8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: April 5, 2004

(Date of earliest event reported)

ACTION PRODUCTS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Florida	000-13118	59-2095427
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No.)

1101 N. Keller Road, Suite E

Orlando, Florida 32810

(Address of principal executive offices, zip code)

(407) 481-8007

(Registrant’s telephone number, including area code)

Item 2. Acquisition or Disposition of Assets.

On April 5, 2004, we completed the acquisition of certain assets of Curiosity Kits, Inc., a developer, manufacturer and marketer of craft and activity kits for kids that are sold primarily to specialty toy and craft retailers, and art museums throughout North America. Curiosity Kits, Inc. is a Delaware corporation and a wholly-owned subsidiary of Brighter Vision Holdings, Inc., a Delaware corporation, a subsidiary of Harlequin Enterprises, Limited, a subsidiary of Torstar Corporation.

We acquired from Curiosity Kits substantially all of its:

• intangible assets and intellectual property for its brands, including patents, trademarks, customer lists and licenses,

• accounts receivable,

• finished-goods inventory, and

• various other assets.

As consideration for these assets, we agreed to pay Curiosity Kits approximately $1.87 million plus the greater of (i) 80% of Curiosity Kits’ current accounts receivable we purchased, and (ii) 90% of such accounts receivable that we actually collect. The purchase price is subject to adjustment for, among other things, any claims for manufacturing defects in the inventory we purchased. To secure our obligation to pay the balance of the purchase price, we gave Curiosity Kits a secured interest in the inventory we purchased.

We obtained financing for part of our initial payment for this acquisition from loans in the aggregate of $495,000 from our original founders, Warren Kaplan, our Chairperson of the Board, and Judith Kaplan, a member of our board of directors. The loans are evidenced by promissory notes which provide for annual interest at 6% which is due when the note matures on March 31, 2006. As further consideration for the notes, we issued the Kaplans an aggregate of 99,000 warrants. The warrants are exercisable at $4.50 per share and may be exercised at any time until March 31, 2009. We may obtain additional financing from the Kaplans or other persons on substantially the same terms, up to a total amount of $1 million.

Item 7. Financial Statements and Exhibits.

(a), (b) Financial Statements - The financial statements required under Item 7 of Form 8-K are not included in this initial report on Form 8-K. We will provide such financial statements by amendment within 60 days from the date that this initial Form 8-K is filed with the Securities and Exchange Commission.

(c) The following Exhibits are being furnished pursuant to Item 12:

2.1	Asset Purchase Agreement by and between Action Products International, Inc., Curiosity Kits, Inc. and Brighter Vision Holdings, Inc., dated April 5, 2004.
10.1	Promissory Note issued to Warren Kaplan Trust in the amount of $250,000 due March 31, 2006.
10.2	Promissory Note issued to Judith Kaplan Trust in the amount of $245,000 due March 31, 2006.

10.3	Warrant issued to Warren Kaplan Trust to purchase 50,000 shares of common stock issued on March 31, 2004.
10.4	Warrant issued to Judith Kaplan Trust to purchase 49,000 shares of common stock issued on March 31, 2004.
99.1	Press release, dated April 6, 2004, issued by Action Products International, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

	ACTION PRODUCTS INTERNATIONAL, INC.
Date: April 19, 2004	By:	/s/ RONALD S. KAPLAN
		Ronald S. Kaplan
		Chief Executive Officer

EX-2.1

Exhibit 2.1

Execution Copy

ASSET PURCHASE AGREEMENT

by and among

Action Products International, Inc.,

Curiosity Kits, Inc.,

and Brighter Vision Holdings Inc.,

Dated April 5, 2004

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (“Agreement”) is dated April 5, 2004, by and among Action Products International, Inc. a Florida corporation (“Buyer”), Curiosity Kits, Inc., a Delaware corporation (“Seller”) and Brighter Vision Holdings Inc., a Delaware corporation (the “Shareholder”).

RECITALS

The Shareholder owns all of the outstanding capital stock of Seller. The Shareholder and Seller have resolved to discontinue the Seller’s Business and, in connection therewith, to liquidate the associated assets. Simultaneously with the execution of this Agreement, Seller is selling, and Buyer is purchasing, the Transferred Assets of Seller for the consideration and on the terms set forth in this Agreement.

Capitalized terms used in the Agreement that are not proper nouns are defined in Article 10.

The parties agree as follows:

1. Sale and Transfer of Assets.

(a) Assets Sold. Upon the terms and subject to the conditions set forth in this Agreement, Seller is selling, conveying, assigning, transferring and delivering to Buyer, and Buyer is purchasing and acquiring from Seller, all of Seller’s right, title and interest in and to all of Seller’s assets, tangible and intangible, of every kind and description, wherever located, including the following (but excluding the Excluded Assets):

(i) all Accounts Receivable;

(ii) all Inventories and the Purchase Orders;

(iii) the benefit of all prepaid expenses and prepaid royalties which Seller has acquired, or for which Seller has paid prior to the date of this Agreement;

(iv) all Tangible Personal Property located at premises identified in Part 1(a)(iv), including those items described in Seller’s fixed asset ledger attached to Part 1(a)(iv);

(v) all of the intangible rights and property of Seller necessary to or useful in the conduct of Seller’s Business related to the Transferred Assets, including Intellectual Property Assets;.

(vi) all Governmental Authorizations and all pending applications therefor or renewals thereof, in each case to the extent transferable to Buyer;

(vii) all data and Records of Seller, which are material to its operation and related to the Transferred Assets, including client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records and

(viii) all claims of Seller against third parties relating to the Transferred Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims listed in Part 1(a)(viii).

All of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the “Transferred Assets.”

(b) Post Closing Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, Buyer shall be solely responsible for payment, performance and discharge when due of all of the liabilities and obligations to be performed by Seller on and after the Closing date under the Contracts (including the Purchase Orders) forming part of the Transferred Assets which by the terms and conditions thereof are to be observed, paid, discharged or performed at any time on or after the Closing date and which arise out of events occurring on and after the Closing date (collectively, the “Post Closing Liabilities”), but Buyer shall not be liable for any other liabilities and obligations of Seller including the Excluded Liabilities set forth in Section 1(e) below.

(c) Excluded Assets. Notwithstanding anything to the contrary contained in Section 1(a) or elsewhere in this Agreement, the following assets of Seller (collectively, the “Excluded Assets”) are not part of the sale and purchase contemplated hereunder, are excluded from the Assets and shall remain the property of Seller:

(i) all cash, cash equivalents and short-term investments;

(ii) deposits, including deposits on leased premises;

(iii) intercompany accounts, income tax accounts and other balance sheet items not described in Section 1(a);

(iv) Intellectual Property Assets and all other assets related specifically to the craft components included in the Brighter Vision Learning Adventures product line (“BVLA Products”) including instructions, artwork, and vendor names, client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records related to the BVLA Products;

(v) Intellectual Property Assets and all other assets related to the product line defined as the Magnetti products, including, client and customer lists and Records, referral sources, research and development reports and Records, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and Records related to the Magnetti products;

(vi) personal belongings of employees expressly designated in Part 1(c) (vi);

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(vii) all minute books, stock Records and corporate seals;

(viii) all insurance policies and rights thereunder;

(ix) all personnel Records and other Records that Seller is required by law to retain in its possession;

(x) all claims for refund of Taxes and other governmental charges of whatever nature;

(xi) all leases of premises by Seller, all rights pursuant to such leases, and all leasehold improvements forming part thereof;

(xii) all agreements between Seller and its employees; and

(xiii) all rights of Seller under this Agreement.

(d) Purchase Price. The price for the Transferred Assets is comprised of all the amounts specified in (i), (ii) and (iii) hereinunder (the “Purchase Price”):

(i) The price of the Accounts Receivable is an amount equal to the greater of

(A) 80% of the face amount of Accounts Receivable which as of the date of this Agreement are less than 61 days past due (i.e. beyond the trading terms), excluding disputed amounts by clients or customers due to errors, and

(B) 90% of the amount of all Accounts Receivable collected within 180 days from the date of this Agreement;

(ii) The price of the Inventories is $837,598.54 (calculated as set forth in Part 8(b)(viii)), and plus

(iii) The price of the other Transferred Assets is Five Hundred and Thirty Thousand dollars ($530,000).

(e) Excluded Liabilities. Save and except for the Post Closing Liabilities as set forth in Section 1(b) hereabove, Buyer is not undertaking to pay any liabilities of Seller including without limitation any responsibility for employee benefits (“Excluded Liabilities”). Buyer shall not have any responsibility, liability or obligation, whether to active employees, former employees, their beneficiaries or to any other Person, with respect to any employee benefit plans, practices, programs or arrangements (including the establishment, operation or termination thereof and the notification and provision of COBRA coverage extension) maintained by Seller.

(f) Additional Inventory and Intellectual Property. In addition to the Inventories and the Intellectual Property referred to above, Seller is transferring to Buyer that additional inventory and Intellectual Property relating to products marketed by Seller in previous years but no longer included in Seller’s 2004 catalog, as well as component inventory related to products marketed in the 2004 catalog. This additional inventory and Intellectual Property is transferred

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without additional cost and as is, without any representations and warranties from Seller. If Buyer decides to license, manufacture, sell or use such inventory or items embodying such additional Intellectual Property as part of its product line, Buyer will have no recourse whatsoever against Seller for any claims or litigation arising from its sale or use.

2. Payment and Allocation of Purchase Price.

(a) Payment of Purchase Price.

(i) Payment on Execution. Upon execution of this Agreement Buyer is paying $1,242,394.54 by wire transfer to an account designated by Seller.

(ii) Payment on April 27, 2004. On April 27, 2004, Buyer shall pay the difference between the payment made on execution as set out in Section 2(a)(i) and the total of the amounts set out in Sections 1(d)(i)(A), 1(d)(ii) and 1(d)(iii) (but not the additional payment for Accounts Receivable described in the following Section) and Buyer’s share of sales and use taxes as required by Section 6(c), by wire transfer to an account designated by Seller. In addition, if the post-Closing physical Inventories count reveals an inaccuracy in the Inventories count used for purposes of Section 1(d)(ii), a correcting adjustment shall be made to Buyer’s payment on April 27, 2004.

(iii) Payment for Additional Accounts Receivable Collected. 180 days after Closing, Buyer will calculate the actual amount of Accounts Receivable collected and will provide Seller with reasonable evidence thereof (which Seller will be entitled to audit at its own expense). If this amount is higher than the amount specified in Section 1(d)(i)(A), then Buyer shall promptly pay the difference by wire transfer to an account designated by Seller. If the amount is lower, then no refund shall be made by Seller.

(b) Allocation. The Purchase Price shall be allocated in accordance with Exhibit 2(b) to be agreed between Buyer and Seller before April 27, 2004. The parties shall make consistent use of the allocation and fair market value specified in Exhibit 2(b) for all Tax purposes and in all filings, declarations and reports with the IRS in respect thereof, including the reports required to be filed under Section 1060 of the Internal Revenue Code of 1986. Buyer shall prepare and deliver IRS Form 8594 to Seller within forty-five (45) days after the date hereof to be filed with the IRS. In any proceeding related to the determination of any Tax, neither Buyer nor Seller or Shareholder shall contend or represent that such allocation is not a correct allocation.

3. Document Deliveries. Simultaneously with the execution of this Agreement

(a) Seller is delivering to Buyer:

(i) a bill of sale for all of the Transferred Assets in the form of Exhibit 3(a)(i) executed by Seller and Buyer;

(ii) an assignment of all Intellectual Property Assets in the form of Exhibit 3(a)(ii) and separate assignments of all applications for and registered Marks and Copyrights;

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(iii) true and complete copies, certified by the Secretary or the Assistant Secretary of Seller and Shareholder, of the resolutions duly and validly adopted by the Board of Directors of the Seller and Shareholder evidencing their authorization of the execution and delivery of this Agreement and the consummation of the transactions contemplated thereby;

(iv) receipt for partial payment of the Purchase Price as set forth in Section 2(a)(i); and

(v) an opinion of in-house counsel of Seller and Shareholder.

(b) Buyer is delivering to Seller:

(i) a certificate of the Secretary of Buyer certifying to the incumbency and signatures of the officers of Buyer executing this Agreement and any other document relating to the Transactions; and

(ii) an opinion of Raice Paykin & Krieg LLP, dated date hereof, in the form of Exhibit 3(b)(ii).

(c) Buyer and Seller are executing and delivering a Security Agreement in the form of Exhibit 3(c), granting Seller a security interest in the Inventories to secure payment of the amounts described in Sections 1(d)(i)(A), 1(d)(ii) and 1(d)(iii) to the extent not paid at Closing as per Section 2(a)(i).

4. Representations and Warranties of Seller and Shareholder. Seller and Shareholder represent and warrant, jointly and severally, to Buyer except as otherwise set forth in the Disclosure Schedule as follows (it being understood by the parties that any matter set forth in any Part of the Disclosure Schedule shall be deemed disclosed with respect to any other section of this Section 4 to which such matter logically relates, so long as the description of such matter contains sufficient facts to provide reasonable notice of the relevance of the matter):

(a) Organization. Seller is a corporation duly organized, and validly existing under the laws of its jurisdiction of incorporation, with full corporate power and authority to carry out its obligations under this Agreement.

(b) Enforceability; Authority; No Conflict.

(i) This Agreement and each other agreement being executed or delivered by Seller herewith (collectively, the “Seller’s Closing Documents”), constitute the legal, valid and binding obligation of Seller and Shareholder, enforceable against Seller and Shareholder in accordance with its terms. Seller has the absolute and unrestricted right, corporate power and authority to execute and deliver this Agreement and the Seller’s Closing Documents to which it is a party and to perform its obligations under this Agreement and the Seller’s Closing Documents, and such action has been duly authorized by all necessary action by Seller’s shareholders and board of directors. The Shareholder has the absolute and unrestricted right, corporate power and authority to execute and deliver this Agreement and the Seller’s Closing Documents to which it is a party and to perform its obligations under this Agreement and the Seller’s Closing Documents to which such Shareholder is a party and to perform its obligations hereunder and thereunder.

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(ii) Assuming all consents, approvals, authorizations and other actions described in Section 4(b)(iii) have been obtained and except as described in Part 4(b)(ii) or as otherwise provided in this Section 4 and except as would not have a Material Adverse Effect, the execution and delivery of this Agreement and the consummation or performance of any of the Transactions will not, directly or indirectly (with or without notice or lapse of time):

(A) Breach (i) any provision of any of the Governing Documents of Seller or (ii) any resolution adopted by the board of directors or the shareholders of Seller;

(B) Breach or give any Governmental Body or Susan Magsamen the right to successfully challenge any of the Transactions or to successfully exercise any remedy or obtain any relief under any Legal Requirement or any Order to which Seller or either Shareholder, or any of the Assets, may be subject;

(C) contravene, conflict with or result in a violation or breach of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Seller or that otherwise relates to the Assets or to the business of Seller;

(D) result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets;

(iii) Seller is not required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Transactions which would prevent Seller or Shareholder from performing any of its material obligations under this Agreement except where the failure to obtain such Consent or to give such notice would not have a Material Adverse Effect.

(c) Financial Information. Seller has provided to Buyer certain information concerning its revenues, cost of goods, sales prices and other financial information related to the business activities through the closing of this transaction. Buyer further acknowledges that Seller has not provided any forward looking statements. The information so provided does not constitute financial statements prepared in accordance with generally accepted accounting principles. However, such information

(i) represents actual, bona fide transactions and has been maintained in accordance with sound business practices

(ii) is in accordance with Seller’s books and records maintained in the ordinary course of business for its internal purposes, including for preparation of Torstar Corporation’s audited financial statements, and

(iii) presents fairly the Seller’s gross revenue, and the Seller will make available a knowledgeable person to assist Buyer in analyzing Seller’s financial documents for integration into Buyer’s financial statements and mandatory reporting requirements.

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(d) Title to Assets; Encumbrances. Subject to Section 1(f), Seller owns good and transferable title to all of the Transferred Assets free and clear of any Encumbrances.

(e) Accounts Receivable. All Accounts Receivable represent valid obligations arising from sales actually made or services actually performed by Seller in the Ordinary Course of Business and at Seller’s usual sales prices and published promotional programs, but excluding close-out sales of discontinued merchandise. Except as set forth in Part 4(e), there is no contest, claim, defense or right of setoff under any Contract with any account debtor of an Account Receivable which is less than 61 days old relating to the amount or validity of such Account Receivable except for amounts not material. Part 4(e) contains a complete and accurate list of all Accounts Receivable as of the date hereof, which list sets forth the aging of each such Account Receivable.

(f) Inventories. All items included in the Inventories (other than a immaterial quantities thereof and other than discontinued items) consist of a quality and quantity usable and, with respect to finished goods, saleable, in the Ordinary Course of Business of Seller. Such Inventories were purchased at a cost not exceeding market prices prevailing at the time of purchase.

(g) Compliance with Legal Requirements. Except as set forth in Part 4(g):

(i) Seller is, and at all times since December 31, 2002 has been, in compliance in all material’s respects with all Legal Requirements or Orders of Governmental Bodies that are or were applicable to the conduct or operation of Seller’s Business or the ownership or use of any of the Transferred Assets;

(ii) Seller has not received, at any time since December 31, 2002, any notice or other written communication from any Governmental Body or any other Person regarding (A) any actual, alleged, possible or potential violation of, or failure to comply with, any Legal Requirement or (B) any actual, or potential obligation on the part of Seller to undertake, or to bear all or any portion of the cost of, any remedial action of any nature except in each case where such failure to comply with any Legal Requirement, or to undertake or bear all or any portion of the cost of any remedial action of any nature, would not prevent the Seller from performing any of its material obligations under this Agreement or and where the failure to comply or bear the costs of any remedial action would not have a Material Adverse Effect.

(h) Legal Proceedings; Orders.

(i) Except as set forth in Part 4(h), there is no pending or, to Seller’s Knowledge, threatened Proceeding:

(A) by or against Seller or that otherwise relates to or may affect the Seller’s Business, or any of the Transferred Assets in any material respect; or

(B) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions in any material respect.

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(i) Absence of Certain Changes and Events. Except as set forth in Part 4(i), since December 31, 2003, Seller has conducted its business only in the Ordinary Course of Business and there has not been any indication by any customer or supplier of an intention to discontinue or change the terms of its relationship with Seller in any material respect. Each Contract relating to the sale, design, manufacture or provision of products or services by Seller and which relates to product lines included in the Transferred Assets, has been entered into in the Ordinary Course of Business of Seller and has been entered into without any consideration having been paid or promised, that is or would be in violation of any Legal Requirement which would have a Material Adverse Effect.

(j) Intellectual Property Assets.

(i) The term “Intellectual Property Assets” means all intellectual property owned or licensed (as licensor or licensee) by Seller in which Seller has a proprietary interest, including:

(A) Seller’s name, all assumed fictional business names, trade names, registered and unregistered trademarks, service marks and applications relating to the Transferred Assets (collectively, “Marks”);

(B) all registered and unregistered copyrights in both published works and unpublished works (collectively, “Copyrights”);

(C) all customer lists, technical information, plans and drawings (collectively, “Trade Secrets”); and

(D) all rights in internet web sites and internet domain names presently used by Seller in connection with the items included in the Inventories (collectively “Net Names”).

(ii) Part 4(j)(ii) contains a complete and accurate list of Seller Contracts relating to the Intellectual Property Assets, for which Seller has delivered to Buyer accurate and complete copies, except for any licensee implied by the sale of a product and perpetual, paid-up licenses for commonly available Software programs with a value of less than $1000 under which Seller is the licensee. There are no outstanding and, to Seller’s Knowledge, no threatened disputes or disagreements with respect to any such Contract.

(iii) Ownership of Intellectual Property Assets. Seller is the owner or licensee of all right, title and interest in and to each of the Intellectual Property Assets, free and clear of all Encumbrances, and has the right to use without payment to a Third Party all of the Intellectual Property Assets, other than in respect of licenses listed in Part 4(j)(iii).

(iv) Notwithstanding the foregoing, as set forth in Section 1(f) above, Seller makes no representations or warranties regarding all Intellectual Property Assets related to products which are not listed in Seller’s 2004 catalog.

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(v) Marks.

(A) Part 4(j)(v) contains a complete and accurate list and summary description of all registered Marks that are material to the operation of Seller’s Business and that are related to the Transferred Assets.

(B) All registered Marks have been registered with the United States Patent and Trademark Office and are currently in compliance with all formal Legal Requirements in all material respects. The Marks material to the operation of the Business are valid and enforceable and are not subject to any maintenance fees or taxes or actions falling due within sixty (60) days after the date hereof.

(C) Except as set forth in Part 4 (j)(v), to Sellers Knowledge no Mark within the “Curiosity” family of marks (meaning those Marks that contain use of the word “Curiosity”) and material to Seller’s Business has been or is now involved in any opposition, invalidation or cancellation Proceeding and, to Seller’s Knowledge, no such action is threatened with respect to any of the Marks within the “Curiosity” family of marks.

(D) Except as set forth in Part 4 (j)(v), to Seller’s Knowledge, there is no potentially interfering trademark or trademark application of any other Person with regard to the “Curiosity” family of marks;

(E) Except as set forth in Part 4 (j)(v), to Seller’s Knowledge none of the Marks which are material to the operation of Seller’s Business has been challenged or threatened in any way.

(F) Except as set forth in Part 4 (j)(v), to Seller’s Knowledge none of the Marks used by Seller, which are material to Seller’s Business, infringes or is alleged to infringe any trade name, trademark or service mark of any other Person.

(G) To Seller’s Knowledge, the Transferred Assets contain a Mark bearing the proper federal registration notice where permitted by law except for where such failure to comply with proper federal registration notice is not material to the operation of the Business.

(vi) Copyrights.

(A) Except as set forth in Part 4(j)(vi), Part 4(j)(vi) contains a complete and accurate list and summary description of all registered Copyrights that are material to the operation of Seller’s Business and that are related to the Transferred Assets.

(B) To Seller’s Knowledge all of the registered Copyrights are currently in compliance with formal Legal Requirements in all material respects and are valid and enforceable

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(C) Except as set forth in Part 4(j)(vi), Seller is not aware that any Copyright has been infringed and has received no written or oral notification challenging or threatening any Copyright in any way.

(vii) Net Names.

(A) Part 4(j)(viii) contains a complete and accurate list and summary description of all Net Names that are material to the operation of the Business.

(B) All Net Names have been registered in the name of Seller and are in compliance with all formal Legal Requirements in all material respects.

(C) To Seller’s Knowledge, no Net Name material to the operation of Seller’s Business is now involved in any dispute, opposition, invalidation or cancellation Proceeding.

(D) Seller has not received any oral or written notification of any pending domain name application by any other Person which would or would potentially interfere with or infringe any Net Name.

(E) Seller has not received any oral or written notification that any Net Name infringes or is alleged to infringe or interfere with the trademark, copyright or domain name of any other Person.

(k) Brokers or Finders. Neither Seller nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payments in connection with the sale of Seller’s business or the Assets or the Transactions, other than a fee payable by Seller, and not by Buyer, to Tucker Capital Inc.

(l) Disclosure. To Seller’s Knowledge no representation or warranty or other statement made by Seller or Shareholder in this Agreement or the Disclosure Schedule contains any untrue statement or omits to state a material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.

(m) Exceptions to Representations. Notwithstanding the foregoing, Seller and Shareholder expressly disclaim any representations and warranties, including any implied warranties, with respect to the Intellectual Property Assets related to products not included in Seller’s 2004 catalog. Further, Buyer acknowledges and agrees that Buyer is not purchasing all of the assets used or held by Seller in the operation of the Business and is not purchasing the Business as a going concern, and therefore Seller and Shareholder expressly disclaim any representations and warranties with respect to the Transferred Assets being sufficient to carry on the Business.

(n) Exclusivity of Representations. The representations and warranties made by Shareholder and the Seller in this Agreement are in lieu of and are exclusive of all other representations and warranties, including any implied warranties. Shareholder and the Seller hereby disclaim any such other implied representations or warranties, notwithstanding the

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delivery or disclosure to the Buyer or its officers, directors, employees, agents or Representatives of any documentation or other information (including any financial projections or information related to future performance of the Business or other supplemental data).

5. Representations and Warranties of Buyer. Buyer represents and warrants to Seller and Shareholder as follows:

(a) Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida with full corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the Transactions contemplated hereby.

(b) Authority; No Conflict.

(i) This Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Each of the Buyer’s Closing Documents constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the Buyer’s Closing Documents and to perform its obligations under this Agreement and the Buyer’s Closing Documents, and such action has been duly authorized by all necessary corporate action.

(ii) Neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Transactions by Buyer will give any Person the right to prevent, delay or otherwise interfere with any of the Transactions pursuant to:

(A) any provision of Buyer’s Governing Documents;

(B) any resolution adopted by the board of directors or the shareholders of Buyer;

(C) any Legal Requirement or Order to which Buyer may be subject; or

(D) any Contract to which Buyer is a party or by which Buyer may be bound.

(c) Consents. Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Transactions.

(d) Certain Proceedings. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the Transactions. To Buyer’s Knowledge, no such Proceeding has been threatened.

(e) Financial Ability. Buyer has cash available or has existing borrowing facilities or unconditional, binding firm commitments that are sufficient to enable it to consummate the Transactions contemplated by this Agreement.

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(f) Brokers or Finders. Neither Buyer nor any of its Representatives have incurred any obligation or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with the Transactions.

6. Covenants of Seller and Shareholder.

(a) Noncompetition. For a period of three (3) years from the date hereof, Seller, Shareholder, Harlequin Holdings, Inc. and any of their subsidiaries (the “Companies”) shall not in North America and Europe directly or indirectly invest in, own, manage, operate, finance, control, advise, render services to or guarantee the obligations of any Person engaged in or planning to become engaged in the business of developing or marketing arts and crafts or activity kits for children through retail stores (“Competing Business”), provided, however, that any of the Companies may purchase or otherwise acquire up to (but not more than) five percent (5%) of any class of the securities of any Person (but may not otherwise participate in the activities of such Person) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. Notwithstanding the foregoing, Brighter Vision Inc., a subsidiary of Shareholder, may continue to conduct through any distribution channel the business it presently conducts under the name “Brighter Vision Learning Adventures,” provided that the relationship between the craft component in the kit and the kit in its entirety remains substantially similar as exists in the product line as at the time of Closing.

(b) Change of Name. Seller shall promptly (a) amend its Governing Documents and take all other actions necessary to change its name to one sufficiently dissimilar to Seller’s present name, in Buyer’s judgment, to avoid confusion and (b) take all actions requested by Buyer to enable Buyer to make use of the name “Curiosity Kits” in its marketing efforts.

(c) Payment of All Taxes Resulting from Transactions. Notwithstanding any provision herein to the contrary, Seller and Buyer agreed to share equally all sales and use taxes incurred as a result of the Transactions contemplated hereby. All other transfer or conveyance Taxes, including without limitation value added, stamp, registration or gains Taxes shall be paid by the party liable therefor under applicable laws and regulations.

(d) Customer and Other Business Relationships. For a period of 90 days after the Closing, Seller, exclusively through its officers, will cooperate with all reasonable Buyer requests in its efforts to continue and maintain for the benefit of Buyer previously existing business relationships of Seller relating to the business to be operated by Buyer, including relationships with licensors, customers, suppliers and others, and Seller will satisfy its retained liabilities in a manner that is not detrimental to any of such relationships. Seller will refer to Buyer all inquiries relating to such business. Neither Seller nor any of its officers, employees, agents (excluding independent sales representatives) or shareholders shall take any action that would tend to diminish the value of the Assets or that would interfere with the business of Buyer to be engaged in after the date hereof, including disparaging the name or business of Buyer.

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7. Additional Covenants.

(a) Further Assurances. The parties shall cooperate reasonably with each other and with their respective Representatives in connection with any steps required to be taken as part of their respective obligations under this Agreement, and shall

(i) furnish upon request to each other such further information;

(ii) execute and deliver to each other such other documents; and

(iii) do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the Transactions.

8. Indemnification; Remedies.

(a) Survival. All representations, warranties, covenants and obligations in this Agreement and the Disclosure Schedule shall survive the consummation of the Transactions until December 31, 2005, except that this limitation shall not apply to the covenants and obligations set forth in Articles 1, 2, 9 and 10, and Section 6(c) which covenants and obligations (collectively, the “Excluded Agreements”) shall survive for the applicable statute of limitations.

(b) Indemnification and Reimbursement by Seller and Shareholder. Subject to Section 8(c), Seller and Shareholder, jointly and severally, will indemnify, defend and hold harmless Buyer, and its Representatives, shareholders, subsidiaries and Related Persons (collectively, the “Buyer Indemnified Parties”) against, and reimburse the Buyer Indemnified Persons for any loss, liability, claim, damage or expense (including costs of investigation and defense and reasonable attorneys’ fees and expenses), whether or not involving a Third-Party Claim (collectively, “Damages”), arising from or in connection with:

(i) any Breach of any representation or warranty made by Seller or either Shareholder in

(A) this Agreement (without giving effect to any supplement to the Disclosure Letter),

(B) the Disclosure Schedule,

(C) any transfer instrument or

(D) any other certificate, document, writing or instrument delivered by Seller or either Shareholder pursuant to this Agreement;

(ii) any Breach of any covenant or obligation of Seller or either Shareholder in this Agreement or in any other certificate, document, writing or instrument delivered by Seller or either Shareholder pursuant to this Agreement;

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(iii) any Liability arising out of the ownership or operation of the Transferred Assets prior to the Closing;

(iv) any brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding made, or alleged to have been made, by any Person with Seller or either Shareholder (or any Person acting on their behalf) in connection with any of the Transactions;

(v) any product or component thereof manufactured and shipped, or any services provided by, Seller, in whole or in part, prior to the Closing;

(vi) any noncompliance with any Bulk Sales Laws or fraudulent transfer law in respect of the Transactions;

(vii) any Employee Plan established or maintained by Seller;

(viii) any Third-Party Claims made within 6 months of the Closing date based on any manufacturing defects in the Inventories transferred on Closing as identified in Part 8(b)(viii) and by the mark “Curiosity Kits, Inc., Hunt Valley, Maryland”, provided that Buyer did not alter the Inventories in any way and provided that the Third-Party Claim arose from the use of the Inventories in keeping with the intended use of the Inventories; and

(ix) any claim by a party to the 1999 Purchase Agreement.

(c) Limitation to Seller’s and Shareholder’s indemnification. Notwithstanding any other provision to the contrary contained herein but subject to the exception for the Excluded Agreements, Shareholder and the Seller shall not be required to indemnify, defend and hold harmless any Buyer Indemnified Parties against or reimburse any Buyer Indemnified Parties for any Damages pursuant to Section 8(b) unless the Buyer has notified Shareholder or the Seller in writing in accordance with Section 8(f) of a pending or threatened claim with respect to such matters within the applicable survival period set forth in Section 8(a) and until the aggregate amount of the Buyer Indemnified Parties’ Damages exceeds $20,000 (the “Threshold Amount”), after which Shareholder and/or Seller, as applicable, shall be obligated for all Damages of the Buyer Indemnified Parties in excess of such amount; provided, however, that all cumulative indemnification obligations of Shareholder and/or Seller, as applicable, under this Article 8 in respect to Section 8(b) shall in no event exceed 25% of the Purchase Price (the “Indemnification Cap”). The foregoing limitations shall not apply to claims respecting the Excluded Agreements.

(d) Indemnification and Reimbursement by Buyer. Buyer, will indemnify defend and hold harmless Seller and its Representatives, shareholders, subsidiaries and Related Persons (collectively, the “Seller Indemnified Parties”) against, and reimburse the Seller, Indemnified Parties for any and all loss, liability, claim, damage, expense (including reasonable attorneys’ fees and expenses)(collectively, “Damages”) that such Seller Indemnified Parties may at any time suffer or incur as a result of or in connection with:

(i) any Breach of any representation or warranty made by Buyer in this Agreement or in any certificate, document, writing or instrument delivered by Buyer pursuant to this Agreement;

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(ii) any Breach of any covenant or obligation of Buyer in this Agreement or in any other certificate, document, writing or instrument delivered by Buyer pursuant to this Agreement;

(iii) any claim by any Person for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on Buyer’s behalf) in connection with any of the Transactions;

(e) Limitation to Buyer’s indemnification. Notwithstanding any other provision to the contrary contained herein but subject to the exception for the Excluded Agreements, Buyer shall not be required to indemnify, defend and hold harmless any Seller Indemnified Parties against or reimburse any Seller Indemnified Parties for any Damages pursuant to Section 8(d) unless the Seller has notified Buyer in writing in accordance with Section 8(f) of a pending or threatened claim with respect to such matters within the applicable survival period set forth in Section 8(a) and until the aggregate amount of the Seller Indemnified Parties’ Damages exceeds $20,000 (the “Threshold Amount”), after which Buyer, shall be obligated for all Damages of the Seller Indemnified Parties in excess of such amount; provided, however, that all cumulative indemnification obligations of Buyer under this Article 8 in respect to Section 8(d) shall in no event exceed 25% of the Purchase Price (the “Indemnification Cap”). The foregoing limitations shall not apply to claims respecting the Excluded Agreements.

(f) Third-Party Claims.

(i) Subject to Sections 8(c) and 8(e), promptly after receipt by a Person entitled to indemnity under Section 8(b) or 8(d) (an “Indemnified Person”) of notice of the assertion of a Third-Party Claim against it, such Indemnified Person shall give notice to the Person obligated to indemnify under such Section (an “Indemnifying Person”) of the assertion of such Third-Party Claim, provided that the failure to notify the Indemnifying Person will not relieve the Indemnifying Person of any liability that it may have to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense of such Third-Party Claim is prejudiced by the Indemnified Person’s failure to give such notice.

(ii) If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section 8(f)(i) of the assertion of a Third-Party Claim, the Indemnifying Person shall be entitled to participate in the defense of such Third-Party Claim and, to the extent that it wishes (unless (i) the Indemnifying Person is also a Person against whom the Third-Party Claim is made and the Indemnified Person determines in good faith that joint representation would be inappropriate or (ii) the Indemnifying Person fails to provide reasonable assurance to the Indemnified Person of its financial capacity to defend such Third-Party Claim and provide indemnification with respect to such Third-Party Claim), to assume the defense of such Third-Party Claim with counsel satisfactory to the Indemnified Person. After notice from the Indemnifying Person to the Indemnified Person of its election to assume the defense of such Third-Party Claim, the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Article 8 for any fees of other counsel or any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently incurred by the Indemnified Person in connection with the defense of such Third

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Party Claim, other than reasonable costs of investigation. If the Indemnifying Person assumes the defense of a Third-Party Claim, (i) such assumption will conclusively establish for purposes of this Agreement that the claims made in that Third-Party Claim are within the scope of and subject to indemnification, and (ii) no compromise or settlement of such Third-Party Claims may be effected by the Indemnifying Person without the Indemnified Person’s Consent unless (A) there is no finding or admission of any violation of Legal Requirement or any violation of the rights of any Person; (B) the sole relief provided is monetary damages that are paid in full by the Indemnifying Person; and (C) the Indemnified Person shall have no liability with respect to any compromise or settlement of such Third-Party Claims effected without its Consent. If notice is given to an Indemnifying Person of the assertion of any Third-Party Claim and the Indemnifying Person does not, within thirty (30) days after the Indemnified Person’s notice is given, give notice to the Indemnified Person of its election to assume the defense of such Third-Party Claim, the Indemnifying Person will be bound by any determination made in such Third-Party Claim or any compromise or settlement effected by the Indemnified Person.

(iii) Notwithstanding the foregoing, if an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect it or its Related Persons other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnifying Person will not be bound by any determination of any Third-Party Claim so defended for the purposes of this Agreement or any compromise or settlement effected without its Consent (which may not be unreasonably withheld).

(iv) Seller and each Shareholder hereby consent to the nonexclusive jurisdiction of any court in which a Proceeding in respect of a Third-Party Claim is brought against any Buyer Indemnified Person for purposes of any claim that a Buyer Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein and agree that process may be served on Seller and Shareholder with respect to such a claim anywhere in the world.

(v) With respect to any Third-Party Claim subject to indemnification under this Article 8: (i) both the Indemnified Person and the Indemnifying Person, as the case may be, shall keep the other Person fully informed of the status of such Third-Party Claim and any related Proceedings at all stages thereof where such Person is not represented by its own counsel, and (ii) the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim.

(vi) With respect to any Third-Party Claim subject to indemnification under this Article 8, the parties shall cooperate in such a manner as to preserve in full (to the extent possible) the confidentiality of all Confidential Information and the attorney-client and work-product privileges. In connection therewith: (i) each party will use its best efforts, in respect of any Third-Party Claim in which it has assumed or participated in the defense, to avoid production of Confidential Information (consistent with applicable law and rules of procedure), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any Third-Party Claim shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege.

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(g) Other Claims. Subject to Sections 8(c) and 8(e) and any right for the Indemnifying Party to contest any claim arising from the application of Article 8, a claim for indemnification for any matter not involving a Third-Party Claim may be asserted by a thirty day written notice (“Claim Notice”) to the party from whom indemnification is sought and shall be paid promptly after such notice if not contested within a period of sixty (60) days from receipt of the Claim Notice.

9. Post Closing Document Delivery and Obligations.

(a) Buyer shall deliver its payment in accordance with Section 2(a)(ii) and any additional payments in accordance with Section 2(a)(iii). Upon payment of the full Purchase Price, Seller shall deliver a receipt for the paid amount and a release of the Asset Lien against the Inventory as per Section 3(c) of this Agreement.

(b) In the event and for so long as Seller, Shareholder or any of their affiliates is contesting or defending against any Proceeding, claim or demand in connection with the operation of the Business prior to the Closing or the 1999 Purchase Agreement, Buyer shall cooperate with such Person and its counsel in the defense or contest, make available their personnel, and provide access to their books and records as shall be reasonably necessary in connection with the defense or contest, provided that any reasonable out-of-pocket costs and expenses of Buyer incurred in connection therewith shall be reimbursed by Seller.

10. Definitions and Usage.

(a) Definitions. For purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Article 10:

(i) “Accounts Receivable” — (a) all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, (b) all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and (c) any claim, remedy or other right related to any of the foregoing.

(ii) “Breach” — any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement, or any event which with the passing of time or the giving of notice, or both, would constitute such a breach, inaccuracy or failure.

(iii) “Business or Seller’s Business” – means the assembling, manufacturing, distributing and selling arts and crafts and activity kits for Children as described in the Seller’s 2004 Catalog.

(iv) “Buyer” — as defined in the first paragraph of this Agreement.

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(v) “Buyer Indemnified Persons” — as defined in Section 8(b).

(vi) “Consent” — any approval, consent, ratification, waiver or other authorization.

(vii) “Transactions” — all of the transactions contemplated by this Agreement.

(viii) “Closing” — the date of signature of this Agreement.

(ix) “Contract” — any agreement, contract or consensual obligation, that is legally binding.

(x) “Copyrights” — as defined in Section 4(j)(i)(B).

(xi) “Damages” — as defined in Section 8(b)

(xii) “Disclosure Schedule” — the disclosure schedule delivered by Seller and the Shareholder to Buyer concurrently with the execution and delivery of this Agreement.

(xiii) “Encumbrance” — any charge, claim, lien, option, pledge, security interest, mortgage, right of way, easement, encroachment, servitude, right of first option, right of first refusal or similar restriction, including any restriction on use.

(xiv) “Excluded Agreements” — as defined in Section 8(a).

(xv) “Excluded Assets” — as defined in Section 1(c).

(xvi) “Governing Documents” — with respect to any particular entity, (a) if a corporation, the articles or certificate of incorporation and the bylaws; (b) if another type of Person, any other charter or similar document adopted or filed in connection with the creation, formation or organization of the Person; (c) all equityholders’ agreements, voting agreements, voting trust agreements, joint venture agreements, registration rights agreements or other agreements or documents relating to the organization, management or operation of any Person or relating to the rights, duties and obligations of the equityholders of any Person; and (d) any amendment or supplement to any of the foregoing.

(xvii) “Governmental Authorization” — any Consent, license, registration or permit issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

(xviii) “Governmental Body” — any:

(A) nation, state, county, city, town, borough, village, district or other jurisdiction;

(B) federal, state, local, municipal, foreign or other government;

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(C) governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court, tribunal or other entity exercising governmental or quasi-governmental powers);

(D) multinational organization or body;

(E) body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power; or

(F) official of any of the foregoing.

(xix) “Indemnified Person” — as defined in Section 8(f)(i).

(xx) “Indemnifying Person” — as defined in Section 8(f)(i).

(xxi) “Intellectual Property Assets” — as defined in Section 4(j)(i).

(xxii) “Inventories” — all finished goods inventories located at Seller’s warehouse in Hunt Valley or still in transit at Closing, of Seller’ currently marketed products. Products are deemed to being “currently marketed” if they appear in Seller’s 2004 sales catalog or were produced for current OEM or private-label customers.

(xxiii) “IRS” — the United States Internal Revenue Service and, to the extent relevant, the United States Department of the Treasury.

(xxiv) “Knowledge of Seller” or “Seller’s Knowledge” means the actual knowledge of Lorenzo DeMarchi, Susan Magsamen and Lynne Morrison – each one of these individuals will be deemed to have Knowledge of a particular fact or other matter if:

(A) that individual is actually aware of that fact or matter; or

(B) that individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonable investigation regarding the accuracy of any representation or warranty contained in this Agreement. In regards to the Intellectual Property Assets, the reasonable investigation set forth above, shall not expand whatever investigations Seller has historically conducted in its Ordinary Course of Business, which Buyer acknowledges has been limited to investigations relating solely to Seller’s “Curiosity” family of marks within the territory of North America.

(xxv) “Legal Requirement” — any federal, state, local, municipal, foreign, international, multinational or other constitution, law, ordinance, principle of common law, code, regulation, statute or treaty.

(xxvi) “Liability” — with respect to any Person, any liability or obligation of such Person of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or

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unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required to be accrued on the financial statements of such Person.

(xxvii) “Marks” — as defined in Section 4(j)(i)(A).

(xxviii) “Material Adverse Effect” means, individually or in the aggregate, a material adverse effect on the Transferred Assets or the results of operations of the Seller; provided, however, that any adverse effect arising out of or resulting from (a) an event or series of events or circumstances affecting (i) the arts and crafts for children and toy industry generally in United States or (ii) the United States economy generally or (b) the entering into of this Agreement or the consummation of the Transactions contemplated hereby or the announcement thereof, shall not constitute a Material Adverse Effect.

(xxix) “Order” — any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Body or arbitrator.

(xxx) “Ordinary Course of Business” — an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action:

(A) is consistent in nature and scope with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person;

(B) does not require authorization by the board of directors or shareholders of such Person.; and

(C) represents prudent actions considering the financial situation of the Person in its last year of operation.

Buyer acknowledges that the following event or actions by Seller is included in the scope and definition of Ordinary Course of Business:

(1) not replacing some employee positions which became vacant through attrition or restructuring of the Business;

(2) reducing capital investment in inventory and improving cash flow by selling products already discontinued or to be discontinued on a “close-out” basis in Seller’s 2004 catalog;

(3) increasing Seller’s promotional efforts in the first quarter of the past two years in an effort to secure additional in store shelf space early in the year;

(4) ordering products in lower quantities than in the past to reduce inventory risk and in some cases delayed ordering of products to improve cash flow;

(5) discontinuing some promotional activities in catalogs and trade shows where the costs/benefits ratio did not justify such expenses; and

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(6) discontinuing Seller’s assembly operation resulting in the lay off of 8 employees due to its decision to source products offshore.

(xxxi) “Part” — a part or section of the Disclosure Schedule.

(xxxii) “Person” — an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Body.

(xxxiii) “Proceeding” — any action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative, judicial or investigative, whether formal or informal, whether public or private) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

(xxxiv) “Purchase Orders” — the following two purchase orders : [omitted].

(xxxv) “Purchase Price” — as defined in Section 1(e)1(e).

(xxxvi) “Records” — information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(xxxvii) “Related Person” —With respect to a specified Person other than an individual:

(A) any Person that directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such specified Person;

(B) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity);

For purposes of this definition, (a) “control” (including “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and shall be construed as such term is used in the rules promulgated under the Securities Act; and (b) Notwithstanding paragraph (a), the controlling Person of Seller and Shareholder is defined and limited to Harlequin Holdings Inc..

(xxxviii) “Representative” — with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial advisor, legal counsel or other representative of that Person.

(xxxix) “Seller” — as defined in the first paragraph of this Agreement.

(xl) “Seller Contract” — any Contract which is material to the operation of the Business (a) under which Seller has any rights or benefits; (b) under which Seller has any obligation or liability; or (c) by which Seller or any of the Transferred Assets owned or used by Seller is bound.

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(xli) “Shareholder” — as defined in the first paragraph of this Agreement.

(xlii) “Software” — all computer software and subsequent versions thereof, including other items and documentation related thereto or associated therewith.

(xliii) “Tangible Personal Property” — all fixed assets, including but not limited to furniture, fixtures, equipment, books comprising the Seller’s library which are identified at the Seller’s premises as being the property of Seller, production tooling, molds, dies or other items of tangible personal property (other than Inventories) of every kind owned or leased by Seller (wherever located and whether or not carried on Seller’s books) located at premises identified in Part 1(a)(iv), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof and all maintenance records and other documents relating thereto.

(xliv) “Tax” — any income, gross receipts, license, excise, stamp, occupation, premium, customs, or other title or registration, foreign or domestic withholding, sales, use, transfer, value added, alternative, add-on minimum and other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Body or payable under any tax-sharing agreement or any other Contract.

(xlv) “Third Party” — a Person that is not a party to this Agreement.

(xlvi) (xlviii) “Third-Party Claim” — any claim against any Indemnified Person by a Third Party, whether or not involving a Proceeding.

(xlvii) “Transferred Assets” — as defined in Section 1(a).

(xlviii) “Transactions” — all of the transactions contemplated by this Agreement.

(xlix) “Transferred Assets” — as defined in Section 1(a).

(l) “1999 Purchase Agreement” — that certain Asset Purchase Agreement dated as of November 24, 1999 among Curiosity Kits, Inc. and Curiosity Development, Inc. as Sellers, Susan Magsamen and Scott Garrett as Sellers’ Shareholders and as Guarantors, and CSEP Acquisition Co. as Buyer.

(b) Usage.

(i) Interpretation. In this Agreement, unless a clear contrary intention appears:

(A) the singular number includes the plural number and vice versa;

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(B) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(C) reference to any gender includes each other gender;

(D) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(E) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(F) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(G) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(H) “or” is used in the inclusive sense of “and/or”;

(I) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”; and

(J) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

(ii) Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with generally accepted accounting principles.

(iii) Legal Representation of the Parties. This Agreement was negotiated by the parties with the benefit of legal representation, and any rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall not apply to any construction or interpretation hereof.

11. General Provisions.

(a) Expenses. Except as otherwise provided in this Agreement, each party to this Agreement will bear its respective fees and expenses incurred in connection with the preparation, negotiation, execution and performance of this Agreement and the Transactions, including all fees and expense of its Representatives.

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(b) Public Announcements. Any public announcement, press release or similar publicity with respect to this Agreement or the Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Notwithstanding the foregoing sentence, Seller, Shareholder and any of their affiliates may make such disclosure from time to time as may be required by applicable law, stock exchange rule or other disclosure obligation.

(c) Notices. All notices, Consents, waivers and other communications required or permitted by this Agreement shall be in writing and shall be deemed given to a party when

(i) delivered to the appropriate address by hand or by nationally recognized overnight courier service (costs prepaid);

(ii) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or

(iii) received or rejected by the addressee, if sent by certified mail, return receipt requested, in each case to the following addresses, facsimile numbers or e-mail addresses and marked to the attention of the person (by name or title) designated below (or to such other address, facsimile number, e-mail address or person as a party may designate by notice to the other parties):

Seller (before the Closing):	Curiosity Kits, Inc.
Attention:	Lorenzo DeMarchi
Fax no.:	(416) 391-7055
E-mail address:	Lorenzo_Demarchi@Harlequin.ca
with a mandatory copy to:	Brighter Vision Holdings
Attention:	Helene Levesque
Fax no.:	(416) 391-7055
E-mail address:	Helene_Levesque@Harlequin.ca
Seller (after the Closing):	Same as before closing
Shareholder:	Brighter Vision Holdings
Attention:	Helene Levesque
Fax no.:	(416) 391-7055
E-mail address:	Helene_Levesque@Harlequin.ca
with a mandatory copy to:	Harlequin Enterprises Limited
Attention:	Helene Levesque
Fax no.:	(416) 391-7055
E-mail address:	Helene_Levesque@Harlequin.ca

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Buyer:	Action Products International, Inc.
Attention:	Ronald Kaplan, President
Fax no.:	(407) 481-2781
E-mail address:	rkaplan@apii.com
with a mandatory copy to:	Raice Paykin & Krieg LLP
Attention:	Joseph N. Paykin
Fax no.:	(212) 684-9022
E-mail address:	jnpaykin@rpklaw.com

(d) Enforcement of Agreement. Seller and Shareholder acknowledge and agree that Buyer would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that any Breach of this Agreement by Seller or Shareholder could not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which Buyer may be entitled, at law or in equity, it shall be entitled to enforce any provision of this Agreement by a decree of specific performance and to temporary, preliminary and permanent injunctive relief to prevent Breaches or threatened Breaches of any of the provisions of this Agreement, without posting any bond or other undertaking.

(e) Waiver; Remedies Cumulative. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither any failure nor any delay by any party in exercising any right, power or privilege under this Agreement or any of the documents referred to in this Agreement will operate as a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law,

(i) no claim or right arising out of this Agreement or any of the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party;

(ii) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and

(iii) no notice to or demand on one party will be deemed to be a waiver of any obligation of that party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

(f) Entire Agreement and Modification. This Agreement supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter (including any letter of intent and any confidentiality agreement between Buyer and Seller) and constitutes (along with the Disclosure Letter, Exhibits and other documents delivered pursuant to this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended, supplemented, or otherwise modified except by a written agreement executed by the party to be charged with the amendment.

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(g) Disclosure Schedule.

(i) The information in the Disclosure Schedule constitutes

(A) exceptions to particular representations, warranties, covenants and obligations of Seller and Shareholder as set forth in this Agreement or

(B) descriptions or lists of assets and liabilities and other items referred to in this Agreement. If there is any inconsistency between the statements in this Agreement and those in the Disclosure Schedule (other than an exception expressly set forth as such in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in this Agreement will control.

(ii) The statements in the Disclosure Letter, and those in any supplement thereto, relate only to the provisions in the Section of this Agreement to which they expressly relate and not to any other provision in this Agreement.

(h) Assignments, Successors and No Third-Party Rights. No party may assign any of its rights or delegate any of its obligations under this Agreement without the prior written consent of the other parties, except that Buyer may collaterally assign its rights hereunder to any financial institution providing financing in connection with the Transactions. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties. Nothing to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement, except as otherwise specifically provided herein and except such rights as shall inure to a successor or permitted assignee pursuant to this Section 10(h).

(i) Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

(j) Construction. The headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “Articles,” “Sections” and “Parts” refer to the corresponding Articles, Sections and Parts of this Agreement and the Disclosure Schedule.

(k) Governing Law. This Agreement will be governed by and construed under the laws of the State of New York without regard to conflicts-of-laws principles that would require the application of any other law.

(l) Execution of Agreement. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of

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which, when taken together, will be deemed to constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes.

(m) Shareholder Obligations. The liability of Shareholder hereunder shall be joint and several with Seller. Where in this Agreement provision is made for any action to be taken or not taken by Seller, Shareholder jointly and severally undertake to cause Seller to take or not take such action, as the case may be. Without limiting the generality of the foregoing, Shareholder shall be jointly and severally liable with Seller for the indemnities set forth in Article 8.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

Buyer:		Shareholder:
Action Products International, Inc.		Brighter Vision Holdings Inc.
By:	/s/ RONALD S. KAPLAN	By:	/s/ HELENE LEVESQUE
Seller:
Curiosity Kits Inc.
By:	/s/ HELENE LEVESQUE

[Schedules and exhibits referenced in the agreement are omitted. A copy of any schedule or exhibit will be furnished supplementally to the Commission upon request.]

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EX-10.1

Exhibit 10.1

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

PROMISSORY NOTE

Issue Date: March 26, 2004

Maturity Date: March 31, 2006

$250,000.00	Number 1
	Orlando, Florida

FOR VALUE RECEIVED, ACTION PRODUCTS INTERNATIONAL, INC., a Florida corporation (the “Maker”), promises to pay to Warren Kaplan Trust, or his, her or its registered assigns (the “Payee”), the principal sum of Two Hundred Fifty Thousand dollars ($250,000.00), together with interest in arrears on the unpaid principal balance from time to time outstanding from the date hereof until the entire principal amount due hereunder is paid in full at the rate of six (6%) percent per annum. The unpaid principal balance and all accrued interest thereon is due and payable in full on March 31, 2006. The Maker may prepay this Note at any time without penalty or premium.

Upon the occurrence of an Event of Default, the entire unpaid principal balance hereunder and any accrued and unpaid interest thereon may be declared immediately due and payable without notice, demand, presentment or protest. The following shall constitute “Events of Default”

(a) If the Maker shall default in the payment of any part of the principal or interest of this Note when the same shall become due and payable, whether at maturity or at any other date fixed for payment;

(b) If the Maker makes an assignment for the benefit of creditors or is adjudicated bankrupt, or if a petition in bankruptcy or for reorganization or to effect a plan of arrangement with creditors is filed by or against the Maker; or if the Maker applies for or permits the appointment of a receiver or trustee for any of its property or assets; or if any such receiver or trustee is appointed for any of its properties or assets, or if any of the above actions or proceedings are commenced by or against the Maker; or

(c) If the Maker is dissolved or liquidated.

If any of the foregoing Events of Default shall occur, the interest rate payable hereunder shall increase to the lower of (i) fifteen percent (15%) per annum or (ii) the highest rate of interest allowable under law and in any such event Payee may at any time (unless all defaults shall theretofore have been remedied) at Payee’s option, by written notice to the Maker, declare this Note to be due and payable in full. Upon mailing of such notice this Note shall immediately mature and become due and payable in full together with interest accrued hereon and Payee may execute Payee’s rights as set forth herein.

If one or more Events of Default shall occur and be continuing, and this Note shall be due and payable as set forth above and, subject to the terms hereof, Payee may proceed to protect and enforce Payee’s rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, or for an injunction against a violation of any of the

terms hereof, or in aid of the exercise of any power granted hereby or by law. In the event of default, the Maker agrees to pay to Payee such further amount as shall be sufficient to cover the costs and expenses of collection, and all costs related to Payee’s enforcement of Payee’s rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses whether or not a formal action is commenced. No right, power or remedy conferred hereby upon Payee shall be exclusive of any other right, power or remedy referred to herein nor now or hereafter available at law, in equity, by statute or otherwise. No course of dealing and no delay on the part of Payee in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Payee’s rights, powers and remedies.

This Note shall be governed by and construed and enforced in accordance with the laws of the State of New York. This Note shall be binding upon the Maker and its successors and assigns and shall inure to the benefit of and be enforceable by Payee and Payee’s successors and assigns. This Note may not be modified or altered in any manner except by a signed writing. The failure of Payee at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by Payee of any condition of this Note or the breach of any provision hereof, whether by conduct or otherwise, in any one or more instances shall be deemed to be construed as a further or continuing waiver of any such condition or breach. By accepting this Note, Payee agrees to be bound by the terms and conditions hereof.

Upon receipt of evidence satisfactory to the Maker of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon delivery of indemnity satisfactory to the Maker (if reasonably requested), or in case of such mutilation, upon surrender and cancellation of this Note, the Maker will issue a new note, or like tenor, in lieu, and dated the date, of such lost, stolen, destroyed or mutilated Note.

All agreements between the Maker and the Payee are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Payee for the use, forbearance or detention of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term “applicable law” shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest than the highest permissible rate under applicable law in effect as of the date hereof, then this Note shall be governed by such new law as of its effective date. If, from any circumstance whatsoever, fulfillment of any provision hereof at the time performance of such provision shall be due shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled shall automatically be reduced to the limit of such validity, and if from any circumstances the Payee should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest, and, if the principal amount of the Note has been paid in full, shall be refunded to the Maker. This provision shall control every other provision of all agreements between the Maker and the Payee with respect to this indebtedness evidenced hereby.

IN WITNESS WHEREOF, the Maker has caused this Note to be executed as an instrument under seal by its duly authorized representative as of the day and year first above written.

WITNESS:	ACTION PRODUCTS INTERNATIONAL, INC.
/s/ ROBERT L. BURROWS	By:	/s/ RONALD S. KAPLAN
Robert L. Burrows		Ronald S. Kaplan
		President and Chief Executive Officer

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EX-10.2

Exhibit 10.2

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT FROM REGISTRATION.

PROMISSORY NOTE

Issue Date: March 29, 2004

Maturity Date: March 31, 2006

$245,000.00 Number 2 Orlando, Florida

FOR VALUE RECEIVED, ACTION PRODUCTS INTERNATIONAL, INC., a Florida corporation (the “Maker”), promises to pay to Judith Kaplan Trust, or his, her or its registered assigns (the “Payee”), the principal sum of Two Hundred Forty-Five Thousand dollars ($245,000.00), together with interest in arrears on the unpaid principal balance from time to time outstanding from the date hereof until the entire principal amount due hereunder is paid in full at the rate of six (6%) percent per annum. The unpaid principal balance and all accrued interest thereon is due and payable in full on March 31, 2006. The Maker may prepay this Note at any time without penalty or premium.

Upon the occurrence of an Event of Default, the entire unpaid principal balance hereunder and any accrued and unpaid interest thereon may be declared immediately due and payable without notice, demand, presentment or protest. The following shall constitute “Events of Default”

(a) If the Maker shall default in the payment of any part of the principal or interest of this Note when the same shall become due and payable, whether at maturity or at any other date fixed for payment;

(b) If the Maker makes an assignment for the benefit of creditors or is adjudicated bankrupt, or if a petition in bankruptcy or for reorganization or to effect a plan of arrangement with creditors is filed by or against the Maker; or if the Maker applies for or permits the appointment of a receiver or trustee for any of its property or assets; or if any such receiver or trustee is appointed for any of its properties or assets, or if any of the above actions or proceedings are commenced by or against the Maker; or

(c) If the Maker is dissolved or liquidated.

If any of the foregoing Events of Default shall occur, the interest rate payable hereunder shall increase to the lower of (i) fifteen percent (15%) per annum or (ii) the highest rate of interest allowable under law and in any such event Payee may at any time (unless all defaults shall theretofore have been remedied) at Payee’s option, by written notice to the Maker, declare this Note to be due and payable in full. Upon mailing of such notice this Note shall immediately mature and become due and payable in full together with interest accrued hereon and Payee may execute Payee’s rights as set forth herein.

If one or more Events of Default shall occur and be continuing, and this Note shall be due and payable as set forth above and, subject to the terms hereof, Payee may proceed to protect and enforce Payee’s rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein, or for an injunction against a violation of any of the

terms hereof, or in aid of the exercise of any power granted hereby or by law. In the event of default, the Maker agrees to pay to Payee such further amount as shall be sufficient to cover the costs and expenses of collection, and all costs related to Payee’s enforcement of Payee’s rights under this Note, including, without limitation, reasonable attorneys’ fees and expenses whether or not a formal action is commenced. No right, power or remedy conferred hereby upon Payee shall be exclusive of any other right, power or remedy referred to herein nor now or hereafter available at law, in equity, by statute or otherwise. No course of dealing and no delay on the part of Payee in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Payee’s rights, powers and remedies.

This Note shall be governed by and construed and enforced in accordance with the laws of the State of New York. This Note shall be binding upon the Maker and its successors and assigns and shall inure to the benefit of and be enforceable by Payee and Payee’s successors and assigns. This Note may not be modified or altered in any manner except by a signed writing. The failure of Payee at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by Payee of any condition of this Note or the breach of any provision hereof, whether by conduct or otherwise, in any one or more instances shall be deemed to be construed as a further or continuing waiver of any such condition or breach. By accepting this Note, Payee agrees to be bound by the terms and conditions hereof.

Upon receipt of evidence satisfactory to the Maker of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon delivery of indemnity satisfactory to the Maker (if reasonably requested), or in case of such mutilation, upon surrender and cancellation of this Note, the Maker will issue a new note, or like tenor, in lieu, and dated the date, of such lost, stolen, destroyed or mutilated Note.

All agreements between the Maker and the Payee are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Payee for the use, forbearance or detention of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term “applicable law” shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest than the highest permissible rate under applicable law in effect as of the date hereof, then this Note shall be governed by such new law as of its effective date. If, from any circumstance whatsoever, fulfillment of any provision hereof at the time performance of such provision shall be due shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled shall automatically be reduced to the limit of such validity, and if from any circumstances the Payee should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest, and, if the principal amount of the Note has been paid in full, shall be refunded to the Maker. This provision shall control every other provision of all agreements between the Maker and the Payee with respect to this indebtedness evidenced hereby.

IN WITNESS WHEREOF, the Maker has caused this Note to be executed as an instrument under seal by its duly authorized representative as of the day and year first above written.

WITNESS:	ACTION PRODUCTS INTERNATIONAL, INC.
/s/ ROBERT L. BURROWS	By:	/s/ RONALD S. KAPLAN
Robert L. Burrows		Ronald S. Kaplan
		President and Chief Executive Officer

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EX-10.3

Exhibit 10.3

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.

For the Purchase of	Number 1
50,000 shares of Common Stock

DATE OF WARRANT: March 31, 2004

WARRANT FOR THE PURCHASE OF

SHARES OF COMMON STOCK OF

ACTION PRODUCTS INTERNATIONAL, INC.

(A Florida corporation)

FOR VALUE RECEIVED, Action Products International, Inc. (“Company”), hereby certifies that Warren Kaplan Trust (“Holder”), or his, her or its Permitted Transferees, is entitled, subject to the terms set forth below, to purchase from the Company, at any time or from time to time during the period commencing on the date hereof and expiring on March 31, 2009, Fifty Thousand (50,000) shares of Common Stock, par value $.001 per share, of the Company (“Common Stock”), at a purchase price equal to Four Dollars and 50/100 ($4.50) per share (the “Warrant”). The number of shares of Common Stock purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Exercise Price,” respectively.

1. EXERCISE

(a) Procedure for Exercise. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the Notice of Exercise form attached hereto duly executed by such Holder) at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment to the Company of the Exercise Price multiplied by the number of Warrant Shares to be purchased (“Aggregate Purchase Price”) (i) in cash, (ii) by certified check, (iii) by wire transfer, or (iv) by a combination of (i), (ii) and (iii).

(b) Date of Exercise. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant, together with the Notice of Exercise form attached hereto duly executed by such Holder or Permitted Transferee shall have been surrendered to the Company. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

(c) Issuance of Certificate. As soon as practicable after the exercise of the purchase right represented by this Warrant, and in any event within ten (10) business days thereafter, the Company at its expense will use its best efforts to cause to be issued in the name of, and delivered to, the Holder, or, subject to the terms and conditions hereof, to such other individual or entity as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct (i) a certificate or certificates for the number of full shares of Warrant Shares to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such

Holder would otherwise be entitled, an additional share as determined pursuant to Section 3 hereof, and (ii) in case such exercise is in part only, a new Warrant or Warrants (dated the date hereof) of like tenor, stating on the face or faces thereof the number of shares currently stated on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise as provided in Section 1(a) above. The Company covenants and agrees that it will pay when due any and all state and federal issue taxes which may be payable in respect of the issuance of this Warrant or the issuance of any Warrant Shares upon exercise of this Warrant.

2. ADJUSTMENTS.

(a) Split, Subdivision or Combination of Shares. If the outstanding shares of the Company’s Common Stock at any time while this Warrant remains outstanding and unexpired shall be subdivided or split into a greater number of shares, or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall, simultaneously with the effectiveness of such subdivision or split or immediately after the record date of such dividend (as the case may be), shall be proportionately decreased. If the outstanding shares of Common Stock shall be combined or reverse-split into a smaller number of shares, the Exercise Price in effect immediately prior to such combination or reverse split shall, simultaneously with the effectiveness of such combination or reverse split, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

(b) Reclassification Reorganization, Consolidation or Merger. In the case of any reclassification of the Common Stock (other than a change in par value or a subdivision or combination as provided for in Section 2(a) above), or any reorganization, consolidation or merger of the Company with or into another corporation (other than a merger or reorganization with respect to which the Company is the continuing corporation and which does not result in any reclassification of the Common Stock), or a transfer of all or substantially all of the assets of the Company, or the payment of a liquidating distribution then, as part of any such reorganization, reclassification, consolidation, merger, sale or liquidating distribution, lawful provision shall be made so that the Holder of this Warrant shall have the right thereafter to receive upon the exercise hereof, the kind and amount of shares of stock or other securities or property which such Holder would have been entitled to receive if, immediately prior to any such reorganization, reclassification, consolidation, merger, sale or liquidating distribution, as the case may be, such Holder had held the number of shares of Common Stock which were then purchasable upon the exercise of this Warrant. In any such case, appropriate adjustment (as reasonably determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder of this Warrant such that the provisions set forth in this Section 2 (including provisions with respect to the Exercise Price) shall thereafter be applicable, as nearly as is reasonably practicable, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of this Warrant.

(c) No Limitations on the Company. This Warrant shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. Nothing herein shall be construed as creating any limitations upon the right and authority of the Board of Directors of the Company to adopt such incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or individuals) as the Board of Directors in its discretion determines desirable, including, without limitation, the granting of stock options or stock appreciation rights.

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(d) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 2 and in the taking of all such actions as may be necessary or appropriate in order to protect against impairment of the rights of the Holder of this Warrant to adjustments in the Exercise Price.

3. FRACTIONAL SHARES. The Company shall not be required to issue fractions of shares of Common Stock upon exercise. If any fractions of a share would, but for this Section 3, be issuable upon any exercise, in lieu of such fractional share the Company shall round up to the nearest whole number.

4. LIMITATION ON SALES. Each holder of this Warrant acknowledges that this Warrant and the Warrant Shares, as of the date of original issuance of this Warrant, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (a) an effective registration statement under the Securities Act as to this Warrant or such Warrant Shares or (b) an opinion of counsel, reasonably acceptable to the Company, that such registration and qualification are not required. The Warrant Shares issued upon exercise thereof shall be imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.”

The Holder hereof and the Company agree to execute such other documents and instruments as the Company reasonably deems necessary to effect the compliance of the issuance of this Warrant and any shares of Common Stock issued upon exercise hereof with applicable federal and state securities laws.

The Company covenants and agrees that (i) all Warrant Shares which may be issued upon exercise of the Warrant, upon issuance, shall be fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof; (ii) the Company will not close its books against the exercise of the Warrant or the transfer of the Common Stock issued or issuable upon exercise of the Warrant in any manner which would interfere with the timely exercise of the Warrant; and (iii) the Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of effecting the exercise of the Warrant, the full number of shares of Common Stock which would be deliverable upon the exercise of the Warrant.

5. TRANSFER OF WARRANT. This Warrant may not be transferred, in whole or in part, whether by operation of law or otherwise, to any person or business entity, without the prior written consent of the Company, and any assignment to the contrary shall be null and void and of no force and effect. Notwithstanding the foregoing, but subject to the provisions of Section 4, the Holder may transfer the Warrant or a portion thereof to one or more trusts established for the exclusive benefit of such Holder and/or one or more of the Holder’s spouse, children, grandchildren, parents, siblings, nieces or nephews (collectively, “Permitted Transferees”), or at death to the Holder’s estate, to any of the Holder’s Permitted Transferees, or to one or more trusts all of the beneficiaries of which are one or more of the Holder’s Permitted Transferees; provided, however, that any such transferee shall hold the transferred Warrant subject to the terms and conditions of this Agreement. Any transfer

3

permitted by the immediately preceding sentence shall be made by presentation of the Warrant to the Company with written instructions for such transfer, including evidence that the transfer is permitted hereunder. Upon such presentation for transfer, the Company shall promptly execute and deliver a new Warrant or Warrants in the form hereof in the name of the assignee or assignees and in the denominations specified in such instructions. The Company shall pay all expenses incurred by it in connection with the preparation, issuance and delivery of Warrants as permitted under this Section.

6. GENERAL RESTRICTIONS. The Company shall not be required to sell or issue any Warrant Shares under this Warrant if the sale or issuance of such Warrant Shares would constitute a violation by the individual exercising the Warrant or by the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration, or qualification of any Warrant Shares subject to the Warrant upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Warrant Shares hereunder, the Warrant may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Warrant. Specifically, in connection with the Securities Act, unless a registration statement under the Securities Act is in effect with respect to the Warrant Shares covered by the Warrant, the Company shall not be required to sell or issue such Warrant Shares unless the Company has received evidence satisfactory to it that the holder of the Warrant may acquire such Warrant Shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Company shall be final, binding, and conclusive. Except as provided herein, the Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of the Warrant or the issuance of Warrant Shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that the Warrant shall not be exercisable unless and until the Warrant Shares covered by the Warrant are registered or are subject to an available exemption from registration, the exercise of the Warrant (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. The Warrant shall not be exercisable unless the Holder shall have received all required regulatory approvals with respect to ownership of the Warrant Shares to be issued upon such exercise.

7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

8. TRANSFERS. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its, his or her address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

9. PAYMENT OF TAXES. The Holder agrees to promptly pay in cash to the Company, upon demand, any taxes that the Company (or any affiliate of the Company) may be required to withhold or collect in connection with any exercise of the Warrant.

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10. CERTAIN NOTICES

(a) Notice of Adjustment. Upon any adjustment of the Exercise Price, the Company shall forthwith give written notice thereto to the Holder of this Warrant describing the event requiring the adjustment, stating the adjusted Exercise Price and the adjusted number of shares purchasable upon the exercise hereof resulting from such event, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

(b) Notices of Record Date. In case: (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other right, or (ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or (iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the notice shall not affect the legality or validity of any such action.

(c) Form and Delivery Requirements. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Warrant (“Notices”) shall be in writing and shall be provided or given in one of the following five ways: (i) personal delivery, (ii) overnight courier service which provides a receipt acknowledging delivery, (iii) express mail or registered mail, return receipt requested, (iv) first class or priority mail, or (v) facsimile transmission. All such Notices shall be deemed to have been so provided or given as follows: (a) provided or given by personal delivery—upon actual delivery to or refusal to accept delivery by party of the Notice, (b) provided or given by overnight courier service which provides a receipt acknowledging delivery—upon actual delivery to or refusal to accept delivery by party of the Notice during normal business hours, (c) provided or given by express mail or registered mail, return receipt requested—upon actual delivery to or refusal to accept delivery by party of the Notice during normal business hours, (d) provided or given by first class or priority mail—the date and time the party who is the sender receives from party who is a recipient a statement or acknowledgement signed by receiving party that such party received the Notice, and (e) provided or given by facsimile transmission—the date and time party who is transmitting the Notice by facsimile receives from the party who is receiving the Notice a statement or acknowledgment signed by such party that the Notice was received by facsimile transmission. Notices to a party shall be addressed to such party at its following address and facsimile number, or at such other address and facsimile number, and to the attention of such other officers or individuals as it may from time to time designate to the other parties in writing:

(i) If to the Company:

Action Products International, Inc.

Attn: Chief Financial Officer

1101 N. Keller Road, Suite E

Orlando, Florida 32810

Facsimile No.: (407) 481-2781

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with a copy to:

Tarter Krinsky & Drogin LLP

Attn: James G. Smith, Esq.

470 Park Avenue South, 14^th Floor

New York, New York 10016

Facsimile No.: (212) 481-9062

(ii) If to Holder, the address of the Holder as maintained on the books and records of the Company,

or to such other address as may be designated by a party in a notice to the other. Each notice, demand, request or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a facsimile) the facsimile confirmation report being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

11. REGISTRATION RIGHTS.

11.1 Piggyback Registration.

(a) Right to Piggyback. If (i) the Company proposes to register any of its Common Stock under the Securities Act except for offerings pursuant to registration statements relating to employee benefit plans or with respect to corporate reorganization or other transactions under Rule 145 of the Securities Act or otherwise registered on Form S-4 under the Securities Act (a “Qualified Public Offering”) and (ii) the registration form to be used may be used for the registration of the Holder Registrable Securities (a “Piggyback Registration”), the Company will at least thirty (30) days prior to a Qualified Public Offering give written notice to the Holder of its intention to effect such a public offering. If the Holder desires to dispose of any of the Holder Registrable Securities (as defined below) in the public offering, it shall provide written notice thereof to the Company within fifteen (15) days after the receipt of any such notice, specifying the Holder Registrable Securities intended to be disposed of by the Holder. Subject to Section 11.1(b), the Company will use its commercially reasonable efforts to effect the registration under the Securities Act of all Holder Registrable Securities which the Company has been so requested to register by the Holder on the same terms and conditions as the securities otherwise being sold in such registration, to the extent requisite to permit the disposition of the Holder Registrable Securities requested to be so registered. Nothing in this Section 11.1 shall prevent the Company from abandoning, at any time, an offering under which the Holder has requested a Piggyback Registration.

(b) Priority in Piggyback Registrations. When a registration pursuant to this Section 11.1 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed by or through one or more underwriters, if the managing underwriter of such underwritten offering informs the Company in writing of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering without adversely affecting the price to be received thereon, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in (or during the time of) such offering, first, all securities proposed by the Company to be sold for its own account or all securities (other than Holder Registrable Securities) proposed by the Company to be sold for the account of the holders thereof who had requested such registration, as the case may be; second, other registrable securities with priority over the

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Registrable Securities (based on the Company’s agreements with the holders thereof); third, such Holder Registrable Securities requested to be included in such registration so proposed to be sold and so requested to be included; and fourth, other securities requested to be included in such registration, in such proportion as the Company may determine (based upon its agreements with the holders thereof). The Company agrees that any such determination is to be made solely by the managing underwriter and the Company agrees that it will act in good faith in seeking to have sold in the offering all of the shares requested to be sold.

11.2 Registration Procedures. If, whenever and to the extent that the Company is required to use commercially reasonable efforts to effect the registration of any Holder Registrable Securities under the Securities Act as provided in Section 11.1, the Company will as expeditiously as possible:

(i) prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use commercially reasonable efforts to cause such registration statement to become and remain effective for a period of two (2) years or, if earlier, until all of such Holder Registrable Securities have been disposed of, provided that the Company may discontinue any registration of its securities at any time prior to the effective date of the registration statement relating thereto;

(ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period set forth in Section 11.3(i) above;

(iii) furnish to Holder such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as Holder may reasonably request in order to dispose of the Holder Registrable Securities;

(iv) use commercially reasonable efforts to register or qualify all Holder Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such United States jurisdictions as Holder shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, except that the Company shall not for any such purpose (a) be required to qualify generally to do business as a foreign corporation in any jurisdiction, (b) to subject itself to taxation in any such jurisdiction or (c) to consent to general service of process in any such jurisdiction;

(v) notify Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and

(vi) use its commercially reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

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11.3 Holdback Agreements. If, in connection with an underwritten public offering of shares of Common Stock of the Company registered pursuant to the Securities Act, the managing underwriter for such registration shall so request, the Holder shall not sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Holder Registrable Securities (other than those Holder Registrable Securities included in such registration) without the prior written consent of the Company for a period designated by the Company in writing to the Holder, which period shall begin not more than thirty (30) days prior to the date the Company has fixed plans to file the registration statement pursuant to which such public offering shall be made and shall not last more than one hundred eighty (180) days (or such other period as the officers and directors of the Company shall determine) after the effective date of such registration statement while this Warrant remains outstanding and unexpired.

11.4 Copies of Registration Statements. The Company shall promptly provide the Holder with copies of all registration statements the Company files with the Commission under the Securities Act during the term of this Warrant Agreement.

11.5 Indemnification.

(a) Indemnification by the Company. In the event of any registration of any Holder Registrable Securities under the Securities Act, to the extent permitted by law, the Company will indemnify and hold harmless Holder, its officers and directors, each underwriter for Holder, and each other Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several (“Losses”), to which the Holder or any such director or officer or underwriter or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, (ii) any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto or any document incident to registration or qualification of any Holder Registrable Securities, (iii) 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 or, with respect to any prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or (iv) any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws (clauses (i) – (iv) above referred to hereafter as, a “Violation”); provided (i) that the Company shall not be liable in any such case to the extent that any such Losses (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company for use in connection with such registration; (ii) that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Holder Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such Losses (or action or proceeding in respect thereof) or expense arises out of such Person’s failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting a Violation at or prior to the written confirmation of the sale of Holder Registrable Securities to such Person if such Violation was corrected in such final prospectus; and (iii) that the Company shall not be liable for any amounts paid in settlement of any Losses or action if such settlement is effected without the consent of the Company. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller.

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(b) Indemnification by Holder. In the event of any registration of the Holder Registrable Securities under the Securities Act, to the extent permitted by law, the Holder will indemnify and hold harmless the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Person selling securities under such registration statement or any of such other Person’s partners, directors or officers or any Person who controls such Person, against any Losses, to which the Company or any such director, officer, controlling Person, underwriter, or such director, officer or controlling Person of such Person may become subject under the Securities Act or Exchange Act or other federal or state law, if such Losses arise out of or relate to a Violation that arose out of or related to the Company’s reliance upon written information furnished to the Company about the Holder for use in the preparation of such registration. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by the Holder.

(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 11.5, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 11.5, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable for any settlement made by the indemnified party without its consent (which consent will not be unreasonably withheld) or for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(d) Contribution. If the indemnification provided for in this Agreement shall for any reason be unavailable to an indemnified party under Section 11.5(a) or 11.5(b) hereof in respect of any Losses (or any action or proceeding in respect thereof), then each indemnifying party shall, in lieu of indemnifying such party, contribute to the amount paid or payable by such indemnified party as a result of such Losses (or action or proceeding in respect thereof), in such proportion as shall be appropriate to reflect (i) the relative benefits received by the Company on the one hand and the Holder included in the offering on the other hand, from the offering of the Holder Registrable Securities, and (ii) the relative fault of the Company on the one hand and the holders of the Holder Registrable Securities included in the offering on the other, with respect to the statements or omissions which resulted in such Losses (or action or proceeding in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Holder on the other with respect to such offering shall be deemed to be in the same proportion as the sum of the total Exercise Price paid to the Company in respect of the securities sold pursuant to the offering plus the total net proceeds from the offering of the securities (before deducting expenses) received by the Company bears to the amount by which the total net proceeds from the offering of the securities (before deducting expenses) received by the Holder with respect to such offering exceeds the Exercise Price paid to the Company in respect of the Holder Registrable Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Holder, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holder agree that it would not

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be just and equitable if contribution pursuant to this Section 11.5 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to in this Section 11.5 shall be deemed to include, for purposes of this Section 11.5, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(e) Survival of Indemnity Obligations. The obligations of the Company and the Holder under this Section 11.5 shall survive completion of any offering of Holder Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(f) Limitation on Preliminary Prospectus Liability. The foregoing indemnity agreements of the Company and the Holder are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Commission Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and was not furnished to the Person asserting the Losses at or prior to the time such action is required by the Securities Act.

11.6 No Assignment of Registration Rights. The rights hereunder to cause the Company to register the Holder Registrable Securities may not be assigned by Holder except in connection with an assignment of the Warrant made in accordance with the terms of this Warrant Agreement.

11.7 Registration Expenses.

(a) Company Expenses. All expenses incident to the Company’s performance of or compliance with this Section 11, and fees and disbursements of counsel for the Company and its independent certified public accountants, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but excluding discounts and commissions and transfer taxes, if any) and other Persons retained by the Company (all such expenses being herein called “Registration Expenses”), will be borne by the Company, and in addition the Company will pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), and the expense of any annual audit or quarterly review, the expense of any liability insurance or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event.

(b) Holder Expenses. To the extent Registration Expenses are not required to be paid by the Company, Holder will pay those Registration Expenses allocable to the registration of the Warrant Shares so included, including fees of counsel for Holder, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered.

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11.8 Further Covenants Relating to and Limitations on Registration Rights of the Holder.

(a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 11.1 that Holder (i) agrees to sell any Holder Registrable Securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

(b) The Company may require Holder to furnish to the Company such information regarding the Holder and the distribution of Warrant Shares as the Company may from time to time reasonably request in writing. The Company will give Holder copies of any registration statements and each prospectus filed with the Commission, and each amendment thereof or supplement thereto.

(c) The Holder agrees by acquisition of such Holder Registrable Securities that upon receipt of any notice from the Company of the happening of any event of the kind described in Section 11.3(v), the Holder will forthwith discontinue such Holder’s disposition of Holder Registrable Securities pursuant to the registration statement relating to such Holder Registrable Securities until receipt of the copies of the supplemented or amended prospectus contemplated by Section 11.3(v) and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, then in the Holder’s possession of the prospectus relating to such Holder Registrable Securities current at the time of receipt of such notice.

(d) The Holder shall have no right to obtain or seek an injunction restraining or otherwise delaying any registration of the Company’s securities as the result of controversy that might arise with respect to the interpretation or implementation of this Agreement.

11.9 Definitions. As used in this Section 11, unless the context otherwise requires, the following terms have the following respective meanings:

Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.

Exchange Act: The Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such similar federal statute.

Holder Registrable Securities: Common Stock issued pursuant to this Warrant and (ii) any shares of Common Stock issued or issuable in respect of such Common Stock upon any stock split, stock dividend, recapitalization, or similar event. Shares of Common Stock shall only be treated as Registrable Securities if they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction or (B) sold or, in the opinion of counsel to the Company, are available for sale in a single transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

Person: A corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, an estate, a governmental or political subdivision thereof or a governmental agency.

Securities Act: The Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar federal statute.

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11.10 Termination. The right to request registration or inclusion in any registration pursuant to Section 11.1 shall terminate on the date that the Holder Registrable Securities may immediately be sold under Rule 144 during any 90-day period.

12. REDEMPTION.

(a) Right of Redemption. The Company may, on twenty (20) days prior written notice, redeem this Warrant at $0.001 per share of Common Stock issuable upon exercise of this Warrant as of the Redemption Date (as defined below), provided, however, that before any such call for redemption of this Warrant can take place there shall be in effect a registration statement under the Securities Act which registered the resale of the Common Stock issuable upon exercise of the Warrant.

(b) Redemption Procedure. In the event the Company exercises its right to redeem all of this Warrant, it shall give or cause to be given notice to the Holder of this Warrant, by mailing to such Holder a notice of redemption, first class, postage prepaid, not later than the twentieth (20th) day before the date fixed for redemption, at its last address as shall appear on the records of the Company. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. The notice of redemption shall specify (i) the redemption price, (ii) the date fixed for redemption, (iii) the place where this Warrant shall be delivered and the redemption price shall be paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the Trading Day immediately preceding the date fixed for redemption. The date fixed for the redemption of this Warrant shall be the “Redemption Date.” No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to the Holder (A) to whom notice was not mailed or (B) whose notice was defective. An affidavit of the Secretary or Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) Right to Exercise. Any right to exercise a warrant shall terminate at 5:00 p.m. (New York time) on the Trading Day immediately preceding the Redemption Date. The redemption price payable to Holder shall be mailed to the Holder at its address of record.

13. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the Holder of this Warrant shall not have or exercise any rights by virtue hereof as a shareholder of the Company. Holder will have and may exercise rights as a shareholder on all stock of the Company held by Holder.

14. HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

15. AMENDMENTS. The terms and provisions of this Warrant may not be modified or amended, or any provisions hereof waived, temporarily or permanently, except by written consent of the Company and the Holder hereof.

16. BINDING EFFECT. Subject to all restrictions provided for in this Warrant and by applicable law relating to assignment and transfer of this Warrant, this Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and permitted assigns.

17. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Warrant nor any term hereof may be amended, waived, discharged, or terminated except by a written instrument signed by the Company and the Holder; provided, however, that the Company or the Holder unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the other party hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

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18. GOVERNING LAW. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York (excluding the choice of law rules thereof).

19. JURISDICTION AND VENUE. Any legal suit, action or proceeding arising out of or relating to this Warrant shall be instituted exclusively in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York. Each party hereto waives any objection to the venue of any such suit, action or proceeding and the right to assert that such forum is not a convenient forum for such suit, action or proceeding and irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each party hereto further agrees to accept and acknowledge service or any and all process which may be served in any such suit, action or proceeding in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York and agrees that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process upon it in any suit, action or proceeding.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed on its behalf as of the date first above written.

COMPANY:
ACTION PRODUCTS INTERNATIONAL, INC.
By:	/s/ RONALD S. KAPLAN
	Ronald S. Kaplan
	President and Chief Executive Officer

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NOTICE OF EXERCISE

TO:	Action Products International, Inc.
	Attn: Chief Financial Officer
	1101 N. Keller Road, Suite E
	Orlando, Florida 32810

1. The undersigned hereby elects to purchase              shares of the Common Stock of Action Products International, Inc., pursuant to terms of the attached Warrant, and tenders herewith payment of the Exercise Price of such shares in full, together with all applicable transfer taxes, if any, in the following manner: (check one box)

¨ cash

¨ certified check

¨ wire transfer

¨ a combination of any of the foregoing

2. Please issue a certificate or certificates representing said shares of the Common Stock in the name of the undersigned or in such other name as is specified below:

3. The undersigned represents that he/she/it will only sell the shares of Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from registration thereunder.

(Name)

(Address)

(Telephone Number)

(Facsimile Number)

(E-mail Address)

(Taxpayer Identification Number)

By:

Title:

Date:

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EX-10.4

Exhibit 10.4

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.

For the Purchase of	Number 2
49,000 shares of Common Stock

DATE OF WARRANT: March 31, 2004

WARRANT FOR THE PURCHASE OF

SHARES OF COMMON STOCK OF

ACTION PRODUCTS INTERNATIONAL, INC.

(A Florida corporation)

FOR VALUE RECEIVED, Action Products International, Inc. (“Company”), hereby certifies that Judith Kaplan Trust (“Holder”), or his, her or its Permitted Transferees, is entitled, subject to the terms set forth below, to purchase from the Company, at any time or from time to time during the period commencing on the date hereof and expiring on March 31, 2009, Forty-Nine Thousand (49,000) shares of Common Stock, par value $.001 per share, of the Company (“Common Stock”), at a purchase price equal to Four Dollars and 50/100 ($4.50) per share (the “Warrant”). The number of shares of Common Stock purchasable upon exercise of this Warrant, and the purchase price per share, each as adjusted from time to time pursuant to the provisions of this Warrant, are hereinafter referred to as the “Warrant Shares” and the “Exercise Price,” respectively.

1. EXERCISE

(a) Procedure for Exercise. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the Notice of Exercise form attached hereto duly executed by such Holder) at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment to the Company of the Exercise Price multiplied by the number of Warrant Shares to be purchased (“Aggregate Purchase Price”) (i) in cash, (ii) by certified check, (iii) by wire transfer, or (iv) by a combination of (i), (ii) and (iii).

(b) Date of Exercise. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant, together with the Notice of Exercise form attached hereto duly executed by such Holder or Permitted Transferee shall have been surrendered to the Company. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.

(c) Issuance of Certificate. As soon as practicable after the exercise of the purchase right represented by this Warrant, and in any event within ten (10) business days thereafter, the Company at its expense will use its best efforts to cause to be issued in the name of, and delivered to, the Holder, or, subject to the terms and conditions hereof, to such other individual or entity as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct (i) a certificate or certificates for the number of full shares of Warrant Shares to which such Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such

Holder would otherwise be entitled, an additional share as determined pursuant to Section 3 hereof, and (ii) in case such exercise is in part only, a new Warrant or Warrants (dated the date hereof) of like tenor, stating on the face or faces thereof the number of shares currently stated on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise as provided in Section 1(a) above. The Company covenants and agrees that it will pay when due any and all state and federal issue taxes which may be payable in respect of the issuance of this Warrant or the issuance of any Warrant Shares upon exercise of this Warrant.

2. ADJUSTMENTS.

(a) Split, Subdivision or Combination of Shares. If the outstanding shares of the Company’s Common Stock at any time while this Warrant remains outstanding and unexpired shall be subdivided or split into a greater number of shares, or a dividend in Common Stock shall be paid in respect of Common Stock, the Exercise Price in effect immediately prior to such subdivision or at the record date of such dividend shall, simultaneously with the effectiveness of such subdivision or split or immediately after the record date of such dividend (as the case may be), shall be proportionately decreased. If the outstanding shares of Common Stock shall be combined or reverse-split into a smaller number of shares, the Exercise Price in effect immediately prior to such combination or reverse split shall, simultaneously with the effectiveness of such combination or reverse split, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of Warrant Shares purchasable upon the exercise of this Warrant shall be changed to the number determined by dividing (i) an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the Exercise Price in effect immediately prior to such adjustment, by (ii) the Exercise Price in effect immediately after such adjustment.

(b) Reclassification Reorganization, Consolidation or Merger. In the case of any reclassification of the Common Stock (other than a change in par value or a subdivision or combination as provided for in Section 2(a) above), or any reorganization, consolidation or merger of the Company with or into another corporation (other than a merger or reorganization with respect to which the Company is the continuing corporation and which does not result in any reclassification of the Common Stock), or a transfer of all or substantially all of the assets of the Company, or the payment of a liquidating distribution then, as part of any such reorganization, reclassification, consolidation, merger, sale or liquidating distribution, lawful provision shall be made so that the Holder of this Warrant shall have the right thereafter to receive upon the exercise hereof, the kind and amount of shares of stock or other securities or property which such Holder would have been entitled to receive if, immediately prior to any such reorganization, reclassification, consolidation, merger, sale or liquidating distribution, as the case may be, such Holder had held the number of shares of Common Stock which were then purchasable upon the exercise of this Warrant. In any such case, appropriate adjustment (as reasonably determined by the Board of Directors of the Company) shall be made in the application of the provisions set forth herein with respect to the rights and interests thereafter of the Holder of this Warrant such that the provisions set forth in this Section 2 (including provisions with respect to the Exercise Price) shall thereafter be applicable, as nearly as is reasonably practicable, in relation to any shares of stock or other securities or property thereafter deliverable upon the exercise of this Warrant.

(c) No Limitations on the Company. This Warrant shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets. Nothing herein shall be construed as creating any limitations upon the right and authority of the Board of Directors of the Company to adopt such incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or individuals) as the Board of Directors in its discretion determines desirable, including, without limitation, the granting of stock options or stock appreciation rights.

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(d) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company but will at all times in good faith assist in the carrying out of all the provisions of this Section 2 and in the taking of all such actions as may be necessary or appropriate in order to protect against impairment of the rights of the Holder of this Warrant to adjustments in the Exercise Price.

3. FRACTIONAL SHARES. The Company shall not be required to issue fractions of shares of Common Stock upon exercise. If any fractions of a share would, but for this Section 3, be issuable upon any exercise, in lieu of such fractional share the Company shall round up to the nearest whole number.

4. LIMITATION ON SALES. Each holder of this Warrant acknowledges that this Warrant and the Warrant Shares, as of the date of original issuance of this Warrant, have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise in the absence of (a) an effective registration statement under the Securities Act as to this Warrant or such Warrant Shares or (b) an opinion of counsel, reasonably acceptable to the Company, that such registration and qualification are not required. The Warrant Shares issued upon exercise thereof shall be imprinted with a legend in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY STATING THAT THE PROPOSED SALE, PLEDGE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.”

The Holder hereof and the Company agree to execute such other documents and instruments as the Company reasonably deems necessary to effect the compliance of the issuance of this Warrant and any shares of Common Stock issued upon exercise hereof with applicable federal and state securities laws.

The Company covenants and agrees that (i) all Warrant Shares which may be issued upon exercise of the Warrant, upon issuance, shall be fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof; (ii) the Company will not close its books against the exercise of the Warrant or the transfer of the Common Stock issued or issuable upon exercise of the Warrant in any manner which would interfere with the timely exercise of the Warrant; and (iii) the Company will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of effecting the exercise of the Warrant, the full number of shares of Common Stock which would be deliverable upon the exercise of the Warrant.

5. TRANSFER OF WARRANT. This Warrant may not be transferred, in whole or in part, whether by operation of law or otherwise, to any person or business entity, without the prior written consent of the Company, and any assignment to the contrary shall be null and void and of no force and effect. Notwithstanding the foregoing, but subject to the provisions of Section 4, the Holder may transfer the Warrant or a portion thereof to one or more trusts established for the exclusive benefit of such Holder and/or one or more of the Holder’s spouse, children, grandchildren, parents, siblings, nieces or nephews (collectively, “Permitted Transferees”), or at death to the Holder’s estate, to any of the Holder’s Permitted Transferees, or to one or more trusts all of the beneficiaries of which are one or more of the Holder’s Permitted Transferees; provided, however, that any such transferee shall hold the transferred Warrant subject to the terms and conditions of this Agreement. Any transfer

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permitted by the immediately preceding sentence shall be made by presentation of the Warrant to the Company with written instructions for such transfer, including evidence that the transfer is permitted hereunder. Upon such presentation for transfer, the Company shall promptly execute and deliver a new Warrant or Warrants in the form hereof in the name of the assignee or assignees and in the denominations specified in such instructions. The Company shall pay all expenses incurred by it in connection with the preparation, issuance and delivery of Warrants as permitted under this Section.

6. GENERAL RESTRICTIONS. The Company shall not be required to sell or issue any Warrant Shares under this Warrant if the sale or issuance of such Warrant Shares would constitute a violation by the individual exercising the Warrant or by the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration, or qualification of any Warrant Shares subject to the Warrant upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Warrant Shares hereunder, the Warrant may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Warrant. Specifically, in connection with the Securities Act, unless a registration statement under the Securities Act is in effect with respect to the Warrant Shares covered by the Warrant, the Company shall not be required to sell or issue such Warrant Shares unless the Company has received evidence satisfactory to it that the holder of the Warrant may acquire such Warrant Shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Company shall be final, binding, and conclusive. Except as provided herein, the Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of the Warrant or the issuance of Warrant Shares pursuant thereto to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that the Warrant shall not be exercisable unless and until the Warrant Shares covered by the Warrant are registered or are subject to an available exemption from registration, the exercise of the Warrant (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption. The Warrant shall not be exercisable unless the Holder shall have received all required regulatory approvals with respect to ownership of the Warrant Shares to be issued upon such exercise.

7. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

8. TRANSFERS. The Company will maintain a register containing the names and addresses of the Holders of this Warrant. Any Holder may change its, his or her address as shown on the warrant register by written notice to the Company requesting such change. Until any transfer of this Warrant is made in the warrant register, the Company may treat the Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

9. PAYMENT OF TAXES. The Holder agrees to promptly pay in cash to the Company, upon demand, any taxes that the Company (or any affiliate of the Company) may be required to withhold or collect in connection with any exercise of the Warrant.

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10. CERTAIN NOTICES

(a) Notice of Adjustment. Upon any adjustment of the Exercise Price, the Company shall forthwith give written notice thereto to the Holder of this Warrant describing the event requiring the adjustment, stating the adjusted Exercise Price and the adjusted number of shares purchasable upon the exercise hereof resulting from such event, and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

(b) Notices of Record Date. In case: (i) the Company shall take a record of the holders of its Common Stock (or other stock or securities at the time deliverable upon the exercise of this Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of any class or any other securities, or to receive any other right, or (ii) of any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the surviving entity), or any transfer of all or substantially all of the assets of the Company, or (iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company, then, and in each such case, the Company will mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be, (i) the date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other stock or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their shares of Common Stock (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at least ten (10) days prior to the notice shall not affect the legality or validity of any such action.

(c) Form and Delivery Requirements. All notices, demands, requests, or other communications which may be or are required to be given, served, or sent by any party to any other party pursuant to this Warrant (“Notices”) shall be in writing and shall be provided or given in one of the following five ways: (i) personal delivery, (ii) overnight courier service which provides a receipt acknowledging delivery, (iii) express mail or registered mail, return receipt requested, (iv) first class or priority mail, or (v) facsimile transmission. All such Notices shall be deemed to have been so provided or given as follows: (a) provided or given by personal delivery—upon actual delivery to or refusal to accept delivery by party of the Notice, (b) provided or given by overnight courier service which provides a receipt acknowledging delivery—upon actual delivery to or refusal to accept delivery by party of the Notice during normal business hours, (c) provided or given by express mail or registered mail, return receipt requested—upon actual delivery to or refusal to accept delivery by party of the Notice during normal business hours, (d) provided or given by first class or priority mail—the date and time the party who is the sender receives from party who is a recipient a statement or acknowledgement signed by receiving party that such party received the Notice, and (e) provided or given by facsimile transmission—the date and time party who is transmitting the Notice by facsimile receives from the party who is receiving the Notice a statement or acknowledgment signed by such party that the Notice was received by facsimile transmission. Notices to a party shall be addressed to such party at its following address and facsimile number, or at such other address and facsimile number, and to the attention of such other officers or individuals as it may from time to time designate to the other parties in writing:

(i) If to the Company:

Action Products International, Inc.

Attn: Chief Financial Officer

1101 N. Keller Road, Suite E

Orlando, Florida 32810

Facsimile No.: (407) 481-2781

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with a copy to:

Tarter Krinsky & Drogin LLP

Attn: James G. Smith, Esq.

470 Park Avenue South, 14^th Floor

New York, New York 10016

Facsimile No.: (212) 481-9062

(ii) If to Holder, the address of the Holder as maintained on the books and records of the Company,

or to such other address as may be designated by a party in a notice to the other. Each notice, demand, request or communication that shall be given or made in the manner described above shall be deemed sufficiently given or made for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery receipt, the affidavit of messenger or (with respect to a facsimile) the facsimile confirmation report being deemed conclusive but not exclusive evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation.

11. REGISTRATION RIGHTS.

11.1 Piggyback Registration.

(a) Right to Piggyback. If (i) the Company proposes to register any of its Common Stock under the Securities Act except for offerings pursuant to registration statements relating to employee benefit plans or with respect to corporate reorganization or other transactions under Rule 145 of the Securities Act or otherwise registered on Form S-4 under the Securities Act (a “Qualified Public Offering”) and (ii) the registration form to be used may be used for the registration of the Holder Registrable Securities (a “Piggyback Registration”), the Company will at least thirty (30) days prior to a Qualified Public Offering give written notice to the Holder of its intention to effect such a public offering. If the Holder desires to dispose of any of the Holder Registrable Securities (as defined below) in the public offering, it shall provide written notice thereof to the Company within fifteen (15) days after the receipt of any such notice, specifying the Holder Registrable Securities intended to be disposed of by the Holder. Subject to Section 11.1(b), the Company will use its commercially reasonable efforts to effect the registration under the Securities Act of all Holder Registrable Securities which the Company has been so requested to register by the Holder on the same terms and conditions as the securities otherwise being sold in such registration, to the extent requisite to permit the disposition of the Holder Registrable Securities requested to be so registered. Nothing in this Section 11.1 shall prevent the Company from abandoning, at any time, an offering under which the Holder has requested a Piggyback Registration.

(b) Priority in Piggyback Registrations. When a registration pursuant to this Section 11.1 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, to be distributed by or through one or more underwriters, if the managing underwriter of such underwritten offering informs the Company in writing of its belief that the number of securities requested to be included in such registration exceeds the number which can be sold in (or during the time of) such offering without adversely affecting the price to be received thereon, then the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in (or during the time of) such offering, first, all securities proposed by the Company to be sold for its own account or all securities (other than Holder Registrable Securities) proposed by the Company to be sold for the account of the holders thereof who had requested such registration, as the case may be; second, other registrable securities with priority over the

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Registrable Securities (based on the Company’s agreements with the holders thereof); third, such Holder Registrable Securities requested to be included in such registration so proposed to be sold and so requested to be included; and fourth, other securities requested to be included in such registration, in such proportion as the Company may determine (based upon its agreements with the holders thereof). The Company agrees that any such determination is to be made solely by the managing underwriter and the Company agrees that it will act in good faith in seeking to have sold in the offering all of the shares requested to be sold.

11.2 Registration Procedures. If, whenever and to the extent that the Company is required to use commercially reasonable efforts to effect the registration of any Holder Registrable Securities under the Securities Act as provided in Section 11.1, the Company will as expeditiously as possible:

(i) prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use commercially reasonable efforts to cause such registration statement to become and remain effective for a period of two (2) years or, if earlier, until all of such Holder Registrable Securities have been disposed of, provided that the Company may discontinue any registration of its securities at any time prior to the effective date of the registration statement relating thereto;

(ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period set forth in Section 11.3(i) above;

(iii) furnish to Holder such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents as Holder may reasonably request in order to dispose of the Holder Registrable Securities;

(iv) use commercially reasonable efforts to register or qualify all Holder Registrable Securities and other securities covered by such registration statement under such other securities or blue sky laws of such United States jurisdictions as Holder shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, except that the Company shall not for any such purpose (a) be required to qualify generally to do business as a foreign corporation in any jurisdiction, (b) to subject itself to taxation in any such jurisdiction or (c) to consent to general service of process in any such jurisdiction;

(v) notify Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and

(vi) use its commercially reasonable efforts to furnish, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, (i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and (ii) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering addressed to the underwriters.

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11.3 Holdback Agreements. If, in connection with an underwritten public offering of shares of Common Stock of the Company registered pursuant to the Securities Act, the managing underwriter for such registration shall so request, the Holder shall not sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Holder Registrable Securities (other than those Holder Registrable Securities included in such registration) without the prior written consent of the Company for a period designated by the Company in writing to the Holder, which period shall begin not more than thirty (30) days prior to the date the Company has fixed plans to file the registration statement pursuant to which such public offering shall be made and shall not last more than one hundred eighty (180) days (or such other period as the officers and directors of the Company shall determine) after the effective date of such registration statement while this Warrant remains outstanding and unexpired.

11.4 Copies of Registration Statements. The Company shall promptly provide the Holder with copies of all registration statements the Company files with the Commission under the Securities Act during the term of this Warrant Agreement.

11.5 Indemnification.

(a) Indemnification by the Company. In the event of any registration of any Holder Registrable Securities under the Securities Act, to the extent permitted by law, the Company will indemnify and hold harmless Holder, its officers and directors, each underwriter for Holder, and each other Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several (“Losses”), to which the Holder or any such director or officer or underwriter or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, (ii) any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto or any document incident to registration or qualification of any Holder Registrable Securities, (iii) 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 or, with respect to any prospectus, necessary to make the statements therein in light of the circumstances under which they were made not misleading, or (iv) any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue sky laws (clauses (i) – (iv) above referred to hereafter as, a “Violation”); provided (i) that the Company shall not be liable in any such case to the extent that any such Losses (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company for use in connection with such registration; (ii) that the Company shall not be liable to any Person who participates as an underwriter in the offering or sale of Holder Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, in any such case to the extent that any such Losses (or action or proceeding in respect thereof) or expense arises out of such Person’s failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, to the Person asserting a Violation at or prior to the written confirmation of the sale of Holder Registrable Securities to such Person if such Violation was corrected in such final prospectus; and (iii) that the Company shall not be liable for any amounts paid in settlement of any Losses or action if such settlement is effected without the consent of the Company. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by such seller.

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(b) Indemnification by Holder. In the event of any registration of the Holder Registrable Securities under the Securities Act, to the extent permitted by law, the Holder will indemnify and hold harmless the Company, each director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Person selling securities under such registration statement or any of such other Person’s partners, directors or officers or any Person who controls such Person, against any Losses, to which the Company or any such director, officer, controlling Person, underwriter, or such director, officer or controlling Person of such Person may become subject under the Securities Act or Exchange Act or other federal or state law, if such Losses arise out of or relate to a Violation that arose out of or related to the Company’s reliance upon written information furnished to the Company about the Holder for use in the preparation of such registration. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and shall survive the transfer of such securities by the Holder.

(c) Notices of Claims, Etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding subdivisions of this Section 11.5, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 11.5, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable for any settlement made by the indemnified party without its consent (which consent will not be unreasonably withheld) or for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(d) Contribution. If the indemnification provided for in this Agreement shall for any reason be unavailable to an indemnified party under Section 11.5(a) or 11.5(b) hereof in respect of any Losses (or any action or proceeding in respect thereof), then each indemnifying party shall, in lieu of indemnifying such party, contribute to the amount paid or payable by such indemnified party as a result of such Losses (or action or proceeding in respect thereof), in such proportion as shall be appropriate to reflect (i) the relative benefits received by the Company on the one hand and the Holder included in the offering on the other hand, from the offering of the Holder Registrable Securities, and (ii) the relative fault of the Company on the one hand and the holders of the Holder Registrable Securities included in the offering on the other, with respect to the statements or omissions which resulted in such Losses (or action or proceeding in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Holder on the other with respect to such offering shall be deemed to be in the same proportion as the sum of the total Exercise Price paid to the Company in respect of the securities sold pursuant to the offering plus the total net proceeds from the offering of the securities (before deducting expenses) received by the Company bears to the amount by which the total net proceeds from the offering of the securities (before deducting expenses) received by the Holder with respect to such offering exceeds the Exercise Price paid to the Company in respect of the Holder Registrable Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Holder, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Holder agree that it would not

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be just and equitable if contribution pursuant to this Section 11.5 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to in this Section 11.5 shall be deemed to include, for purposes of this Section 11.5, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(e) Survival of Indemnity Obligations. The obligations of the Company and the Holder under this Section 11.5 shall survive completion of any offering of Holder Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation.

(f) Limitation on Preliminary Prospectus Liability. The foregoing indemnity agreements of the Company and the Holder are subject to the condition that, insofar as they relate to any Violation made in a preliminary prospectus but eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question becomes effective or the amended prospectus filed with the Commission pursuant to Commission Rule 424(b) (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and was not furnished to the Person asserting the Losses at or prior to the time such action is required by the Securities Act.

11.6 No Assignment of Registration Rights. The rights hereunder to cause the Company to register the Holder Registrable Securities may not be assigned by Holder except in connection with an assignment of the Warrant made in accordance with the terms of this Warrant Agreement.

11.7 Registration Expenses.

(a) Company Expenses. All expenses incident to the Company’s performance of or compliance with this Section 11, and fees and disbursements of counsel for the Company and its independent certified public accountants, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, and any fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but excluding discounts and commissions and transfer taxes, if any) and other Persons retained by the Company (all such expenses being herein called “Registration Expenses”), will be borne by the Company, and in addition the Company will pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), and the expense of any annual audit or quarterly review, the expense of any liability insurance or other expenses for the preparation of financial statements or other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any event.

(b) Holder Expenses. To the extent Registration Expenses are not required to be paid by the Company, Holder will pay those Registration Expenses allocable to the registration of the Warrant Shares so included, including fees of counsel for Holder, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered.

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11.8 Further Covenants Relating to and Limitations on Registration Rights of the Holder.

(a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to Section 11.1 that Holder (i) agrees to sell any Holder Registrable Securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

(b) The Company may require Holder to furnish to the Company such information regarding the Holder and the distribution of Warrant Shares as the Company may from time to time reasonably request in writing. The Company will give Holder copies of any registration statements and each prospectus filed with the Commission, and each amendment thereof or supplement thereto.

(c) The Holder agrees by acquisition of such Holder Registrable Securities that upon receipt of any notice from the Company of the happening of any event of the kind described in Section 11.3(v), the Holder will forthwith discontinue such Holder’s disposition of Holder Registrable Securities pursuant to the registration statement relating to such Holder Registrable Securities until receipt of the copies of the supplemented or amended prospectus contemplated by Section 11.3(v) and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, then in the Holder’s possession of the prospectus relating to such Holder Registrable Securities current at the time of receipt of such notice.

(d) The Holder shall have no right to obtain or seek an injunction restraining or otherwise delaying any registration of the Company’s securities as the result of controversy that might arise with respect to the interpretation or implementation of this Agreement.

11.9 Definitions. As used in this Section 11, unless the context otherwise requires, the following terms have the following respective meanings:

Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.

Exchange Act: The Securities Exchange Act of 1934, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act of 1934 shall include a reference to the comparable section, if any, of any such similar federal statute.

Holder Registrable Securities: Common Stock issued pursuant to this Warrant and (ii) any shares of Common Stock issued or issuable in respect of such Common Stock upon any stock split, stock dividend, recapitalization, or similar event. Shares of Common Stock shall only be treated as Registrable Securities if they have not been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction or (B) sold or, in the opinion of counsel to the Company, are available for sale in a single transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale.

Person: A corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, an estate, a governmental or political subdivision thereof or a governmental agency.

Securities Act: The Securities Act of 1933, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar federal statute.

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11.10 Termination. The right to request registration or inclusion in any registration pursuant to Section 11.1 shall terminate on the date that the Holder Registrable Securities may immediately be sold under Rule 144 during any 90-day period.

12. REDEMPTION.

(a) Right of Redemption. The Company may, on twenty (20) days prior written notice, redeem this Warrant at $0.001 per share of Common Stock issuable upon exercise of this Warrant as of the Redemption Date (as defined below), provided, however, that before any such call for redemption of this Warrant can take place there shall be in effect a registration statement under the Securities Act which registered the resale of the Common Stock issuable upon exercise of the Warrant.

(b) Redemption Procedure. In the event the Company exercises its right to redeem all of this Warrant, it shall give or cause to be given notice to the Holder of this Warrant, by mailing to such Holder a notice of redemption, first class, postage prepaid, not later than the twentieth (20th) day before the date fixed for redemption, at its last address as shall appear on the records of the Company. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Holder receives such notice. The notice of redemption shall specify (i) the redemption price, (ii) the date fixed for redemption, (iii) the place where this Warrant shall be delivered and the redemption price shall be paid, and (iv) that the right to exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the Trading Day immediately preceding the date fixed for redemption. The date fixed for the redemption of this Warrant shall be the “Redemption Date.” No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to the Holder (A) to whom notice was not mailed or (B) whose notice was defective. An affidavit of the Secretary or Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(c) Right to Exercise. Any right to exercise a warrant shall terminate at 5:00 p.m. (New York time) on the Trading Day immediately preceding the Redemption Date. The redemption price payable to Holder shall be mailed to the Holder at its address of record.

13. NO RIGHTS AS SHAREHOLDER. Until the exercise of this Warrant, the Holder of this Warrant shall not have or exercise any rights by virtue hereof as a shareholder of the Company. Holder will have and may exercise rights as a shareholder on all stock of the Company held by Holder.

14. HEADINGS. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

15. AMENDMENTS. The terms and provisions of this Warrant may not be modified or amended, or any provisions hereof waived, temporarily or permanently, except by written consent of the Company and the Holder hereof.

16. BINDING EFFECT. Subject to all restrictions provided for in this Warrant and by applicable law relating to assignment and transfer of this Warrant, this Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, and permitted assigns.

17. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement and supersedes all prior understandings and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. Neither this Warrant nor any term hereof may be amended, waived, discharged, or terminated except by a written instrument signed by the Company and the Holder; provided, however, that the Company or the Holder unilaterally may waive any provision hereof in writing to the extent that such waiver does not adversely affect the interests of the other party hereunder, but no such waiver shall operate as or be construed to be a subsequent waiver of the same provision or a waiver of any other provision hereof.

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18. GOVERNING LAW. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York (excluding the choice of law rules thereof).

19. JURISDICTION AND VENUE. Any legal suit, action or proceeding arising out of or relating to this Warrant shall be instituted exclusively in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York. Each party hereto waives any objection to the venue of any such suit, action or proceeding and the right to assert that such forum is not a convenient forum for such suit, action or proceeding and irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each party hereto further agrees to accept and acknowledge service or any and all process which may be served in any such suit, action or proceeding in New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York and agrees that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process upon it in any suit, action or proceeding.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed on its behalf as of the date first above written.

COMPANY:
ACTION PRODUCTS INTERNATIONAL, INC.
By:	/s/ RONALD S. KAPLAN
	Ronald S. Kaplan
	President and Chief Executive Officer

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NOTICE OF EXERCISE

TO:	Action Products International, Inc.
	Attn: Chief Financial Officer
	1101 N. Keller Road, Suite E
	Orlando, Florida 32810

1. The undersigned hereby elects to purchase              shares of the Common Stock of Action Products International, Inc., pursuant to terms of the attached Warrant, and tenders herewith payment of the Exercise Price of such shares in full, together with all applicable transfer taxes, if any, in the following manner: (check one box)

¨ cash

¨ certified check

¨ wire transfer

¨ a combination of any of the foregoing

2. Please issue a certificate or certificates representing said shares of the Common Stock in the name of the undersigned or in such other name as is specified below:

3. The undersigned represents that he/she/it will only sell the shares of Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an exemption from registration thereunder.

	(Name)
	(Address)
	(Telephone Number)
	(Facsimile Number)
	(E-mail Address)
	(Taxpayer Identification Number)
By:
Title:
Date:

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EX-99.1

Exhibit 99.1

Press Release

Action Products Acquires Curiosity Kits(R) — The Leading Award-Winning Specialty Brand For Kids’ Craft and Activity Kits

ORLANDO, Fla., April 6 /PRNewswire-FirstCall/ — Action Products International, Inc. (Nasdaq: APII - News), a leading toy designer and manufacturer of educational and positive, non-violent branded toys for pre-school children through pre-teens, announced today that it has acquired the assets of Curiosity Kits, Inc., the developer, manufacturer and marketer of award- winning craft and activity kits for kids aged 4-14 that are sold primarily to specialty toy and craft retailers, and art museums throughout North America. The terms of the transaction provide for an all cash purchase.

A former division of Harlequin Enterprises, Limited, which is a subsidiary of Torstar Corporation (Toronto Stock Exchange: TO - News), Curiosity Kits is recognized within the specialty toy industry as one of the leading developers of activity-based kits for children. Its widely respected products and brands have won numerous industry awards for their ability to offer fun and creative ways for children and their families to discover, share and express their creative interests.

Action Products will assume the rights to all Curiosity Kits’ brands, trademarks, copyrights, patents, finished goods inventory, accounts receivable and various other assets. Featuring over 140 products divided into eight categories, Curiosity Kits’ top selling products in 2003 included Pottery Wheel, Swirl Master, Official Trickster Kit, Paint a Pair of Mugs, Shrinky Dink^® Refills, Paint Your Own Chair, Forest Fairies, Kooky Krayon Maker, Glam Girl Vanity and Mega Volcano. Curiosity Kits’ products fall into one of the strongest segments of the toy industry — arts and crafts. According to the Toy Industry Association, while the overall toy market shrank by 2.8% in the second half of 2002 (last reported period), this segment grew by 16.6%.

Curiosity Kits’ products have won numerous awards for their ability to offer fun and creative ways for children and their families to find, share, and express their creative interests. The impressive list of awards includes: Dr. Toy, Oppenheim Toy Portfolio, Parenting Magazine, Parent’s Choice Foundation, National Parenting Center, Family Fun Magazine, Canadian Toy Testing Council, and Child Magazine. Curiosity Kits’ innovative line includes more than 150 proprietary activity kits and supplies in seven Irresistible Basics(TM) categories.

The Company recently introduced over 50 new products at the American International Toy Fair held in February in New York City. Every Curiosity Kit includes all materials necessary to complete the project, including markers and glue. Easy-to-follow illustrated instructions also provide kids with relevant background information that puts each activity in meaningful context. Curiosity Kits enjoy high brand awareness and preference, and are sold throughout the U.S. and Canada. Their distribution is focused exclusively on the specialty channels, including toy stores, arts, crafts and hobby retailers, bookstores, education stores, specialty catalogs, gift shops, and museums. For the last few years, the Company has recorded annual net sales of between $4 million to $6 million of its branded products that range in price between $4.00 to $50.00 retail.

Ron Kaplan, Chief Executive Officer of Action Products, said, “We are pleased, and I am personally honored, to bring the fantastic collection of Curiosity Kits’ products and brands to the Action Products International family of brands. Since 1988, Curiosity Kits has endeavored and succeeded in satisfying children’s natural curiosity by bringing experiential childhood learning and development into homes in ways that teach and build confidence, individual expression and bonding relationships with parents and caregivers. Action Products is committed to fulfilling and building upon Curiosity Kits’ legacy.”

Mr. Kaplan added, “This acquisition marks another critical milestone in the evolution and growth of Action Products International. With Curiosity Kits, Action successfully expands its product line-up, gains additional points of distribution for our entire portfolio of brands and establishes a notable

presence for Action Products within another niche market — specialty crafts. We look forward to introducing the Curiosity Kits line to our growing global distributor network and to leveraging its established sales channels within the arts and crafts market to bring necessary volume increases to certain other brands such as our I DIG properties, among others. Finally, the consolidation of this brand into our portfolio brings welcome advantages and strengths to Action’s and Curiosity Kit’s existing retail dealers through the elimination of duplicative overhead cost structures that do not directly benefit them or their customers.”

With sales of $4.8 million in 2003, Curiosity Kits is expected to contribute approximately $3 million in revenue to Action Products in 2004, due largely to the timing of the acquisition, integration of operations and the scheduled re-launch of the line as an Action Products offering. Accordingly, Action Products is revising its 2004 revenue estimates upward to $13 million from the previously stated $10 million.

In association with the asset purchase, the APII’s Board of Directors agreed to accept a below market rate loan facilities from the Kaplan family, to complete the acquisition. The terms of the financing provide for the CEO, Company’s founder, directors, and management, to jointly (or singularly) loan the Company up to $1 million pursuant to a 2-year note bearing an annual interest rate of 6%. In addition, the lenders will be issued warrants to purchase up to 200,000 common shares (pro-rata to the loan amounts) at an exercise price of $4.50 per share. The final number of warrants to be issued will depend upon the final size of the loans (but will not exceed 200,000).

ABOUT ACTION PRODUCTS INTERNATIONAL, INC.

Action Products is a leading designer and manufacturer of educational and positive branded toys emphasizing fun, quality brands including JAY JAY THE JET PLANE Wooden Adventure System(TM), I DIG Dinosaurs^® and I DIG Treasures^® excavation activity kits, Space Voyagers^® (“The most authentic Space Toys on Earth”), Wild Climbers(TM) and Climb@Tron(TM) window-climbing animals and robots, Play and Store(TM) themed playsets, Kidz Workshop(TM) wooden projects, and Drop Zone Extreme(TM) parachute toys. Its products are marketed and sold worldwide to specialty retailers, museums, toy stores, theme parks, attractions, zoos, catalog companies, Internet retailers and educational markets. For more information on Action Products’ toys, email marketing@apii.com or visit the Company’s web site at www.apii.com.

Any statements that are not historical facts contained in this release are forward-looking statements. It is possible that the assumptions made by management for purposes of such statements may not materialize. Actual results may differ materially from those projected or implied in any forward-looking statements. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, the effect of economic conditions, and intellectual property rights and the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions, and other factors discussed from time to time in the Company’s Securities and Exchange Commission filings. The Company undertakes no obligation to update or revise any forward-looking statement for events or circumstances after the date on which such statement is made.

Contact:

ACTION PRODUCTS INTERNATIONAL, INC.

Raymond Oliver, Vice President, Investor Relations

407-481-8007, ext. 716

ELITE FINANCIAL COMMUNICATIONS GROUP, LLC

Andrea Strittmatter

407-585-1080

apii@efcg.net/