                                                2/97
race track) with permanently attached non-articulated figurine 
- ------------------------------------------------------------------------------------------------------------------------------------
Radio/remote control vehicles (turbo racers)                                                                        2/97
- ------------------------------------------------------------------------------------------------------------------------------------
"Glow Zone" luminous removable vinyl stickers and zone maps (glow                                                   2/97
stickers are attached to the map creating a world map)
- ------------------------------------------------------------------------------------------------------------------------------------


Unless otherwise expressly provided in this Amendment, the terms used herein
will have the same meaning ascribed to them in the Agreement. The Agreement, as
modified herein, is hereby confirmed.



SABAN MERCHANDISING, INC. (SMI)                 SABAN INTERNATIONAL N.V. (SINV)


By:                                    By:
Print:                                 Print:
Its:                                   Its:
Date:                                  Date:



   17



JAKKS PACIFIC, INC.


By:

Print:
Its:

Date:

   1



EXHIBIT 10.14  

                                LICENSE AGREEMENT


     This LICENSE AGREEMENT (the "AGREEMENT") dated as of June 1, 1996 by and
between WOW WEE INTERNATIONAL, LTD. ("WWI"), a Hong Kong corporation, and JAKKS
PACIFIC, INC. ("LICENSEE"), a Delaware corporation.

                              W I T N E S S E T H :

     WHEREAS, WWI is the owner of the tradenames, logos, trademarks and other
intellectual properties set forth on Schedule A attached hereto and any
applications therefore (the "LICENSED MARKS") and the goodwill associated
therewith; and

     WHEREAS, WWI has developed, and directly or indirectly manufactures, an
accessory charged toy vehicle and toy vehicle line extensions and accessories
being marketed under the name of Turbo Touch Racers; and

     WHEREAS, Licensee desires to obtain an exclusive license to sell and
distribute the Licensed Products (as defined herein) within the Territory (as
defined herein) and WWI is willing to grant to Licensee an exclusive License to
use the Licensed Marks solely in conjunction with the sale and distribution of
the Licensed Products within the Territory on the terms and conditions set forth
herein.

     NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and agreements hereinafter set forth, and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto do hereby agree as follows:



   2



     1. Definitions. As used in this Agreement:

          (a) "Advertising Materials" means all advertising and promotional
     materials and all packaging, wrapping and labelling materials for the
     Licensed Products which are produced by or for Licensee and which make use
     of any of the Licensed Marks.

          (b) "Licensed Products" means the goods or products set forth on
     Schedule B, attached hereto and such other products as may be added thereto
     from time to time using WWI's technology upon such terms and conditions as
     may be agreed to by the parties.

          (c) "Net Sales Price" means the amount invoiced by Licensee to its
     retail customers or distributors for sales of Licensed Products, less
     authorized returns actually received and customary trade and volume
     discounts and allowances. In computing Net Sales Price, no costs incurred
     in selling, advertising or distributing the Licensed Products shall be
     deducted. If a sale, transfer or other disposition is made otherwise than
     at arm's length, including, without limitation, a sale by Licensee to an
     affiliate of Licensee, the Net Sales Price of such Licensed Products shall
     be deemed to be the Net Sales Price of like quantities of like products
     sold at arm's length.

          (d) "Patent Rights" means all patentable inventions, including all
     applications for patents, whether domestic or foreign, disclosing or
     claiming such inventions, all continuations, continuations-in-part,
     divisions, renewals and patents of addition thereof, all


                                     - 2 -


   3



     patents granted thereon, whether domestic or foreign, all reissued or
     reexamined patents based thereon which are used in the manufacturer of the
     Licensed Products.

          (e) "Premiums" means any article used for the purpose of increasing
     the sale, promoting or publicizing any other product, or any service,
     including, without limitation, incentives for sales forces and for fund
     raising, give-aways and entries in sweepstakes.

          (f) "Term" shall have the meaning set forth in Section 3(a) hereof.

          (g) "Territory" means the country or countries set forth on Schedule
     C, attached hereto.

          (h) "WWI Patent Rights" shall mean the Patent Rights owned by WWI.

     2. Grant of License.

          (a) Grant. Subject to the terms, conditions and limitations set forth
     in this Agreement, WWI hereby grants to Licensee the exclusive right,
     license and privilege, during the Term of this Agreement (i) to sell the
     Licensed Products throughout the Territory and (ii) to use or reproduce the
     Licensed Marks solely in connection with the sale and distribution of the
     Licensed Products throughout the Territory (the "LICENSE"). The License
     shall include the right to use the Licensed Marks to advertise, market and
     promote the Licensed Products. Licensee hereby covenants and agrees to use
     its best efforts to distribute, sell, advertise and promote the Licensed
     Products in the Territory during the Term of this Agreement.


                                     - 3 -


   4



          (b) Exclusivity. The License granted herein shall be exclusive within
     the Territory.

          (c) Limitations.

               (i) Licensee shall not sell the Licensed Products outside the
          Territory or sell to those third parties Licensee knows or has reason
          to know will sell the Licensed Products outside the Territory.

               (ii) The License does not include the right to export any
          Licensed Products from the Territory.

               (iii) WWI shall not sell the Licensed Products to those third
          parties it knows or has reason to know will sell the Licensed Products
          in the Territory, or will sell the Licensed Products to other parties
          (other than the Licensee) who will sell the Licensed Products in the
          Territory.

               (iv) The Licensed Products shall not be used as Premiums, in
          combination sales, as give-aways, as charitable contributions or
          disposed of under similar methods of merchandising or other transfer
          without the prior written consent of WWI.

     3. Term.

          (a) Term. This Agreement shall commence on June 1, 1996 (the
     "COMMENCEMENT DATE") and shall expire on December 31, 1997, unless sooner
     terminated in accordance with the terms hereof (the "INITIAL TERM");
     provided, however, that in the event that


                                     - 4 -


   5



     Licensee is unable to secure orders for 100,000 units of the Licensed
     Products on or before October 15, 1996, the Initial Term shall extend to
     June 30, 1998.

          (b) Renewal Option. Licensee may renew this Agreement, for an
     additional twelve (12) months and for each twelve (12) month period
     thereafter by providing WWI with written notice of its intent to renew
     ninety (90) days prior to the expiration of the Term and provided that
     Licensee is not in default hereunder. The terms for such renewal periods
     shall be as provided in this Agreement, except that the Guaranteed Amount
     (as defined herein) shall be increased by 10% during any renewal period.
     The Initial Term and any renewal term are hereinafter referred to as the
     "Term."

     4. Purchase Price.

          (a) Licensee shall purchase the Licensed Products from WWI at the
     prices indicated in Schedule D annexed hereto as such Schedule may be
     amended from time to time.

     5. Payments.

          All payments for the purchase of Licensed Products shall be made by a
     sight transferable irrevocable letter of credit in U.S. dollars (the
     "LETTER OF CREDIT") FOB Hong Kong.

     6. Advance Against Guaranteed Amount. Licensee shall pay an advance against
Royalties (as defined herein) in the amount of US$300,000.00 payable as follows:
on the Commencement Date, Licensee shall pay to WWI by wire transfer to an
account designated by


                                     - 5 -


   6

WWI the amount of US$150,000.00 (the "ADVANCE"). The remaining $150,000
shall be paid by a separate transferable irrevocable letter of credit payable
upon the shipment of goods or when it is determined that goods with the
functions set forth on Schedule B attached hereto are ready to be shipped. Such
payment shall be made by a drawdown by WWI of such letter of credit. If after
receiving an order from Licensee, WWI fails to ship any Licensed Products to
Licensee by October 15, 1996, Licensee may immediately terminate this Agreement
and WWI shall refund the Advance in full.

     7. Minimum Purchase Obligation.

          During the Term of this Agreement Licensee hereby undertakes to
     purchase from WWI Licensed Products the aggregate value of which is not
     less than US$3,000,000 (Three Million United States Dollars) (the 
     "GUARANTEED AMOUNT"). Within sixty (60) days of the Commencement Date, 
     Licensee shall provide WWI with a projected breakout by quarter of the 
     distribution of purchases for the Term.

     8. Accepted Quality.

          (a) Defective Product. Licensee shall bear the full cost of all
     shipments of Licensed Products where less than 3% of the total shipment is
     defective; provided that, if greater than 3% of any shipment of Licensed
     Products is defective, WWI shall replace, on a one for one basis, all
     defective items with items in the manner provided in (b) below.


                                     - 6 -


   7

          (b) Returned Product. Any defective Licensed Products that are
     returned to Licensee shall be replaced by WWI. The determination as to
     whether a particular Licensed Product is defective shall be made by WWI and
     Licensee. If any such defective items are no longer being sold by Licensee,
     WWI shall reimburse Licensee either in the form of cash or credit against
     amounts owed by Licensee to WWI for such defective items at Licensees cost
     therefore.

     9. Royalties.

          (a) Notwithstanding anything else to the contrary contained in this
     Agreement, in consideration for the License granted to Licensee hereunder,
     Licensee shall pay to WWI, at the times and in the manner set forth in
     Section 10(b) hereof the greater of (i) $300,000.00 with regard to the
     Initial Term and $330,000 with regard to the renewal first term; or (ii)
     royalties equal to 2% of net sales of Licensed Products that are sold with
     the name Power Ranger ZEO or other Power Ranger name Licensed for use by
     License, 3% of net sales of Licensed Products sold with other names therein
     that are licensed by others for use by the Licensee and 5% of net sales on
     all other Licensed Products ("ROYALTIES"). All Royalties due to WWI shall
     accrue upon the sale of Licensed Products, regardless of the time of
     collection by Licensee. For purposes of this Agreement, a Licensed Product
     shall be considered "sold" as of the date on which such Licensed Product is
     billed, invoiced, shipped or paid for, whichever event occurs first.

          (b) Statements and Payments. Within forty-five (45) days after the
     close of the calendar quarter in which the initial shipment of Licensed
     Products is made, and thereafter within forty-five (45) days after the
     close of each successive calendar quarter, Licensee shall furnish to WWI
     complete and accurate statements (the "QUARTERLY STATEMENTS") certified by
     the


                                     - 7 -


   8



     President or Chief Financial Officer of Licensee, which shall set forth the
     number and Net Sales Price of each Licensed Product sold by Licensee during
     the preceding calendar quarter and of all Licensed Products for which the
     Licensee has given its customers credits for return and allowances in the
     amount of each such credit in such proceeding calendar quarter. The
     Quarterly Statements shall be furnished to WWI whether or not any Licensed
     Products have been sold and whether or not Royalties are due and payable
     for the preceding calendar quarter. Payment of the amount shown on the
     Quarterly Statements due as Royalties shall accompany the Quarterly
     Statements and shall be made in U.S. dollars.

          (c) No Waiver. The receipt or acceptance by WWI of any of the
     Quarterly Statements or of any Royalties paid hereunder (or the cashing of
     any checks evidencing such payments) shall not preclude WWI from
     questioning the correctness thereof at any time, and in the event any
     inconsistencies, mistakes or errors are discovered in the Quarterly
     Statements or payments, such mistakes shall be immediately rectified and
     the appropriate payment made by Licensee or WWI to the other, as the case
     may be.

          (d) Time of Essence; Interest. Time is of the essence with respect to
     the furnishing of all statements and the making of all payments due
     hereunder. All amounts payable by Licensee to WWI paid more than fifteen
     (15) days after the due date thereof shall bear interest equal to the lower
     of (i) the maximum rate allowed by law or (ii) 1-1/2% per month, computed
     from the original due date until paid.


                                     - 8 -


   9



     10. Advertising.

          Licensee shall use its best efforts to advertise and promote the
     Licensed Products throughout the Territory in a manner which is
     commensurate with the reputation and prestige of the Licensed Marks. No
     other trademark or trade name, including Licensee's own trademark or trade
     name, may be associated with the Licensed Marks without the consent of WWI
     which shall not be unreasonably withheld or delayed. Licensee shall use its
     best efforts to ensure that all advertising produced by Licensee or
     Licensee's designees hereunder shall be of the highest caliber.

     11. Books and Records; Audit. Licensee shall keep accurate books of account
and records at its principal place of business covering all transactions
relating to the License granted hereunder. WWI and WWI's duly authorized
representatives shall have the right during regular business hours upon five
business day's notice to examine said books of account and records and all other
documents and material in the possession or under control of Licensee with
respect to the subject matter and terms of this Agreement, and shall have free
and full access thereto to make copies and extracts thereof. In order to
facilitate inspection by WWI or WWI's representatives, Licensee shall maintain
books and records concerning the Licensed Products separately from the books and
records of goods which are not licensed hereunder. If any such examination
discloses that Licensee owes Royalties to WWI in excess of five percent (5%) of
those previously paid, Licensee shall pay, in addition to such deficiency, the
cost of such


                                     - 9 -


   10



examination and collection. If such examination discloses that Licensee owes
Royalties to WWI in an amount in excess of ten percent (10%) of the Royalties
previously paid, then, in addition to any and all other remedies that WWI may
have hereunder, WWI shall have the right to terminate this Agreement upon
written notice to Licensee. All books of account and records shall be kept
available for at least three (3) years after the expiration of the Term or
earlier termination of this Agreement.

     12. Approval of Advertising

          Licensee shall comply with all reasonable procedures which WWI may
     from time to time adopt regarding its use of Advertising Materials which
     Licensee proposes to use under this Agreement. Licensee agrees to retain
     all materials relating to approvals in its files while this Agreement
     remains in effect and for one (1) year thereafter.

     13. Intellectual Property.

          (a) General. All uses of the Licensed Marks hereunder shall inure to
     WWI's benefit. Licensee acknowledges that WWI is the exclusive owner of all
     the Licensed Marks, any trademark incorporating all or any part of any
     Licensed Marks, the trademark rights created by such uses, the WWI Patent
     Rights and any improvements thereon. All ideas, designs and suggestions
     submitted or approved by WWI in connection with the sale, offer for sale or
     distribution of the Licensed Products shall be deemed to be and shall
     remain the sole and exclusive property of WWI, except to the extent, if
     any, that they are in the public domain, and


                                     - 10 -


   11



     Licensee hereby agrees not to use or incorporate for use any such ideas and
     designs in products manufactured or sold by Licensee, directly or
     indirectly, other than the Licensed Products, nor to sell to any third
     party or disclose the same except through the promotion and sale of the
     Licensed Products hereunder. Without limiting the foregoing, Licensee
     hereby assigns to WWI any trademark incorporating all or any part of any
     Licensed Mark other than trademarks registered or otherwise belonging to
     third parties and the trademark rights created by such uses together with
     the goodwill attaching to that part of the business in connection with
     which such Licensed Mark or trademarks are used. Licensee agrees to execute
     and deliver to WWI such documents as are required to register Licensee as a
     registered user or permitted user of the Licensed Marks or such trademarks
     and to follow WWI's instructions for proper use thereof in order that
     protection and/or registrations for the Licensed Marks and such trademarks
     may be obtained or maintained.

          (b) Prohibitions. Licensee agrees not to use any Licensed Marks or any
     trademark incorporating all or any part of any Licensed Marks on any
     business sign, business cards, stationery or forms (except as licensed
     herein) or to use any Licensed Marks, as the name of Licensee's business or
     any division thereof, unless otherwise agreed by WWI in writing.

     14. Registrations. Except with the written consent of WWI, neither
Licensee, its parent or any subsidiary of Licensee shall register or attempt in
any country to register copyrights in, or to register as a trademark, service
mark, design patent or industrial design or


                                     - 11 -


   12



business designation, any of the Licensed Marks or derivations or adaptations
thereof, or any word, symbol or design which is so similar thereto as to suggest
association with or sponsorship by WWI or any subsidiary of WWI. In the event of
breach of the foregoing, Licensee agrees, at Licensee's expense and WWI's
request, immediately to terminate the unauthorized registration activity and
promptly to execute and deliver, or cause to be delivered, to WWI such
assignments and other documents as WWI may require to transfer to WWI all rights
to the registrations, patents or applications involved.

     15. Unauthorized Use of Licensed Materials.

          (a) No Unauthorized Use. Licensee shall not use the Licensed Marks or
     any other material the copyright to which is owned by WWI in any way other
     than as herein authorized (or as is authorized in such other written
     contract signed by WWI and Licensee as may be in effect between such
     parties). In addition to any other remedy WWI may have, Licensee agrees
     that the profits from any use thereof on products other than the Licensed
     Products (unless authorized by WWI in writing), and all profits from the
     use of any other copyrighted material of WWI without written authorization,
     shall be payable to WWI.

          (b) Notice of Unauthorized Use. Licensee shall give to WWI prompt
     written notice of any unauthorized use by third parties of Licensed Marks
     known to Licensee and Licensee shall not, without written consent, bring or
     cause to be brought any criminal prosecution, lawsuit or administrative
     action for infringement, interference with or violation of


                                     - 12 -


   13



     any rights to Licensed Marks. Licensee agrees to cooperate with WWI, and,
     if necessary, to be named by WWI, at WWI's expense as a sole complainant or
     co-complainant in any action against an infringer of the Licensed Marks and
     Licensee agrees to pay to WWI all or any part of damages or other monetary
     relief recovered in such action other than for reasonable expenses incurred
     at WWI's request.

     16. Indemnification.

          (a) Licensee shall indemnify WWI during and after the Term of this
     Agreement against all claims, liabilities (including settlements entered
     into in good faith with Licensee's consent, such consent not to be
     unreasonably withheld) and expenses (including reasonable attorneys' fees)
     arising out of Licensee's activities hereunder. The parties indemnified
     hereunder shall include WWI, any subsidiary or affiliate of WWI, and their
     officers, directors, employees and agents. The indemnity shall not apply to
     any claim or liability relating to any infringement of the intellectual
     properties of a third party caused by Licensee's utilization of the
     Licensed Marks in accordance with provisions hereof.

          (b) WWI agrees to indemnify and hold Licensee and any person acting in
     Licensee's behalf harmless from any action, claim, loss, cost, liability,
     expense or damage (including reasonable attorneys' fees and disbursements
     incurred in investigating, negotiating or litigating any claim or action)
     which Licensee may suffer arising out of or related to any sales made, or
     other actions taken, by Licensee based on the rights granted to it by WWI
     under this


                                     - 13 -


   14



     Agreement. The parties indemnified hereunder shall include Licensee, any
     affiliate or subsidiary of Licensee, and their officers, directors,
     employees and agents. WWI further indemnifies Licensee against any loss,
     cost, liability, expense or damage (including reasonable attorneys' fees
     and disbursements incurred in investigating, negotiating or litigating any
     claim or action) which Licensee may suffer arising out of any action or
     claim based on or relating to that certain License Agreement dated as of
     January 1, 1995 by and between WWI and Happiness Express, Inc., a Delaware
     corporation.

          (c) Promptly after receipt by an indemnified party (the "INDEMNIFIED
     PARTY") of notice of any claim or the commencement of any action against it
     for which it is indemnified under this Agreement, the Indemnified Party
     shall notify the Indemnifying party (the "Indemnifying Party") of such
     claim or action in writing. In case any such action is brought against an
     Indemnified Party, and it notifies the Indemnifying Party of the
     commencement thereof, the Indemnifying Party will be entitled to
     participate in, and, to the extent that it may wish, to assume the defense
     thereof with counsel selected by the Indemnifying Party who shall be
     reasonably satisfactory to the Indemnified Party, and after notice from the
     Indemnifying Party to the Indemnified Party of its election so to assume
     the defense thereof, the Indemnifying Party will not be liable to the
     Indemnified Party under this Section for any legal or other expenses
     subsequently incurred by the Indemnified Party in connection with the
     defense thereof other than reasonable costs of investigation. The
     indemnified party shall have the right to employ separate


                                     - 14 -


   15



     counsel in any such action and to participate in the defense thereof, but
     the fees and expenses of such counsel shall not be at the Indemnifying
     Party's expense if the Indemnifying Party has assumed the defense of the
     action with counsel reasonably satisfactory to the Indemnified Party.

     17. Insurance. Licensee shall maintain in full force and effect at all
times while this Agreement is in effect and for five (5) years thereafter,
comprehensive general and commercial liability insurance, including broad form
contractual and products liability coverage waiving subrogation, with combined
single limits of no less than one million dollars (US $1,000,000.00), with a
deductible of no more than $[____ ] and naming as additional insured those
indemnified in Section 17(a) hereof. Licensee shall deliver to WWI a certificate
or certificates of insurance evidencing satisfactory coverage and indicating
that WWI shall receive written notice of cancellation, non-renewal or of any
material change in coverage at least thirty (30) days prior to the effective
date hereof. Compliance herewith in no way limits Licensee's indemnity
obligations, except to the extent that Licensee's insurance company actually
pays WWI amounts which Licensee would otherwise pay WWI. Licensee shall take all
necessary steps to ensure that the insurer has no right of subrogation against
the WWI.

     18. Termination. Without prejudice to any other right or remedy available
to WWI:

          (a) Default; Breach. If Licensee fails to sell and distribute the
     Licensed Products or to furnish statements and pay Royalties as herein
     provided, or if Licensee breaches the terms of this Agreement and if any
     such failure is not corrected within thirty (30) days after


                                     - 15 -


   16



     WWI sends Licensee written notice that a default under or breach of this
     Agreement has occurred , WWI shall have the right at any time to terminate
     this Agreement by giving Licensee a written notice of termination.

          (b) Immediate Termination. Notwithstanding the cure provisions set
     forth in subsection (a) above, WWI shall have the right at any time to
     terminate this Agreement forthwith by giving Licensee written notice
     thereof if:

               (i) Licensee delivers to any customer without WWI's written
          authorization, merchandise containing representations of Licensed
          Marks or other material the copyright or other proprietary rights to
          which are owned by WWI other than the Licensed Products approved in
          accordance with Section 14 hereof;

               (ii) Licensee delivers any of the Licensed Products outside the
          Territory or knowingly sells any of the Licensed Products to a third
          party for delivery outside the Territory unless pursuant to a written
          distribution permission or separate written license agreements with
          WWI or any subsidiary of WWI;

               (iii) a breach occurs which is of the same nature, and which
          violates the same provision of this Agreement, as a breach of which
          WWI has previously given Licensee one (1) written notice regardless of
          any cure of the breach giving rise to such prior written notice;

               (iv) Licensee breaches any material term of any other license
          agreement between WWI and Licensee, and WWI terminates such agreement
          for cause; or


                                     - 16 -


   17



               (v) Licensee makes an assignment for the benefit of creditors, or
          files a petition in bankruptcy, or is adjudged bankrupt, or becomes
          insolvent, or is placed in the hands of a receiver, or if the
          equivalent of any such proceedings or acts occurs, though known by
          some other name or term.

     19. Rights and Obligations Upon Expiration or Termination.

          (a) Sell-Off Period. Upon the expiration or termination of this
     Agreement, all rights herein granted to Licensee shall revert to WWI, and
     WWI shall be entitled to retain all Royalties and other things of value
     paid or delivered to WWI. Licensee agrees that following the expiration or
     termination of this Agreement; (i) Licensee will deliver to WWI any and all
     artwork which may have been used or created by Licensee in connection with
     this Agreement; (ii) that Licensee will at WWI's option either sell to WWI
     at cost or destroy or efface any molds, plates and other items used to
     reproduce Licensed Marks; and (iii) Licensee will cease selling the
     Licensed Products. If Licensee has any unsold Licensed Products in
     inventory on the expiration or termination date, Licensee shall provide WWI
     with a full statement of the numbers of such unsold Licensed Products and
     shall thereupon, but only if such statement has been provided to WWI and if
     Licensee has fully complied with the terms of this Agreement including the
     payment of all Royalties due, have the right for a limited period of one
     hundred twenty (120) days from such expiration or earlier termination date,
     to sell off and deliver such Licensed Products or, at the option of WWI
     resell such Licensed Products to WWI at cost.


                                     - 17 -


   18



     Licensee shall furnish WWI with statements covering such sales and pay WWI
     Royalties in respect of such sales.

          (b) Final Quarter. During the three-month period immediately preceding
     the expiration of the Term or any renewal period (hereinafter, the "FINAL
     QUARTER"), Licensee shall not have on hand an inventory of Licensed
     Products in excess of the inventory of such Licensed Products in its
     possession during the three-month period immediately preceding the Final
     Quarter. The intent of this provision is to facilitate the orderly
     disposition of Licensee's inventory of Licensed Products upon expiration of
     this Agreement.

     20. Competing Products. Licensee covenants and agrees that if during the
Term of this Agreement it shall enter into any licensing agreement or renewal or
undertaking for the distribution in the Territory of products of the same nature
as the Licensed Products, such products shall not be identical with and shall be
noticeably distinguishable from the Licensed Products and shall be marketed in
such manner as not to be confused with the Licensed Products.

     21. Representations, Warranties and Covenants.

          (a) By WWI. WWI hereby represents and warrants that it has full right,
     power and authority to enter into this Agreement and to perform all of its
     obligations hereunder and that it is the owner of the Licensed Marks and
     where applicable the trademark registrations therefor. WWI further
     represents and warrants that no broker or finder brought about this


                                     - 18 -


   19



     transaction and WWI hereby indemnifies Licensee against and holds it
     harmless of and from any and all liabilities (including, without
     limitation, reasonable attorneys' fees and disbursements paid or incurred
     in connection with any such liabilities) for any brokerage commissions or
     finders' fees in connection with this Agreement or the transactions
     contemplated hereby.

          (b) By Licensee. Licensee hereby represents and warrants that it has
     full right, power and authority to enter into this Agreement and to perform
     all of its obligations hereunder. Licensee further represents and warrants
     that no broker or finder brought about this transaction and Licensee hereby
     indemnifies WWI against and holds it harmless of and from any and all
     liabilities (including, without limitation, reasonable attorneys' fees and
     disbursements paid or incurred in connection with any such liabilities) for
     any brokerage commissions or finders' fees in connection with this
     Agreement or the transactions contemplated hereby. Licensee hereby
     covenants and agrees to comply with all laws, rules, regulations,
     ordinances and treaties relating to the distribution and sale of the
     Licensed Products and to the performance of Licensee's obligations
     hereunder.

     22. Waivers. A waiver by either party at any time of a breach of any
provision of this Agreement shall not apply to any breach of any other provision
of this Agreement or imply that a breach of the same provision at any other time
has been or will be waived or that this Agreement has been in any way amended,
nor shall any failure by either party to object to


                                     - 19 -


   20



conduct of the other be deemed to waive such party's right to claim that a
repetition of such conduct is a breach hereof.

     23. Non-Assignability. Licensee shall not voluntarily or by operation of
law assign, sublicense, transfer, encumber or otherwise dispose of all or any
part of its interest in this Agreement without WWI's prior written consent. Any
attempted assignment, sub-license, transfer, encumbrance or other disposal
without such consent shall be void and shall constitute a material default and
breach of this Agreement. "Transfer" within the meaning of this Section 24 shall
include any (i) merger or consolidation involving Licensee's company whereafter
neither Jack Friedman or Stephen Berman remain executive officers and directors
of Licensee following such merger, (ii) any sale or transfer of all or
substantially all of Licensee's assets and (iii) any transaction or series of
related transactions resulting in the transfer of thirty-three and one-third
percent (33-1/3%) or more of the voting stock of Licensee.

     24. Relationship. This Agreement does not provide for a joint venture,
partnership, agency or employment relationship between the WWI and Licensee.

     25. Confidentiality. All information disclosed in writing, whether before
or after the date hereof, in connection with the transactions contemplated by,
or the discussions and negotiations preceding, this Agreement to any other party
(or its representatives) shall be kept confidential by such other party and its
representatives and shall not be used by any persons other than as contemplated
by this Agreement, except to the extent that (i) such information was


                                     - 20 -


   21



known by the recipient when received, (ii) such information is or hereafter
becomes lawfully obtained from other sources, (iii) it is necessary or
appropriate to disclose such information to a governmental entity having
jurisdiction over the party from whom disclosure is sought, (iv) any law
requires otherwise or (v) such duty as to confidentiality is waived in writing
by the other party. If this Agreement is terminated, each party shall use all
reasonable efforts return upon written request from the other party all
documents (and reproductions thereof) received by it or its representatives from
such other party (and, in the case of reproductions, all such reproductions made
by the receiving party) that include information not within the exceptions
contained in the first sentence of this Section 28, unless the recipients
provide assurances reasonably satisfactory to the requesting party that such
documents have been destroyed.

     26. Headings. Headings of paragraphs herein are for convenience of
reference only and are without substantive significance.

     27. Modifications or Extensions of this Agreement. Except as otherwise
provided herein, this Agreement can only be extended or modified by a writing
signed by both parties.

     28. Notices. All notices and statements required hereunder shall be in
writing and shall be sent by hand delivery, prepaid telex, cable or telecopy or
by registered or certified mail (postage prepaid and return receipt requested)
or by reputable overnight courier or express mail to the addresses set forth
below unless notification of a change of address is given in writing. Notice
shall be deemed effective when so personally delivered, telexed, cabled or
telecopied or


                                     - 21 -


   22



if mailed two business days following the date the notice is mailed (one
business day in the case of express mail or overnight courier service).

            All notices to WWI to:

                        Wow Wee International, Ltd.
                        Tuny Ying Building, Room 702
                        100 Nathan Road
                        Tsim Sha Tsui, Kowloon
                        Hong Kong



            with a copy to:

                        Squadron, Ellenoff, Plesent & Sheinfeld, LLP
                        551 Fifth Avenue
                        New York, New York 10176
                        Attn:  Ira S. Greene, Esq.

            If to Licensee, to:

                        Jakks Pacific, Inc.
                        24955 Pacific Coast Highway
                        Malibu, California 90265
                        Attn: Jack Friedman or Stephen Berman

            with a copy to:

                        Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
                        750 Lexington Avenue
                        New York, New York  10022-1200
                        Attn: Gabriel Kaszovitz, Esq.
                               or Murray L. Skala, Esq.
                        Fax: (212) 888-7776


                                     - 22 -


   23



     29. Entire Agreement. This Agreement contains the entire agreement between
the parties concerning the subject matter hereof and supersedes any pre-existing
agreement and any oral or written communications between the parties.
 
     30. Choice of Law and Forum. This Agreement shall be deemed to be entered
into in New York and shall be governed and interpreted according to the laws of
the State of New York. Any legal actions pertaining to this Agreement shall be
commenced within the State of New York. The prevailing party shall be entitled
to recover reasonable attorney's fees and costs incurred therein.


                                     - 23 -


   24


     IN WITNESS WHEREOF, the parties hereunto have signed this Agreement as of
the date first written above.

                                             WOW WEE INTERNATIONAL, LTD.


                                             By: _______________________________

                                             Title:_____________________________



                                             JAKKS PACIFIC, INC.


                                             By: _______________________________

                                             Title:_____________________________


                                     - 24 -


   25



                                   SCHEDULE A

                                 Licensed Marks



Turbo Touch Racers
TTR
Boomerangs





   26


                                   SCHEDULE B

                                Licensed Products


- - Turbo Touch Racers charged toy vehicles and extensions thereof and accessories
therefore having all of the following ten features:


        Infra Red anti smash sensor
        Charging sound of revving engine
        one finger contact slot
        4 second charge time
        60 second running time
        Left/right steering
        Reverse function
        Stop/start function at any time
        Approximately 35 ft. range from point of individual using the product
        Screeching sound when stop or anti smash is activated
        Works indoors and outdoors
        Glove fits and functions on age group 4-10 years of age




   27

                                   SCHEDULE C

                                   Territory

With regard to TTR charged toy vehicles, extensions and accessories - United
States

With regard to Power Ranger ZEO TTR - United States, Canada and Mexico.


   28

                                   SCHEDULE D

                                 Purchase Price

10 functions TTR Charged Toy Vehicle for not more than $10.00 per unit.

   1

EXHIBIT 10.15                DISTRIBUTION AGREEMENT


     THIS DISTRIBUTION AGREEMENT is made on the ______ day of July 1996, between
QUANTUM TOY CONCEPTS PTY, LTD., Level 14, 600 St. Kilda Road, Melbourne, 3004
Australia ("Quantum") and JAKKS PACIFIC INC., 24955 Pacific Coast Highway,
Malibu, California USA ("Jakks").


     WHEREAS, Quantum owns or controls all rights in respect of a radio
controlled vehicle known as the "The Reactor" ("the Property") and has appointed
Jakks as its exclusive distributor within the United States of America its
territories and possessions and Canada ("The Territory");


     WHEREAS, Jakks desires to act as exclusive distributor to Quantum or its
nominated manufacturing company for the Property in the Territory.


     NOW IT IS HEREBY AGREED AS FOLLOWS:


1.   GRANT OF RIGHTS

On the terms and conditions hereof Quantum hereby grants to Jakks, and Jakks
hereby accepts the exclusive right to distribute, advertise and sell in the
Territory the Products based upon or adapted from the Property, being the Large
"Reactor", and any other size radio controlled "Reactor" vehicles which may be
developed by quantum ("the Products").


2.   TERM

This Agreement shall commence as of the 1st day of July 1996 and shall continue
for a period of two years and six months or unless sooner terminated in
accordance with the provisions hereof.


3.   SUPPLY OF THE PRODUCT


     3.1  Jakks shall from time to time during the Term place orders with
          Quantum for such Products as Jakks may require for sale in the
          Territory, and Quantum agrees to supply Jakks with sufficient Products
          to enable Jakks to promote the sale of the Products in the Territory.



   2



     3.2  Jakks agrees to send all orders for the Products to Quantum's office
          in Australia as above or such other address as may be subsequently
          notified by Quantum in writing, for acceptance or rejection by
          Quantum.


     3.3  Upon receipt of orders, Quantum shall use all reasonable endeavors to
          meet the delivery date.


     3.4  Jakks shall, in respect of each order for the Products to be supplied
          hereunder, be responsible for:


          3.4.1 ensuring the accuracy of the order;

          3.4.2 providing Quantum with any information which is necessary in
                order to enable Quantum to fulfill the order and comply with all
                labeling, marketing and other applicable legal requirements in
                the Territory;

          3.4.3 obtaining any necessary import licenses or other requisite
                documents, and paying all applicable customs, duties and taxes 
                in respect of the importation of the Products into the 
                Territory.


4.   PAYMENT, ORDERS AND GUARANTEE


     4.1  The prices for all Products to be supplied by Quantum hereunder shall
          be at Quantum's standard Pricing Structure as or as advised by Quantum
          from time to time. The standard price per unit of the large Reactor
          Product shall be US$22.00 for the initial 18 months commencing July 
          1, 1996 ("the First Term"). Jakks shall have the right to resell the 
          Products in the Territory at whatever price or on whatever terms 
          Jakks determines in its discretion.


     4.2  Payment for orders of Products shall be made by irrevocable letter of
          credit, to be paid on shipment (F.O.B.) from China (or Hong Kong if so
          elected by Quantum) for the full value of merchandise order, opened by
          Jakks to Quantum or its Agent or such other entity as Quantum may
          later designate.


     4.3  Subject to the provisions of Clause 4.4, Jakks shall place minimum
          orders for the Products in the Territory for the First Term follows:


                                        2

   3



          100,000 units of the Large Reactor in respect of U.S.A. 5,000 units 
          of the Large Reactor in respect of Canada ("the Minimum Order")


     4.4  In the event that Jakks fails to place the Minimum Order and effect
          payment of same by irrevocable letter of credit in accordance with
          Clause 4.2 then Jakks shall pay an agreed compensation to Quantum
          ("the Guaranteed Minimum Compensatory Payment") in accordance with
          this clause:


               Jakks acknowledge that this compensation is referable to the
               minimum acceptable amortization by Quantum of its establishment
               costs and in particular trading and design costs.


          Jakks agrees that during the First Term Quantum will receive a
          Guaranteed Minimum Compensatory Payment of Two Hundred Ninety Four
          Thousand (US$294,000) Dollars, it being agreed that the price per 
          Product payable by Jakks shall be $22.00 of which $2.80 is the per 
          Product Guaranteed minimum Compensatory Payment.

          The Guaranteed Minimum Compensatory Payment shall be subject to
          adjustment as set forth below and shall be paid within 30 days of the
          end of the First Term, and shall be calculated according to the
          following formula


Guaranteed Minimum Compensatory Payment is equal to (M.O. minus A.O.) times
$2.80

          Where M.O. equals the Minimum Order defined in Clause 4.3, and A.O.
                equals the actual orders placed by Jakks and delivered by
                Quantum during the First Term less any Products ordered by
                Jakks and not delivered by Quantum or which Jakks has the
                right to return as defective or otherwise not conforming to
                the product specifications and which have not been replaced by
                replacement Products. The Obligations of the parties under
                this clause shall survive termination of this Agreement.


     4.5  Jakks shall pay to Quantum a non-refundable Advance of US$73,500
          being 25% of the Guaranteed Minimum Compensatory Payment which
          shall be credited against payment of the Guaranteed Minimum
          Compensatory Payment.


                                        3

   4



          The sum of US$73,500 shall be paid immediately upon the signing
          of the Agreement and remitted by bank draft to the account nominated
          by Quantum. If at the end of the First Term, after deducting the
          Advance, the calculation results in a negative figure, such amount
          shall be refunded forthwith by Quantum to Jakks.


     4.6  Jakks shall:

          4.6.1 maintain an accurate account and record of all sales of Products
                in the Territory in each month up to the close of business on 
                the last working day of each month, and shall prepare in a form
                approved by Quantum a quarterly monthly financial statement
                thereof and shall remit the same to the Company on or before 
                each Quarter.

          4.6.2 keep sale accounts and records of sales of the Product in the
                Territory and ensure that such accounts and records and all
                supporting vouchers, invoices, delivery notes and the like shall
                be open to inspection on at least two weeks notice to an
                authorized representative of the Quantum who may make copies (at
                Quantum's expense) of such accounts and records as it requires.

          4.6.3 keep such accounts and records not less than three years.


     4.7  Any claim by Jakks against Quantum in respect of defects or actual
          faults in the Product shall be allowed only when it is submitted in
          writing to Quantum within 30 days after discovery of the such defect.
          Defective Products shall be clearly identified and made available to
          Quantum for inspection, and subsequent acceptance or rejection of the
          claim. Quantum may, at its option, require such defective product to
          be returned by shipment.

          In respect of a defective product return allowance, Jakks will bear
          responsibility for 7% of the value of the orders for Products.
          Thereafter Quantum will bear the responsibility. Quantum's liability
          in respect to defective product shall be limited to the replacement of
          the Products or at Quantum's option, a credit or cash payment
          equivalent to the cost price of the defective product returned. After
          April 30, 1998, Jakks shall not be bound to accept replacement product
          in respect of defective product for which Quantum is liable.



                                        4

   5



5.   MARKETING


     5.1  Jakks shall use its best endeavors to promote the sale of the Products
          throughout the Territory and to satisfy market demand thereof. Quantum
          shall support Jakks efforts to promote the sale and distribution of
          the Products in the Territory.


     5.2  Jakks agrees to promote the Products in the USA and Canada by a
          significant national television campaign at its cost.


     5.3  Jakks shall maintain such stocks of the Products as may be reasonably
          necessary to meet its customer request.


     5.4  Quantum shall from time to time provide Jakks with samples,
          catalogues, brochures and up to date information concerning the
          Products in order to assist Jakks with the sale of the Product in the
          Territory, and shall endeavor to answer as soon as practicable any
          technical inquiries concerning the Products which are made by Jakks or
          its customers.


6.   SAMPLES


     6.1  Quantum has supplied Jakks with a sample of the Product on July 3,
          1996, ("the First Sample").


     6.2  Quantum shall supply further Prototype samples of Products to Jakks in
          October 1996 and thereafter Products to be available for shipment in
          March 1997.


     6.3  Quantum has supplied an additional sample on or about July 16, 1996
          containing a new feature of sequential L.E.D. lights. The parties
          agree that the initial standard price of $22.00 per unit
          applies to the First Sample only and any further modification,
          variations or new features shall remain the subject of further
          negotiation and agreement.



                                        5

   6



7.   PRODUCT LIABILITY INSURANCE


     7.1  Jakks shall maintain with a reputable insurer product liability
          insurance including Quantum as an additional named insured in the
          amounts customary in the Territory. Jakks shall hold Quantum harmless
          from any and all liability arising from the sale marketing and
          distribution of any Products in the Territory.


     7.2  Quantum hereby agrees to indemnify, defend and hold Jakks harmless
          from any loss or claim, currently existing or arising in the future,
          arising from any act, omission, event, conduct or transaction, to the
          extent such claim relates to or arises out of the fact that the sale
          of Products in the Territory in accordance with the terms and
          conditions of this Agreement infringes upon the trademark, trade name
          or other rights of any third party, other than Jakks.


     7.3  Except for the first 7% of the defective product return allowance,
          Quantum agrees to indemnify defend and hold harmless Jakks from any
          loss or claim arising out of defects in any Product existing at the
          time such Product is sold by Quantum to Jakks provided that Jakks
          gives Quantum reasonable notice of any such loss or claim and
          cooperates with Quantum in the handling thereof.


8.   TERMINATION


     This Agreement may be terminated at the option of Jakks or Quantum
     forthwith upon written notice to the applicable other party in any of the
     following events:


     8.1  If either party becomes insolvent or makes a general assignment for
          the benefit of creditors or if a petition in bankruptcy is filed
          against either party or if either party is adjudged bankrupt or
          insolvent;


     8.2  If a receiver or other custodian (permanent or temporary) is appointed
          for either party by instrument or by a court of competent jurisdiction
          or if any proceeding for a compromise of creditors to be instituted by
          or against either party is not satisfied, lifted, vacated or dismissed
          within fifteen (15) days or if the assets of either party are sold or
          levied by a sheriff or any other authority duly authorized on his
          behalf;


                                        6

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     8.3  If either party (the "defaulting party") is in default under any
          obligation on its part contained herein and the defaulting party fails
          to cure such default to the satisfaction of the other party within
          thirty (30) days of receiving written notice from the other party to
          cure such default.


9.   INTELLECTUAL PROPERTY


     9.1  Quantum hereby authorizes Jakks to use the trademarks and the
          copyrights in the Territory on or in relation to the Products for the
          purposes of exercising its rights and performing its obligations under
          the Agreement.


     9.2  Jakks may utilize and attach its logos, trademarks or trade names to
          the packaging of the Products in connection with Jakks' marketing,
          distribution and sale of the Products.


     9.3  Jakks hereby agrees to indemnify, defend and hold Quantum harmless
          from any loss or claim currently existing or arising in the future
          arising from any act, omission, event, conduct or transaction to the
          extent such claim relates to or arises out of the fact that the sale
          of Products in the Territory infringes upon the Jakks trademark, or
          trade name.


10.  REPRESENTATIONS AND WARRANTIES


     10.1 Quantum and Jakks have the right and power to enter into and perform
          this Agreement and have taken all steps necessary and appropriate to
          authorize the execution and performance hereof. This Agreement is a
          valid and legally binding obligation of Quantum and Jakks and is fully
          enforceable against the other party in accordance with its terms.


     10.2 Quantum owns or controls all rights necessary to grant Jakks the
          rights granted to it hereunder.


     10.3 The execution, delivery and performance of this Agreement by quantum
          does not and shall not conflict with the terms of any agreement or
          other instrument to which Quantum is a party or by which quantum, or
          any of its properties, is


                                        7

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          bound.


11.  GENERAL PROVISIONS


     11.1 In this Agreement, words importing the singular include the plural and
          vice versa and words importing gender include all genders.


     11.2 The insertion of headings and the division of this Agreement into
          articles and sections are for convenience of reference only and shall
          not affect the interpretation hereof.


     11.3 This Agreement and any documents incorporated by reference herein
          constitutes the entire agreement between the parties pertaining to the
          subject matter hereof and supersedes all prior agreements,
          understandings, negotiations and discussions with respect to the
          subject matter hereof whether oral or written. No supplements,
          modification or waiver of this Agreement shall be binding unless
          executed in writing by officers of Jakks and Quantum.


     11.4 The invalidity of any provision of this Agreement or any covenant
          herein contained shall not affect the validity or enforceability of
          any other provision or covenant hereof or herein contained and any
          such invalid provision or covenant shall be deemed to be severable.


     11.5 This Agreement shall be binding upon and endure to the benefit of the
          parties hereto and their permitted assigns and successors.


     11.6 Notice - All notices, consents and approvals (herein referred to as
          "Notice") permitted or required to be given or made hereunder shall be
          in writing and shall be deemed to be sufficiently and duly given or
          made if delivered personally or if sent by prepaid registered mail or
          if transmitted by telex or facsimile transmission, to the address
          hereinbefore referred to. Any party from time to time by Notice may
          change its address for the purpose of this Agreement. In the event of
          actual or threatened disruption of postal service, a notice shall be
          delivered or sent by telex or other form of recorded communication
          tested prior to transmission.



                                        8

   9


     11.7 Time of Essence - The parties agree that time is of the essence in
          this Agreement.


     11.8 Further Assurance - The parties agree to do or cause to be done all
          acts or things necessary to implement and carry into effect this
          Agreement to its full extent.


     11.9 Proper Law - This Agreement shall be construed in accordance with the
          Laws of Australia.


     IN WITNESS WHEREOF, the parties have executed this Agreement as an
agreement in two counterparts on the date hereinbefore set out:




SIGNED BY:                                                   DATE:
QUANTUM DEVELOPMENTS:




SIGNED BY:                                                   DATE:
JAKKS PACIFIC INC.




                                        9

   1
 
                                                                      EXHIBIT 21
 
J-X Enterprises, Inc., a New York corporation
 
JP (HK) Ltd., a Hong Kong corporation
 
JAXXS (HK) Ltd., a Hong Kong corporation
 
JAKKS Acquisition Corp., a Delaware corporation

Road Champs Ltd., a Hong Kong corporation

Road Champs, Inc., a Pennsylvania corporation

   1
                                                                EXHIBIT 23.1

                        CONSENT OF PANNELL KERR FORSTER

We hereby consent to the inclusion in the Amendment No. 2 to Registration
Statement on Form SB-2 of JAKKS Pacific, Inc. of our report dated January 23,
1997, except for note 15, for which the date if February 6, 1997, on our audits
of the consolidated financial statements of JAKKS Pacific, Inc. as of December
31, 1996 and 1995, and for the year and nine months then ended.

We also hereby consent to the reference to our firm as "Experts" in the
Registration Statement.


/s/ PANNELL KERR FORSTER

PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation


Los Angeles, California
April 11, 1997

   1
                                                                EXHIBIT 23.2

                       CONSENT OF PANNELL KERR FORSTER PC

We hereby consent to the inclusion in the Amendment No. 2 to Registration
Statement on Form SB-2 of JAKKS Pacific, Inc. of our report dated February 12,
1997 on our audit of the combined financial statements of Road Champs, Inc. and
Subsidiary and Die Cast Associates, Inc. as of December 31, 1996 and December
31, 1995 and for the years then ended.

We also hereby consent to the reference to our firm under the caption "Experts" 
in the Registration Statement.


/s/ PANNELL KERR FORSTER PC

PANNELL KERR FORSTER PC


New York, New York
April 11, 1997

   1
 
   
                                                                      EXHIBIT 24
    
 
                               POWER OF ATTORNEY
 
     JAKKS Pacific, Inc. (the "Company") and each person whose signature appears
below, hereby appoints Joel Bennett as attorney-in-fact with full power of
substitution, to execute in the name and on behalf of the Company and each such
person, individually and in each capacity stated below, a Registration Statement
on Form SB-2, and any amendments thereto (including post-effective amendments)
for an underwritten offering of the Company's Common Stock, for which Cruttenden
Roth Incorporated is acting as the Representative of the Underwriters, as the
attorney-in-fact deems appropriate and to file such Registration Statement and
any amendment thereto with the Securities and Exchange Commission.
 
     This Power of Attorney may be signed in counterpart.
 
                                          JAKKS PACIFIC, INC.
 
                                          By:        /s/ JACK FRIEDMAN
                                            ------------------------------------
                                                  Jack Friedman, President
 
   


                  SIGNATURE                                 TITLE                     DATE
- ---------------------------------------------  --------------------------------  ---------------
                                                                           
              /s/ JACK FRIEDMAN                President, Chief Executive        April 10, 1997
- ---------------------------------------------  Officer and Chairman of the
                Jack Friedman                  Board
 
            /s/ STEPHEN G. BERMAN              Executive Vice President, Chief   April 9, 1997
- ---------------------------------------------  Operating Officer, Secretary and
              Stephen G. Berman                Director
 
            /s/ MICHAEL G. MILLER              Director                          April 10, 1997
- ---------------------------------------------
              Michael G. Miller
 
             /s/ MURRAY L. SKALA               Director                          April 9, 1997
- ---------------------------------------------
               Murray L. Skala
 
             /s/ ROBERT E. GLICK               Director                          April 9, 1997
- ---------------------------------------------
               Robert E. Glick

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