10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended March 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to          .

Commission file number 001-14944

MAD CATZ INTERACTIVE, INC.

(Exact name of Registrant as specified in its charter)

Canada	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7480 Mission Valley Road, Suite 101 San Diego, California (Address of principal executive offices)	92108 (Zip Code)

Registrant’s telephone number, including area code:

(619) 683-9830

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, no par value	American Stock Exchange
	Toronto Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).  Yes o     No þ

The aggregate market value of the voting and non-voting common stock held by non-affiliates based on the closing sale price of common stock as reported on the American Stock Exchange on September 30, 2008, the last business day of the second fiscal quarter, was $26,447,304.

There were 55,098,549 shares of the registrant’s common stock issued and outstanding as of June 23, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Part II and Part III incorporates information by reference from the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the solicitation of proxies for the Registrant’s 2009 Annual Meeting of Shareholders.

MAD CATZ INTERACTIVE, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2009

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Business		2
	Item 1A.	Risk Factors		9
	Item 1B.	Unresolved Staff Comments		25
	Item 2.	Properties		25
	Item 3.	Legal Proceedings		25
	Item 4.	Submission of Matters to a Vote of Security Holders		26
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		26
	Item 6.	Selected Financial Data		28
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		44
	Item 8.	Financial Statements and Supplementary Data		45
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		45
	Item 9A.	Controls and Procedures		45
	Item 9B.	Other Information		47
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		47
	Item 11.	Executive Compensation		47
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		47
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		47
	Item 14.	Principal Accounting Fees and Services		47
PART IV
	Item 15.	Exhibits, Financial Statement Schedules		47
EX-10.18
EX-10.19
EX-10.20
EX-10.21
EX-10.22
EX-10.23
EX-10.24
EX-10.25
EX-10.26
EX-10.27
EX-10.28
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K and the documents incorporated by reference herein, contain forward-looking statements and forward looking information as defined in applicable Canadian securities legislation (collectively “forward looking statements”), which are prospective and reflect management’s expectations regarding our business, operations, financial performance and business prospects and opportunities. Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate,” “plan,” “estimate,” “expect” “believe” and “intend” and statements that an event or result “may,” “will,” “should,” “could” or “might” occur or be achieved and other similar expressions together with the negative of such expressions. These forward-looking statements reflect management’s current beliefs and expectations and are based on information currently available to management, as well as its analysis made in light of its experience, perception of trends, current conditions, expected developments and other factors believed to be reasonable and relevant in the circumstances. Specifically, this document contains forward looking statements regarding, among other things, our focus and strategy for fiscal 2010, the expected life cycles of videogame console systems and accessories and the market’s transition to new generation systems, the expectation of additional competition if new companies enter the market, the increased difficulty in forecasting demand for specific products as we introduce and support additional products and enter additional markets, the possible use of financial hedging techniques, the ability to renew our credit facility on acceptable terms and the belief that sufficient funds will be available to satisfy our operating needs for the next twelve months. Forward-looking statements are subject to significant risks, uncertainties, assumptions and other factors, any of which could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. More detailed information about these risks, uncertainties, assumptions and other factors is provided under Item 1A “Risk Factors”. Investors should not place undue reliance on such forward-looking statements. We assume no obligation to update or alter such forward-looking statements whether as a result of new information, future events or otherwise except as required by law.

TRADEMARKS

Mad Catz, the Mad Catz logo, Joytech, the Joytech logo, Saitek and GameShark are registered trademarks of Mad Catz, Inc., its parent and affiliated companies.

CURRENCY

Unless otherwise indicated, all dollar references herein are in U.S. dollars.

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PART I

Item 1.   Business

In this annual report on Form 10-K, “Mad Catz Interactive, Inc.,” “Mad Catz,” the “Company,” “we,” “us” and “our” refer to Mad Catz Interactive, Inc. and all of our consolidated subsidiaries.

Mad Catz Interactive, Inc. was incorporated under the Canada Business Corporations Act on August 25, 1993 under the name Patch Ventures Inc. and in 1994 acquired all of the issued and outstanding shares of Legacy Manufacturing Corporation and changed its name to Legacy Storage Systems International Inc. In 1996, the Company changed its name to Tecmar Technologies International, Inc. (“Tecmar”). At that time, our principal business consisted of designing and developing data storage systems for networks and workstations and marketing such systems to computer original equipment manufacturers and distributors through several operating subsidiaries.

In 1998, we completed the sale of our operating business, Tecmar, and changed our name to Xencet Investments Inc. To meet the listing requirements of the Toronto Stock Exchange, we acquired all of the outstanding securities of Games Trader Inc., a corporation incorporated under the laws of Ontario, Canada that sold previously played videogames. In connection with the acquisition, we changed our name to Games Trader Inc. and later changed our name to GTR Group Inc. in 1999. Effective August 31, 1999, we completed the acquisition of Mad Catz, Inc. (“MCI”), a corporation incorporated under the laws of Delaware that designs, manufactures, markets and distributes videogame accessories. MCI and its predecessor company have been involved in the videogame industry since approximately 1991. In September 2001, we changed our name from GTR Group Inc. to Mad Catz Interactive, Inc. In January 2003, we acquired the intellectual property associated with the GameShark brand of products.

Recent Acquisitions

In September 2007, we acquired certain assets of Joytech from Take-Two Interactive Software, Inc. The assets acquired included inventories, property and equipment and intangible assets such as trademarks, customer relationships and product lines.

In November 2007, we acquired all of the outstanding stock of Winkler Atlantic Holdings Limited (“WAHL”), a private holding company that owned five operating Saitek subsidiaries (“Saitek”). The five operating subsidiaries worked in concert to develop, manufacture, market, sell and distribute PC games accessories, PC input devices, multimedia audio products, chess and intelligent games. We acquired all of Saitek’s net tangible and intangible assets, including trademarks, tradenames, customer relationships and product lines.

Corporate Structure

We have several direct and indirect operating subsidiaries: (i) MCI, a corporation incorporated under the laws of Delaware is our corporate headquarters and also sells our products in the United States under the name Mad Catz, Inc., participates in the design of our products and provides corporate services for all entities of the Company; (ii) 1328158 Ontario Inc. (“MCC”), a corporation incorporated under the laws of the Province of Ontario, Canada that sells our products in Canada under the name Mad Catz Canada;, (iii) Mad Catz Europe, Limited (“MCE”), a corporation incorporated under the laws of England and Wales that sells our products in Europe; (iv) Mad Catz Interactive Asia Limited (“MCIA”), a corporation incorporated under the laws of Hong Kong engaged in the engineering, design, contract manufacture and regional sales of our products; and (v) Mad Catz Technological Development (Shenzhen) Co., Ltd. (“MCTD”), a corporation incorporated under the laws of the People’s Republic of China engaged in the engineering, design, quality assurance and quality control of our products. In November 2007, we acquired WAHL, which was the holding company for five operating subsidiaries located in the United Kingdom, France, Germany, the United States and Hong Kong. The Saitek entities which previously operated in the United States, the United Kingdom and Hong Kong no longer exist as they were merged into the local Mad Catz entities in April, July and October 2008, respectively. We also beneficially own, directly or indirectly, all of the issued and outstanding shares of the following inactive companies: FX Unlimited Inc., a corporation incorporated under the laws of Delaware; Xencet USA, Inc., a corporation incorporated under the laws of Delaware; Singapore Holdings Inc., a corporation incorporated under the laws of Delaware and Mad Catz Limited, a corporation incorporated under the laws of England and Wales.

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Our common stock trades on the Toronto Stock Exchange (“TSX”) and the American Stock Exchange (“AMEX”) under the symbol “MCZ.” Our registered office is located at 181 Bay Street, Suite 2500, Toronto, Ontario, M5J 2T7, and our telephone number is (416) 360-8600. MCI, our primary operating subsidiary and our operational headquarters is located at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108, and our telephone number is (619) 683-9830.

Overview

We design, manufacture (primarily through third parties in Asia), market and distribute accessories for all major videogame platforms, the personal computer (“PC”) and, to a lesser extent the iPod and other audio devices. Our accessories are marketed primarily under the Mad Catz, Saitek, Joytech, GameShark, and AirDrives brands; we also produce for selected customers a limited range of products which are marketed on a “private label” basis. Our products include videogame, PC and audio accessories, such as control pads, video cables, steering wheels, joysticks, memory cards, light guns, flight sticks, dance pads, microphones, car adapters, carry cases, mice, keyboards and headsets. We also market videogame enhancement products and publish videogames.

Our Products

The typical life cycle of successful videogame and PC accessories is similar to the life cycle of the relevant platform, which generally ranges from two to ten years. Factors such as competition for access to retail shelf space, changing technology, consumer preferences and seasonality could result in shortening the life cycle for older products, increasing the importance of our ability to release new products on a timely basis. We must frequently introduce new products and revisions to existing products in order to generate new revenues and/or to replace declining revenues from older products. The complexity of new platform technologies has resulted in longer development cycles and the need to carefully monitor and manage the product development process.

In fiscal 2009, approximately 25% of our gross sales was derived from products designed for use with Nintendo’s videogame platforms and handheld products. Nintendo’s Wii console was launched in North America in November 2006, with launches in Japan and Europe following in December 2006. The Wii console was the successor to Nintendo’s GameCube console, launched in the United States in 2001. In fiscal 2009, approximately 16% of our gross sales was derived from the sale of products designed for use with the Wii console. Although Nintendo discontinued marketing the GameCube platform in 2007, we continue to sell products for the GameCube console. In fiscal 2009, approximately 2% of our gross sales was derived from the sale of products designed for use with the GameCube console. The Wii is backward compatible for GameCube games — meaning that the Wii is capable of also playing games designed for the older, GameCube platform — but is not backward compatible for accessories. We offer unlicensed accessories for the Wii. Nintendo’s Game Boy Advance SP was launched in 2003 and continues to be available in the market. Gross sales of our products designed for this handheld videogame system accounted for approximately 1% of our gross sales in fiscal 2009. In 2004, Nintendo launched the Nintendo DS, followed in 2006 by the Nintendo DS Lite, and in April 2009 by the DSi. Sales of products compatible with these DS systems accounted for approximately 6% of our gross sales in fiscal 2009.

In fiscal 2009, approximately 20% of our gross sales was derived from products designed for use with Microsoft’s videogame platforms. Microsoft’s Xbox 360 console was launched in North America in November 2005, with launches in Europe and Japan following in December 2005. The Xbox 360 was the successor to Microsoft’s Xbox videogame console, which was launched in 2001. In fiscal 2009 sales of Xbox 360 products accounted for approximately 19% of our gross sales and sales of Xbox-compatible products accounted for approximately 1% of our gross sales. The Xbox 360 is backward compatible for some games but not accessories. We have entered into a license agreement with Microsoft to produce wired and certain wireless accessories for the Xbox 360.

In fiscal 2009, approximately 15% of our gross sales was derived from products designed for use with Sony’s videogame platforms and handheld products. Sony launched the PlayStation 3 in North America and Japan in late 2006 and in Europe in early 2007. Sony launched the PlayStation 2 in the United States in 2000. In March 2005, Sony launched the Sony PSP handheld videogame system, MP3 player and movie player in North America. The PSP launched in Europe in September 2005. In June 2009, Sony announced a new version of the PSP called the PSP

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Go!, which Sony has announced is scheduled to be available in October 2009. In fiscal 2009, products designed for use with the PlayStation 2, which Sony continues to manufacture and market, accounted for approximately 4% of our gross sales. In fiscal 2009, products designed for use with the PlayStation 3 accounted for approximately 8% of our gross sales. The PlayStation 3 is backward compatible for games but not accessories. We offer a full line of accessories for the PlayStation 3, which accessories are not licensed by Sony. In fiscal 2009, approximately 3% of our gross sales were derived from products designed for use with the PSP.

Videogame console prices typically are reduced as the products mature in the market place and as the launch of new consoles is anticipated. In the prior generation of videogame consoles, the PlayStation 2 and Xbox game consoles launched in the United States with a retail price of $299 and GameCube launched with a retail price of $199. After successive price decreases, the price of the PlayStation 2 system was lowered from $129 to $99 on April 1, 2009, while the Xbox and GameCube consoles have been discontinued. A similar pattern is beginning to emerge with the current generation of videogame consoles. In November 2005, Microsoft’s Xbox 360 launched in the United States in two configurations, the Core priced at $299 and the Premium priced at $399, followed up with the launch of the Elite in April 2007 at $480. After successive price decreases, as of May 2009, the Core, which was discontinued and replaced by the Arcade retails at $200, the Premium at $300 and the Elite at $400. Sony’s PlayStation 3 was launched in the United States in November 2006 in two configurations, a 20 GB model priced at $499 and a 60 GB model priced at $599. In July 2007, Sony lowered the price of the 60 GB version to $499, eliminated the 20 GB version and introduced an 80 GB version priced at $599. In October 2007, Sony in effect took another price reduction by eliminating the 60 GB version and introducing a 40 GB version at $400, while at the same time reducing the price of the 80 GB version to $499. In November 2008 Sony introduced a 160 GB PlayStation 3 for $499, at which time they dropped the price of the 80 GB version to its current $399. Nintendo launched its Wii in the United States in November of 2006 at its current price of $250. Lower console prices usually result in higher unit sales of console systems. Management believes that the more price sensitive “late adopter” consumer that waits for these price reductions before purchasing a system is also more likely to purchase value-priced accessories. Management believes that in fiscal 2010 there may be price reductions on one or more of the videogame console systems, but Microsoft, Nintendo or Sony have not announced any intention to do so, and there are no assurances any such price reductions will take place.

In fiscal 2009, approximately 30% of our gross sales was derived from personal computer gaming and other accessories which are marketed and sold under our Saitek brand. Saitek’s products include: PC games controllers, comprised of joysticks, gamepads and steering wheels; PC input devices, comprised primarily of mice, keyboards and other minor products such as web-cams and hubs; digital media speakers for both PCs and the iPod/MP3 market; and chess and intelligent games, which includes chess and bridge computers and related accessories.

The remaining approximate 10% of our fiscal 2009 gross sales was derived from products whose use is not specific to any particular hardware platform.

Mad Catz Strategy

During fiscal 2009, the Company’s key initiatives included: completing the full integration of Saitek into Mad Catz and expanding efforts initiated in fiscal 2008 to combine resources in product development and sales and marketing; launching our initial products under our Rock Band license; continuing the discipline in working capital management and product placement profitability; continuing to expand our portfolio of licensed properties; expanding our range of AirDrives products and expanding distribution for the AirDrives line; continuing our efforts to maintain compliance with environmental regulations in all of the jurisdictions in which we do business; continuing to pursue videogame publishing opportunities, with a particular emphasis on hardware-videogame bundles; and identifying strategic opportunities for the expansion of products in adjacent and compatible categories that will best optimize the Company’s infrastructure.

In fiscal 2010, we will focus on:

•  leveraging our global product development capabilities to increase the flow and timeliness of new products;

•  seeking efficiencies to meaningfully lower our operating costs without impacting our ability to continue to grow our business;

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•  increasing market penetration of our PC products, particularly in North America;

•  refining the market positioning of our brands to more effectively compete in all relevant categories and price-points;

•  continuing our discipline in working capital management and product placement profitability;

•  continuing to expand our portfolio of licensed properties;

•  continuing our efforts to maintain compliance with environmental regulations in all of the jurisdictions in which we do business;

•  identifying strategic opportunities for the expansion of products in adjacent and compatible categories, including transactions with companies for which products Mad Catz can leverage its global distribution capabilities;

•  continuing to expand our range of AirDrives portable audio headset products and distribution for the AirDrives line; and

•  continuing to pursue videogame publishing opportunities, with a particular emphasis on hardware-videogame bundles

Intellectual Property Needed to Produce our Products

Historically, a majority of our revenue has come from videogame accessories that are reverse engineered to work with videogame platforms sold by Sony, Nintendo and Microsoft. Some, but not all, of our products that are compatible with these videogame platforms have been produced under license agreements pursuant to which we received proprietary and other useful information, as well as the right to use first-party logos.

We currently do not have any license agreements with Sony. All of our current and historic product portfolio can be produced without a license from Sony. However, there is no guarantee that Sony will not alter their technologies to make unlicensed product offerings more difficult, cost prohibitive or impossible to produce. In the event that future Sony videogame platforms are developed or altered to become “closed systems” that cannot be reverse engineered, we would not be able to produce, manufacture and market accessories for those platforms without access to the applicable first-party proprietary information. Moreover, if Sony enters into license agreements with companies other than us for these “closed systems,” we would be placed at a substantial competitive disadvantage.

We have a peripheral and compatibility license from Microsoft covering specific product categories, including wireless specialty controllers, wired control pads, steering wheels, arcade sticks, flight sticks and dance mats for the Xbox 360 console. The license excludes light guns, cheat cards, memory units, wireless standard control pads and hard drives. The license will expire in March 2011.

We have a license from Nintendo for the rights to produce and distribute peripherals for the Rock Band videogame for the Wii system. The license will expire in June 2011.

From time to time, we acquire intellectual property licenses to augment the commercial appeal of our core products. We must obtain a license agreement before exploiting such intellectual property.

Product Development and Support

We develop products using a group of concept design, production and technical professionals, in coordination with our marketing and finance departments, with responsibility for the entire development and production process including the supervision and coordination of internal and external resources. Our hardware products are typically conceived and designed by our internal teams in San Diego, California, Bristol, England, Shenzen, China and Hong Kong, China. For these products we own the industrial design, and in most cases the tools, dies and molds used for production. From time to time, we also acquire the rights to produce and distribute products that are, or will be, independently created by third parties.

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In addition, we seek out and engage independent third-party developers to create videogames and videogame enhancement products on our behalf. Such products are sometimes owned by us, and usually we have unlimited rights to commercially exploit these products. In other circumstances, the third-party developer may retain ownership of the intellectual property and/or technology included in the product and reserve certain exploitation rights. We typically select these independent third-party developers based on their expertise in developing products in a specific category. Each of our third-party developers is under contract with us for specific products. From time to time, we also acquire the license rights to distribute videogames that are or will be independently created by third-party publishers. In such cases, the agreements with such publishers provide us with exclusive distribution rights for a specific period of time, often for specified platforms and territories.

In consideration for their services, the independent third-party developer usually receives a royalty, generally based on the net sales of the product that it has developed. Typically, the developer also receives an advance, which we recoup from the royalties otherwise payable to the developer. The advance generally is paid in “milestone” stages. The payment at each stage is tied to the completion and delivery of a detailed performance milestone. Working with an independent developer allows us to reduce our fixed development costs, share development risks with the third-party developer, take advantage of the third-party developer’s expertise in connection with certain categories of products or certain platforms, and gain access to proprietary development technologies.

Manufacturing

Our accessory products are manufactured to our specifications by outsourced factories located predominantly in and around Shenzhen, China. The use of outsourced manufacturing facilities is designed to take advantage of specific expertise and allow for flexibility and scalability to respond to seasonality and changing demands for our products. Our videogame enhancement products are manufactured by outsourced replication companies in the United States, Hong Kong and Europe. In some instances, packaging and final assembly is performed at our distribution facility in California or by outsourced suppliers in the United States or Europe.

Distribution

Our products are sold to many of the world’s largest retailers of interactive entertainment products primarily on a direct basis without the use of intermediaries or distributors. We also appoint distributors in certain territories to service retail accounts not dealt with on a direct basis. We maintain a direct sales force in the United States, Europe and China. Direct shipping programs with certain customers, whereby the customer receives and takes title of the products directly in Hong Kong, are managed by our Asian operation. Until June 2009, we operated a leased 95,000 square foot distribution center in Mira Loma, California which services North American customers. This facility was replaced in June 2009 with a 101,000 square foot distribution center in Redlands, California. We also utilize two outsourced distribution centers and related logistics solutions for the European market, one in the United Kingdom and one in Germany. All freight is handled by outsourced transportation companies. We operate information systems, including electronic data interchange (EDI) and integrated warehouse management systems, to remain compliant with the requirements of our mass market retailers.

Principal Markets

The Company operates as one business segment, in the design, manufacture (primarily through third parties in Asia), marketing and distribution of videogame and PC accessories and videogames. In fiscal 2009, approximately 58% of our gross sales were generated by customers whose retail stores are located in the United States, 37% in Europe, 2% in Canada, and 3% in other countries, including Australia, Japan, Korea, New Zealand and Singapore. In fiscal 2008, approximately 59% of our gross sales were generated by customers whose retail stores are located in the United States, 36% in Europe, 3% in Canada, and 2% in other countries, including Australia, Japan, Korea, New Zealand and Singapore. In fiscal 2007, approximately 71% of our gross sales were generated by customers whose retail stores are located in the United States, 22% in Europe, 6% in Canada, and less than 1% in other countries

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Customers

Our products are sold by many of the largest videogame and consumer accessories retailers in the world including Amazon.com, Best Buy, GameStop, Hollywood Video, Meijer, Target and Wal-Mart in the United States; Future Shop, GameStop/EB Games, in Canada and ASDA, Argos, Auchan, Carrefour, Curry’s, Dixons, Electronic Partner, Game, GameStation, GameStop, Media Markt, Micromania, PC World, ProMarkt, and Saturn in Europe.

In fiscal 2009, one of our customers, GameStop Inc., individually accounted for at least 10% of our gross sales, accounting for approximately 29% or our gross sales in fiscal 2009, taking into account all of its US and non-US entities. In fiscal 2008, one of our customers, GameStop Inc., individually accounted for at least 10% of our gross sales, accounting for approximately 33% of our gross sales in fiscal 2008. In fiscal 2007, two of our customers individually accounted for at least 10% of our gross sales. These customers, GameStop Inc. and Best Buy Co., Inc., together accounted for approximately 50% of our gross sales in fiscal 2007.

Competitive Environment

The primary markets in which we sell our products are the United States and Europe, and to a lesser extent, Canada. These markets are highly competitive, and we expect that we may face increased competition if additional companies enter these markets. Historically, price has been a significant competitive factor for interactive videogame and PC accessories. We believe that the other principal competitive factors that historically have affected retailer and consumer choice include value, product features, ease of use and installation, realism in simulation, name brand recognition, product styling and whether the product is licensed. Additional competitive factors from the perspective of the major retailers include margins, service, support, merchandising and promotional support, reliable and timely delivery, track record and electronic data interchange capability. We seek to differentiate our products through superior product design, packaging, product innovation, licensing and branding.

Our principal competitors for videogame and PC accessories include first-party manufacturers Microsoft, Nintendo and Sony, and third-party manufacturers including Accessories 4 Technology, ALS, Bensussen Deutsch, Big Ben, Core Gamer, Datel, Gamester, Genius, Griffin Technology, Intec, Hama GmbH & Co KG, Jöllenbeck GmbH, Katana Game Accessories, Inc., Logic3, Logitech, Naki, NYKO, Performance Designed Products LLC, Speedvision, Thrustmaster and Trust International B.V.

We believe that our products are targeted to a broad demographic group and that the major factors that will provide us with continued viability and competitive edge are licenses, low-cost products, quality, service, brands and retail relationships.

Employees

At March 31, 2009, we had 234 full-time employees in the following locations:

Location
United States	70
United Kingdom	43
Germany	21
France	7
Hong Kong	30
China	63
Total	234

Temporary employees are used in our distribution center in California, especially during the peak shipping months of October through December. Temporary employees during this period generally range between 10 and 20 hourly employees. Our ability to attract and retain qualified personnel is essential to our continued success. None of our employees are covered by a collective bargaining agreement, nor have we ever experienced any work stoppage and we believe that our employee relations are good.

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Executive Officers of the Registrant

Our executive officers and their ages as of June 23, 2009, are as follows:

Name	Position	Age
Darren Richardson	President, Chief Executive Officer and Director of Mad Catz Interactive, Inc. and MCI		48
Stewart Halpern	Chief Financial Officer of Mad Catz Interactive, Inc. and MCI		52
Whitney Peterson	Vice President Corporate Development and General Counsel of MCI		44

Darren Richardson has been our President and Chief Executive Officer since April 2004 and was elected to our Board of Directors in August 2005. Prior to his appointment as our President and Chief Executive Officer, Mr. Richardson served as our Executive Vice President since October 1997 and President and Chief Operating Officer of MCI since August 1999. Mr. Richardson also served in several senior management capacities with Games Trader, including Chief Operating Officer, and Vice President of Business Development, responsible for sales and marketing with a focus on new account development. He has a Master of Business Administration degree from Trinity College, Dublin and a Bachelor of Commerce degree from the University of Wollongong, Australia.

Stewart Halpern has been our Chief Financial Officer since January 2007. Prior to joining us, Mr. Halpern served as Head of Finance of Rockstar Games, a division of Take Two Interactive Software, Inc., a publicly-traded videogame publisher, since 2005. Prior to his service with Rockstar Games, from 2002 to 2005, Mr. Halpern was Managing Director, Entertainment Equity Research at RBC Capital Markets, where he covered the videogame and entertainment industries. In addition, Mr. Halpern has held sell-side equity research positions at Banc of America Securities and ING Barings Furman Selz LLC, and, previously served for eight years in the investment banking department at Credit Suisse First Boston. Mr. Halpern also served for three years as the Chief Financial Officer of Rush Communications. Mr. Halpern earned a Bachelor of Science in Administrative Sciences from Yale College. He also earned a Masters of Public and Private Management degree from Yale School of Management.

Whitney Peterson has been Vice President Corporate Development and General Counsel for MCI since July 1998. Prior to joining MCI, Mr. Peterson spent seven years working at the international law firm of Latham & Watkins, where he represented and consulted with numerous Fortune 500 companies. Mr. Peterson received his law degree from the J. Rueben Clark School of Law at Brigham Young University, where he graduated Magna Cum Laude. Mr. Peterson also served as an Articles Editor on the BYU Law Review in which he was published. Following law school, Mr. Peterson clerked for the Honorable Bruce S. Jenkins, Chief Judge of the Federal District Court in Utah.

Available Information

We provide our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports free of charge under “Investor Relations” on our website at www.madcatz.com as soon as reasonably practicable after we electronically file this material with, or furnish this material to, the SEC. The information contained on our website is not part of this Annual Report. You may also read and copy the documents to which we refer at the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at www.sec.gov.

We are required to file reports and other information with certain Canadian provincial securities commissions. You are invited to read and copy any reports, statements or other information, other than confidential filings, that we file with the provincial securities commissions. These filings are also electronically available from the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) (http://www.sedar.com), the Canadian equivalent of the SEC’s Electronic Document Gathering And Retrieval System, as well as on our website at www.madcatz.com under “Investor Relations.”

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Item 1A.   Risk Factors

You should consider each of the following factors, as well as the other information in this Annual Report, and in our other filings with the SEC, before deciding whether to invest in or continue to hold our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently consider immaterial may also impair our business operations. If any of the following risks actually occur, our business and financial results could be harmed. In that case, the trading price of our common shares could decline. You should also refer to the other information set forth in this Annual Report, including our financial statements and the related notes.

Risks Concerning Our Customers and Products

A significant portion of our revenue is derived from a few large customers.

The vast majority of our sales are generated from a small number of customers. Our top customer accounted for approximately 29% of our gross sales in fiscal 2009 and 33% of our gross sales in fiscal 2008, our top two customers accounted for approximately 50% of our gross sales in fiscal 2007. In fiscal 2009, our largest customer was GameStop Inc. Our top ten customers accounted for approximately 62% of gross sales in fiscal 2009, 70% of gross sales in fiscal 2008, and 82% of gross sales in fiscal 2007.

We do not have long-term agreements with these or other significant customers and our agreements with these customers do not require them to purchase any specific number or amount of our products. As a result, agreements with respect to pricing, returns, cooperative advertising or special promotions, among other things, are subject to periodic negotiation with each customer. No assurance can be given that these or other customers will continue to do business with us or that they will maintain their historical levels of business. The loss of any of our significant customers could have a material adverse effect on our business, results of operations, financial condition and liquidity. In addition, the uncertainty of product orders can make it difficult to forecast our sales and allocate our resources in a manner consistent with actual sales, and our expense levels are based in part on our expectations of future sales. If our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.

One or more of our largest customers may directly import or manufacture private-label products that are identical or very similar to our products. This could cause a significant decline in our sales and profitability.

Videogame and PC accessories are widely available from manufacturers and other suppliers around the world. Each of our largest customers has substantially greater resources than we do, and has the ability to directly import or manufacture private-label videogame accessories from manufacturers and other suppliers, including from some of our own subcontract manufacturers and suppliers. Our customers may believe that higher profit margins can be achieved if they implement a direct import or private-label program, reducing sales of our products. As a consequence, our sales and profitability could decline significantly.

A significant portion of our revenue is derived from a few core product categories.

We are dependent on a small number of core product categories to generate a significant proportion of our revenues. No assurance can be given that these or other products will continue to have consumer acceptance or that they will maintain their historical levels of sales. The loss of one or more of these products could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Our financial results are dependent on timely introduction of new products, and any failure or delay in the introduction of new products to the marketplace may have a material adverse effect on our business, results of operations, financial condition and liquidity. Our product mix constantly changes.

We generate our revenues from a number of frequently updated and enhanced “active products.” We define active products as products that have maintained a minimum level of average gross sales per quarter. Each product may be configured and sold in a number of different stock keeping units. We typically introduce new products and

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discontinue a similar number of products each year to maintain an optimal number of active products that we believe best supports our customers and the market. If we do not introduce new products in a timely and efficient manner and in accordance with our operating plans, our results of operations, financial condition and liquidity could be negatively and materially affected.

There are numerous steps required to develop a product from conception to commercial introduction and to ensure timely shipment to retail customers, including designing, sourcing and testing the electronic components, receiving approval of hardware and other third-party licensors, factory availability and manufacturing and designing the graphics and packaging. Any difficulties or delays in the product development process will likely result in delays in the contemplated product introduction schedule. It is common in new product introductions or product updates to encounter technical and other difficulties affecting manufacturing efficiency and, at times, the ability to manufacture the product at all. Although these difficulties can be corrected or improved over time with continued manufacturing experience and engineering efforts, if one or more aspects necessary for the introduction of products are not completed as scheduled, or if technical difficulties take longer than anticipated to overcome, the product introductions will be delayed, or in some cases may be terminated. No assurances can be given that products will be introduced in a timely fashion, and if new products are delayed, our sales and revenue growth may be limited or impaired.

The typical life cycle of successful videogame and PC accessories and titles is similar to the life cycle of the relevant game platforms, which historically has ranged from two to ten years. Factors such as competition for access to retail shelf space, consumer preferences and seasonality could result in the shortening of the life cycle for older products and increase the importance of our ability to release new products on a timely basis. We must introduce new products in order to generate new revenues and/or to replace declining revenues from older products. The complexity of new platform technologies has, in some cases, resulted in higher development expenses, longer development cycles, and the need to carefully monitor and plan the product development process.

Some of our products have been only recently introduced and although they may experience strong initial market acceptance, no assurance can be given that any initial acceptance will result in future sales. As a general matter, we expect that sales of these products will decline over the product’s life cycle. We cannot predict the length of the life cycle for any particular product. In order to control costs, and take advantage of the limited shelf space provided to us, we must periodically discontinue some of our product offerings. Our long-term operating results will therefore depend largely upon our continued ability to conceive, develop and introduce new appealing products at competitive prices.

We depend upon third parties to develop products and videogames.

Our business is dependent upon the continued development of new and enhanced videogame platforms and videogames by first-party manufacturers, such as Sony, Microsoft and Nintendo, and videogames by publishers, including but not limited to, Activision, Electronic Arts, Ubisoft, Take-Two Interactive Software and THQ. Our business could suffer if any of these parties fail to develop new or enhanced videogame platforms or popular game and entertainment titles for current or future generation platforms. If a platform is withdrawn from the market or fails to sell, we may be forced to liquidate our inventories or accept returns resulting in significant losses.

New game platforms and development for multiple consoles create additional technical and business model uncertainties that could impact our business.

A significant portion of our revenues are derived from the sale of videogame accessories for use with proprietary videogame platforms, such as the Nintendo Wii, GameCube, Game Boy Advance, Game Boy Advance SP, DS and DSi; the Microsoft Xbox and Xbox 360; the Sony PlayStation 2, PlayStation 3 and PSP. The success of our products is significantly affected by commercial acceptance of such videogame platforms and the life cycle of older platforms. In addition, we anticipate that the research and development expenses incurred to develop compatible accessories for new and updated videogame platforms may impact our profitability.

If first-party manufacturers choose to design PC or console-based systems that do not operate with third-party accessories and are successful in implementing technological barriers that prevent us from developing, manufacturing, marketing and distributing products for these new game platforms, our ability to continue our current

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business would be severely limited and our business, financial condition, results of operations and liquidity would be harmed.

Changes to current game platforms or introductions of new game platforms may result in our products becoming inoperable on some game platforms, which would reduce sales of our products and adversely affect our business, results of operations, financial condition and liquidity.

A significant proportion of our revenues are derived from products that are reverse engineered. First-party manufacturers continually update their game platforms to correct problems in the operating systems and reduce costs. These manufacturers also expend significant resources to create new game platforms. During the development of such product updates and new game platforms, manufacturers may implement changes to the design of the new game platforms that render our products inoperable. If our products become inoperable on one or more game platform, our sales may be significantly reduced. Moreover, we may have excess inventories of products that do not operate properly with new game platforms, which would limit our growth and harm our business, results of operations, financial condition and liquidity.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and may adversely affect our business, operating results and financial condition.

Our operations and some of our products are regulated under various federal, state, local and international environmental laws. In addition, regulatory bodies in many of the jurisdictions in which we operate propose, enact and amend environmental laws and regulations on a regular basis. The laws and regulations applying to our business include those governing the discharge of pollutants into the air and water, the management, disposal and labeling of, and exposure to, hazardous substances and wastes and the cleanup of contaminated sites. We are required to incur additional costs to comply with such regulations and may incur fines and civil or criminal sanctions, third-party property damage or personal injury claims, or could be required to incur substantial investigation or remediation costs, if we were to violate or become liable under environmental laws. Liability under environmental laws can be joint and several and without regard to comparative fault. The ultimate costs under environmental laws and the timing of these costs are difficult to predict. Although we cannot predict the ultimate impact of any new laws and regulations, they will likely result in additional costs or decreased revenue, and could require that we redesign or change how we manufacture our products, any of which could have a material adverse effect on our business. To the extent that our competitors choose not to abide by these environmental laws and regulations, we will be at a cost disadvantage, thereby hindering our ability to effectively compete in the marketplace.

Errors or defects contained in our products, failure to comply with applicable safety standards or a product recall could result in delayed shipments or rejection of our products, damage to our reputation and expose us to regulatory or other legal action.

Any defects or errors in the operation of our products may result in delays in their introduction. In addition, errors or defects may be uncovered after commercial shipments have begun, which could result in the rejection of our products by our customers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs and warranty claims, any of which could harm our business. Adults and children could sustain injuries from our products, and we may be subject to claims or lawsuits resulting from such injuries. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. We may also be unable to obtain adequate liability insurance in the future. Because we are a small company, a product recall would be particularly harmful to us because we have limited financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies. A significant product defect or product recall could materially and adversely affect our brand image, causing a decline in our sales, and could reduce or deplete our financial resources.

If we do not accurately forecast demand for particular products, we could incur additional costs or experience manufacturing delays, which would reduce our gross margins or cause us to lose sales.

Demand for our products depends on many factors such as consumer preferences and the introduction or adoption of game platforms and related content, and can be difficult to forecast. Demand for our products may

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remain stagnant or decrease. We expect that it will become more difficult to forecast demand for specific products as we introduce and support additional products, enter additional markets and as competition in our markets intensifies. If we misjudge the demand for our products, we could face the following problems in our operations, each of which could harm our operating results:

•  If our forecasts of demand are too high, we may accumulate excess inventories of products, which could lead to markdown allowances or write-offs affecting some or all of such excess inventories. We may also have to adjust the prices of our existing products to reduce such excess inventories.

•  If demand for specific products increases beyond what we forecast, our suppliers and third-party manufacturers may not be able to increase production rapidly enough to meet the demand. Our failure to meet market demand would lead to missed opportunities to increase our base of users, damage our relationships with retailers and harm our business.

•  Rapid increases in production levels to meet unanticipated demand could result in increased manufacturing errors, as well as higher component, manufacturing and shipping costs, including increased air freight, all of which could reduce our profit margins and harm our relationships with retailers and consumers.

Our pricing and product return policies and other promotional activities may negatively impact our sales and profitability and harm our business, results of operations, financial condition and liquidity.

Many of our products are value-priced or feature-enhanced versions of products offered by first-party manufacturers. Sales of products that compete with a similar first-party product generally comprise nearly half of our gross sales. In the event a first-party manufacturer or other competitor reduces its prices, we could be forced to respond by lowering our prices to remain competitive. If we are forced to lower prices, we may be required to “price protect” the products that remain unsold in our customers’ inventories at the time of the price reduction. Price protection results in us issuing a credit to our customers in the amount of the price reduction for each unsold unit in the customer’s inventory. Our price protection policies, which are customary in the videogame industry, can have a major impact on our sales and profitability if we are forced to reduce the price of products for which a large inventory exists. It is also likely that we will experience additional price competition, which may lead to price protection, as we continue to introduce new and enhanced products.

To the extent we introduce new versions of products or change our product sales mix, the rate of product returns may also increase above historical levels. Although we establish allowances for anticipated product returns and believe our existing policies have resulted in allowances that are adequate, there can be no assurance that such product return obligations will not exceed our allowances in the future, which would have a material adverse effect on our future operating results and financial condition.

We may not be able to comply with the terms of our license agreements, which may result in the loss of one or more of the licenses.

We have entered into license and royalty agreements with various parties in which we pay fees in exchange for rights to use product inventions or trademarked names, shapes and likenesses in our products. The agreements often include minimum fee guarantees based on a reasonable expectation of the product sales to be generated throughout the life of the agreement. We cannot assure you that we will be able to meet these expectations and may be obligated to pay unearned fees as a result. Some of our license agreements also contain stringent requirements regarding the use of the licensor’s trademarks. Our license and royalty agreements are for fixed terms. We cannot assure you that we will be able to comply with all of the requirements contained in our licenses or that we will be able to maintain or extend the rights to our existing licenses.

Some of our license agreements with videogame console developers have expired or may expire within the next fiscal year, which could limit our product offerings and significantly reduce our revenues.

Historically, a majority of our revenues have come from the sale of videogame accessories for use with videogame consoles sold by first-party manufacturers. Some of these products have been produced under license agreements with these first-party manufacturers. Some of these licenses are necessary in order for us to actually

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produce and sell the products (“license dependent products”), while other licenses have some perceived or actual marketing or sales benefit, but do not dictate whether we can produce the product (“marketing licenses”). Some of these license agreements have expired and others may expire, which could limit our product offerings and significantly reduce our revenues.

In March 2009, we amended our license agreement with Microsoft Corporation under which we have the right to manufacture, market and sell certain peripheral products for the Xbox 360 videogame console (“Xbox 360 Agreement”). The products produced pursuant to the Xbox 360 Agreement are license-dependent products. The term of the Xbox 360 Agreement is two years, with automatic renewals for successive one-year periods unless either party provides written notice of its intention to terminate the license at least 90 days prior to the end of the current term. Should the Xbox 360 Agreement expire, be terminated for cause, or fail to be renewed, our product offerings may be limited thereby significantly reducing our revenues.

The collectibility of our receivables depends on the continued viability and financial stability of our retailers and distributors.

Due to the concentration of our sales to large high-volume customers, we maintain individually significant accounts receivable balances with these customers. As of March 31, 2009 and March 31, 2008, our 10 largest accounts receivable balances accounted for approximately 76% and 71% of total accounts receivable, respectively. We generally do not require any collateral from our customers to secure payment of these accounts receivable. However, we do seek to control credit risk through ongoing credit evaluations of our customers’ financial condition and by purchasing credit insurance on European retail accounts receivable balances. If any of our major customers were to default in the payment of their obligations to us, our business, financial condition, operating results and cash flows could be adversely affected.

On November 10, 2008, Circuit City, a customer representing less than 5% of our gross sales, filed for Chapter 11 bankruptcy. We have assessed the impact of the bankruptcy filing on our business and accordingly recorded a charge to bad debt expense of $465,000 for the fiscal year ended March 31, 2009 in relation to this account.

Risks Concerning Our Suppliers

The manufacture and supply of our products is dependent upon a limited number of third parties, and our success is dependent upon the ability of these parties to manufacture and supply us with sufficient quantities of our products and on the continued viability and financial stability of these third-party suppliers.

We rely on a limited number of manufacturers and suppliers for our products. There can be no assurance that these manufacturers and suppliers will be able to manufacture or supply us with sufficient quantities of products to ensure consumer availability. In addition, these parties may not be able to obtain the raw materials or to obtain the energy or oil supply required to manufacture sufficient quantities of our products. Moreover, there can be no assurance that such manufacturers and suppliers will not refuse to supply us with products, and independently market their own competing products in the future, or will not otherwise discontinue their relationships with or support of our Company. Our failure to maintain our existing manufacturing and supplier relationships, or to establish new relationships in the future, could have a material adverse effect on our business, results of operations, financial condition and liquidity. If our suppliers are unable or unwilling for any reason to supply us with a sufficient quantity of our products, our business, revenues, results of operations, financial condition and liquidity would be materially adversely affected. We obtain our GameShark videogame enhancement products from third-party suppliers, for which an alternative source may not be available. If any of our key suppliers became financially unstable, our access to these products might be jeopardized, thereby adversely affecting our business, cash flow, financial condition and operational results.

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Production levels that do not match demand for our products could result in lost sales or a reduction in our gross margins.

The videogame and PC accessories industry is characterized by rapid technological change, frequent new product introductions, short-term customer commitments and rapid changes in demand. We determine production levels based on forecasts of the demand for our products. Actual demand for our products is difficult to forecast. If the actual demand for our products does not match the manufacture of our products, a number of problems could occur, including the loss of potential sales if production cannot be increased to match demand, and additional expenditures necessary to accelerate the production of some products, resulting in lower gross margins. Additionally, if customers find alternative sources of supply to meet their needs, our revenues, results of operations and financial condition could be adversely affected.

Any disruption of shipping and product delivery operations globally could harm our business.

We rely on contract ocean carriers to ship virtually all of our products from China to our primary distribution centers in the United States, Germany and the United Kingdom. Customers that take delivery of our products in China rely on a variety of carriers to ship those products to their distribution centers and retail outlets. We also rely on a number of sources of ground transportation to deliver our products from our primary distribution centers in the United States, the United Kingdom and Germany to our retail customers’ and distributors’ distribution centers and retail outlets. Any disruption or delay in the importation of our products, in the operation of our distribution centers or in the delivery of our products from our primary distribution centers to our retail customers’ and distributors’ distribution centers and retail outlets for any reason, including labor strikes or other labor disputes, terrorism, international incidents or lack of available shipping containers or vehicles, could significantly harm our business and reputation.

Risks of Doing Business Internationally

Any loss of China’s Normal Trade Relations “NTR” with the United States, or any changes in tariffs or trade policies, could increase our manufacturing expenses and make it more difficult for us to manufacture our products in China, if at all.

The majority of our products are manufactured in China and exported from Hong Kong and China to the United States and worldwide. Our products sold in the United States are currently not subject to United States import duties. However, as a result of opposition to policies of the Chinese government and China’s growing trade surpluses with the United States, there has been, and in the future may be, opposition to the extension of NTR status for China. The loss of NTR status for China, changes in current tariff structures, or adoption in the United States of other trade policies adverse to China could increase our manufacturing expenses and make it more difficult for us to manufacture our products in China, if at all.

Our manufacturing relationships in China may be adversely affected by changes in the political, economic and legal environment in China.

We maintain offices in Hong Kong and in China. The success of our operations in Hong Kong and China is highly dependent on the Chinese government’s continued support of economic reform programs that encourage private investment, and particularly foreign private investment. A change in these policies by the Chinese government could adversely affect us by, among other things, imposing confiscatory taxation, restricting currency conversion, imports and sources of supplies, prohibiting us from manufacturing our products in China, or restricting our ability to ship products from China into Hong Kong, or to ship finished products out of Hong Kong, or otherwise shutting down our offices in Hong Kong and China. Although the Chinese government has chosen economic reform policies to date, no assurance can be given that it will continue to pursue such policies or that such policies will not be significantly altered, especially in the event of a change in leadership or other social or political disruption.

Our sources of manufacturing and distribution capabilities could be adversely affected by ongoing tensions between the Chinese and Taiwanese governments. The Chinese government has threatened military action against Taiwan unless Taiwan adopts a plan for unifying with China. As of yet, Taiwan has not indicated that it intends to propose or adopt a reunification plan. Any military action on the part of China could lead to sanctions or military

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action by the United States and/or European countries, which could materially affect our sales to those countries and our operations in China.

There are also uncertainties regarding the interpretation and enforcement of laws, rules and policies in China. The Chinese legal system is based on written statutes, and prior court decisions have limited precedential value. In addition, many laws and regulations are relatively new; and the Chinese legal system is still evolving, resulting in sporadic and inconsistent enforcement and interpretation. The Chinese judiciary is relatively inexperienced in enforcing the laws that exist, leading to additional uncertainty as to the outcome of any litigation. Even where adequate laws exist in China, it may be impossible to obtain swift and equitable enforcement of such laws, or to obtain enforcement of a judgment by a court in a different jurisdiction.

The Chinese tax system is subject to substantial uncertainties and has been subject to recently enacted changes, the interpretation and enforcement of which are also uncertain. There can be no assurance that changes in Chinese tax laws or their interpretation or their application will not subject us to substantial Chinese taxes in the future.

There are numerous risks associated with our international operations, any number of which could harm our business.

We have offices and sales throughout the world. Our registered office and a sales office are in Canada. Our operational headquarters is in San Diego, California. We also have offices in the United Kingdom, France, Germany, China and Hong Kong. Approximately 60% of our gross sales in fiscal year 2009 were generated by customers whose retail locations are in North America, and a substantial majority of our products are manufactured by third parties in Hong Kong and China. The geographical distances between our operations create a number of logistical and communications challenges. These challenges include managing operations across multiple time zones, directing the manufacture and delivery of products across long distances, coordinating procurement of components and raw materials and their delivery to multiple locations, and coordinating the activities and decisions of the management team, which is based in a number of different countries.

In addition, there are other risks inherent in international operations, which could result in disruption or termination of supply of our products available for sale. These risks include:

•  unexpected changes in regulatory requirements, taxes, trade laws and tariffs;

•  political instability and the potential reversal of current favorable policies encouraging foreign investment or foreign trade by host countries;

•  differences in labor laws, labor unrest and difficulties in staffing and managing international operations;

•  longer payment cycles;

•  fluctuations in currency exchange rates;

•  potential adverse tax consequences;

•  limitations on imports or exports of components or assembled products, or other travel restrictions;

•  differing intellectual property rights and protections;

•  delays from doing business with customs brokers and governmental agencies; and

•  higher costs of operations.

These factors could materially and adversely affect our business, operating results, and financial condition.

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Intellectual Property Risks

We may be faced with legal challenges related to our products, including that our products infringe third parties’ intellectual property rights. These challenges could cause us to incur significant litigation or licensing expenses or could prohibit us from producing or marketing some or all of our products entirely.

Although we do not believe that our products infringe the proprietary rights of any third parties, there can be no assurance that infringement or other legal claims will not be asserted against us or that any such claims will not materially adversely affect our business, financial condition, or results of operations. Regardless of their validity or success, such claims may result in costly litigation, divert management’s time and attention, cause product shipment delays or require us to enter into royalty or licensing agreements, which may not be available on terms acceptable to us, or at all. If licensing arrangements are required but unavailable, we may be prohibited from marketing and distributing these products. In addition, we could also incur substantial costs to redesign our products to comply with legal orders or contractual arrangements. Any of these costs or outcomes could adversely affect our business, results of operations, financial condition and liquidity.

Our intellectual property rights may not prevent our competitors from using our technologies or similar technologies to develop competing products, which could weaken our competitive position and harm our financial results.

Our success depends in part on the use of proprietary technologies. We rely, and plan to continue to rely, on a combination of patents, copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our proprietary rights. We have entered into confidentiality and invention assignment agreements with our employees and contractors, and nondisclosure agreements with selected parties with whom we conduct business to limit access to and disclosure of our proprietary information. These contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent misappropriation of that intellectual property or deter independent third-party development of similar technologies. Monitoring the unauthorized use of proprietary technology and trademarks is costly, and any dispute or other litigation, regardless of outcome, may be costly and time consuming and may divert our management and key personnel from our business operations. The steps taken by us may not prevent unauthorized use of our proprietary technology or trademarks. Many features of our products are not protected by patents; and as a consequence, we may not have the legal right to prevent others from reverse engineering or otherwise copying and using these features in competitive products. If we fail to protect or to enforce our intellectual property rights successfully, our competitive position could suffer, which could adversely affect our financial results.

If our products are copied or “knocked-off,” our sales of these products may be materially reduced and our profitability may be negatively affected.

Occasionally in the videogame and PC accessories industry, successful products are “knocked-off” or copied by competitors. While we strive to protect our intellectual property, we cannot guarantee that knock-offs will not occur or that they will not have a significant effect on our business. The costs incurred in protecting our intellectual property rights could be significant, and there is no assurance that we will be able to successfully protect our rights.

Financing Risks

The amount of our outstanding debt may prevent us from taking actions we would otherwise consider in our best interest.

On November 20, 2007, in connection with the acquisition of our Saitek operations, we issued convertible notes with an aggregate principal amount of $14,500,000 (the “Saitek Notes”). The Saitek Notes bear interest at an annual interest rate equal to 7.5%. The first principal and interest payment under the Saitek Notes of $4,500,000 and $701,779, respectively, is due on October 31, 2009. The remaining principal and interest payment under the Saitek Notes of $10,000,000 and $2,451,162, respectively, is due on October 31, 2010. The Saitek Notes are convertible into shares of our common stock at any time up to the respective maturity date at a fixed conversion price of approximately $1.42 per share, representing a 15% premium to the average closing share price of our stock over the

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15 trading days preceding the execution of the Stock Purchase Agreement relating to the Saitek acquisition. If fully converted, the Saitek Notes would convert into approximately 10,217,744 shares of our common stock.

On June 24, 2009, the terms of the Saitek Notes were amended as follows. The maturity of the Saitek Notes was extended to March 31, 2019 with annual principal and interest payments of $2,400,000 due beginning March 31, 2011 until the Saitek Notes are retired. The Saitek Notes will bear interest at 7.5% through March 31, 2014 and 9.0% thereafter. Quarterly cash payments for partial interest in the amount of approximately $45,000 are due beginning June 30, 2009, in addition to an interest payment of $500,000 due on October 31, 2009, and an interest payment of $596,035 due on March 31, 2010. In connection with the amendment of the Saitek Notes, the maturity term of the Saitek $847,000 completion note was also amended to require payment in full, including accrued interest, on March 31, 2010, from its previous maturity date of August 1, 2011. The debt represented by the conversion of and the limitations contained in the Saitek Notes could have material consequences on our business, including:

•  it may be difficult to generate sufficient capital to satisfy our obligations under the Saitek Notes and our outstanding credit facility;

•  cash required to repay borrowings under our credit facility and the Saitek Notes, should such Saitek Notes not be converted into equity, may limit our ability to make necessary or desirable capital investments in our business and to take advantage of significant business opportunities, including acquisitions or divestitures;

•  the amounts outstanding under the Saitek Notes and our credit facility may make it more difficult to obtain other debt financing in the future;

•  shares issued upon conversion of the Saitek Notes will represent a large share of our outstanding common stock;

•  the debt obligations represented by the Saitek Notes could make us more vulnerable to general adverse economic and industry conditions; and

•  we could be at a competitive disadvantage to competitors with less debt.

We depend upon the availability of capital under our credit facility to finance our operations. Any additional financing that we may need may not be available on favorable terms, or at all.

In addition to cash flow generated from sales of our products, we finance our operations with a Credit Facility (the “Credit Facility”) provided by Wachovia Capital Finance Corporation (Central) (“Wachovia”), formerly Congress Financial Corporation (Central), an unrelated party. The Credit Facility was renewed in 2006 extending the expiration until October 30, 2009. On June 23, 2009, we extended the Credit Facility until October 31, 2012 and reduced the Credit Facility from $35.0 million to $30.0 million. If we are unable to comply with the restrictive and financial covenants contained in the Credit Facility, Wachovia may declare the outstanding borrowings under the facility immediately due and payable. In such an event, our liquidity will be materially adversely affected, which could in turn have a material adverse impact on our future financial position and results of operations. We would be required to obtain additional financing from other sources. We cannot predict whether or on what terms additional financing might be available. If we are required to seek additional financing and are unable to obtain it, we may have to change our business and capital expenditure plans, which would have a materially adverse effect on our future results of operations.

The Credit Facility contains financial and other covenants that we are obligated to maintain. If we violate any of these covenants, we will be in default under the Credit Facility. If a default occurs and is not timely cured or waived by Wachovia, Wachovia could seek remedies against us, including: (1) penalty rates of interest, (2) immediate repayment of the debt or (3) foreclosure on assets securing the Credit Facility. No assurance can be given that we will maintain compliance with these covenants in the future. The Credit Facility is asset based and can only be drawn down in an amount to which eligible collateral exists and can be negatively impacted by extended collection of accounts receivable, unexpectedly high product returns and slow moving inventory, among other factors. We were in violation of a financial covenant as of December 31, 2008, which violation was waived by Wachovia. As of March 31, 2009, we were in compliance with all covenants.

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If we need to obtain additional funds for any reason, including the termination of the Credit Facility or acceleration of amount due there under, increased working capital requirements, possible acquisitions or otherwise, there can be no assurance that alternative financing can be obtained on substantially similar or acceptable terms, or at all. Our failure to promptly obtain alternate financing could limit our ability to implement our business plan and have an immediate, severe and adverse impact on our business, results of operations, financial condition and liquidity. In the event that no alternative financing is available, we would be forced to drastically curtail operations, or dispose of assets, or cease operations altogether.

Funding for our future growth may depend upon obtaining new financing, which may be difficult to obtain given prevalent economic conditions and the general credit crisis.

To accommodate our expected future growth, we may need funding in addition to cash provided from current operations and continued availability under our Credit Facility provided by Wachovia Capital Finance Corporation (Central). Our ability to obtain additional financing may be constrained by current economic conditions affecting global financial markets. Specifically, the recent credit crisis and other related trends affecting the banking industry have caused significant operating losses and bankruptcies throughout the banking industry. Many lenders and institutional investors have ceased funding even the most credit-worthy borrowers. If we are unable to obtain additional financing, we may be unable to take advantage of opportunities with potential business partners or new products, to finance our existing operations or to otherwise expand our business as planned.

Accounts receivable represent a large portion of our assets, a large portion of which are owed by a few customers. If these accounts receivable are not paid, we could suffer a significant decline in cash flow and liquidity which, in turn, could limit our ability to pay liabilities and purchase an adequate amount of inventory.

Our accounts receivable represented 28%, 16%, and 24% of our total assets as of March 31, 2009, 2008 and 2007, respectively. As a result of the substantial amount and concentration of our accounts receivable, if any of our major customers fails to timely pay us amounts owed, we could suffer a significant decline in cash flow and liquidity which could negatively affect our ability to make payments under our Credit Facility and which, in turn, could adversely affect our ability to borrow funds, to purchase inventory, to sustain or expand our current sales volume. Accordingly, if any of our major customers fails to timely pay us amounts owed, our sales and profitability may decline.

Increases in interest rates may increase our interest expense and adversely affect our profitability and cash flow and our ability to service indebtedness.

We depend, in a significant part, on borrowings under the Credit Facility to finance our operations. At March 31, 2009, the outstanding balance under the Credit Facility was $13.3 million. The interest rate applicable to the Credit Facility varies based on the U.S. prime rate plus 0.75%. The interest rate applicable to the Credit Facility pursuant to the extension, as of June 23, 2009, is the U.S. prime rate plus 2.00% or, at our option, LIBOR plus 3.5% with a LIBOR floor of 1.5%. The variable rate debt outstanding under the Credit Facility had a weighted average annual interest rate of approximately 4.5% for the year ended March 31, 2009. Increases in the interest rate under the Credit Facility will increase our interest expense, which could harm our profitability and cash flow.

We have a substantial amount of goodwill on our balance sheet that may have the effect of decreasing our earnings or increasing our losses in the event that we are required to recognize an impairment charge to goodwill.

As of March 31, 2009, $8.5 million of goodwill is recorded on our balance sheet, which represents the excess of the total purchase price of our acquisitions over the fair value of the net assets acquired. At March 31, 2009, goodwill represented 15.2% of our total assets.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), we perform an annual impairment review at the reporting unit level during the fourth quarter of each fiscal year or more frequently if we believe indicators of impairment are present. SFAS No. 142 requires that goodwill and certain intangible

18

assets be assessed for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. We determined that we have one reporting unit and we assess fair value based on a review of our market capitalization as well as a discounted cash flow model, for which the key assumptions include revenue growth, gross profit margins, operating expense trends and our weighted average cost of capital. Given the volatility of our stock price and market capitalization, which fluctuates significantly throughout the year, we do not believe that our market capitalization is necessarily the best indicator of the fair value of our Company at any moment in time. However, we have determined that market capitalization over a sustained period, when considered with other factors may be an appropriate indicator of fair value. Further, to the extent the carrying amount of our reporting unit exceeds its market capitalization over a sustained period, an impairment may exist and require us to test for impairment. Accordingly, given that the carrying amount of our reporting unit had exceeded its market capitalization over a sustained period, we determined that a triggering event had occurred in the quarter ended December 31, 2008 and therefore recorded a goodwill impairment charge of $27.9 million during the year ended March 31, 2009. No assurance can be given that we will not be required to record additional goodwill impairments in future periods.

General Risk Factors

Acquired companies can be difficult to integrate, disrupt our business and adversely affect our operating results. The benefits we anticipate may not be realized in the manner anticipated.

The Company has made past acquisitions and may make future acquisitions with the expectation that these acquisitions would result in various benefits including, among other things, enhanced revenue and profits, greater market presence and development, particularly in Europe, and enhancements to our product portfolio and customer base. We may not realize these benefits, as rapidly as, or to the extent, anticipated by our management. Operations and costs incurred in connection with the integration of acquired companies with our other operating subsidiaries also could have an adverse effect on our business, financial condition and operating results. If these risks materialize, our stock price could be materially adversely affected.

Acquisitions involve numerous risks, including:

•  difficulties in integrating operations, technologies, services and personnel of the acquired companies;

•  potential loss of customers of the acquired companies;

•  diversion of financial and management resources from existing operations;

•  potential loss of key employees of the acquired companies;

•  integrating personnel with diverse business and cultural backgrounds;

•  preserving the development, distribution, marketing and other important relationships of the companies;

•  assumption of liabilities of the acquired companies; and

•  inability to generate sufficient revenue and cost savings to offset acquisition costs.

Our acquisitions may also cause us to:

•  assume certain liabilities;

•  incur additional debt, such as the debt we incurred to fund the acquisitions of Joytech and Saitek;

•  make large and immediate one-time write-offs and restructuring and other related expenses;

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•  become subject to intellectual property or other litigation; and

•  create goodwill or other intangible assets that could result in significant impairment charges and/or amortization expense.

As a result, if we fail to properly evaluate, execute and integrate acquisitions, our business and prospects may be seriously harmed.

We must stay at the forefront of technology and any inability to do so would have a material adverse effect on our results of operations, financial condition and liquidity.

The videogame and PC accessories industry is characterized by rapid technological advances, evolving industry standards, frequent new product introductions and enhancements and changing customer requirements. Much of the development of our new product offerings is dependent upon our ability to reverse engineer first-party products as they are introduced by the manufacturers; and the introduction of products that prevent or delay our ability to effectively develop products through reverse engineering could prevent us from developing new products, which would harm our business operations, financial condition, results of operations and liquidity. The introduction of products embodying or based upon new technologies and the emergence of new industry standards could render our existing inventory of products obsolete, incompatible with new consoles and unmarketable. We believe that any future success will depend upon our ability to reverse engineer new videogame systems, introduce new products that keep pace with technological developments, respond to evolving end-user requirements and achieve market acceptance. If we cannot reverse engineer the next generation videogame platforms or fail to develop and introduce new enhancements or new products for existing platforms, or if changes to existing videogame platforms render our products out of date or obsolete, or if our intended customers do not accept these products, our business would be materially harmed.

Current economic, political and market conditions may adversely affect our revenue growth and operating results.

Our revenue and profitability are affected by global business and economic conditions, including the current crisis in the credit markets, particularly in the United States and Europe. Downturns in the global economy could have a significant impact on demand for our products. In a poor economic environment such as we are operating in today, there is a greater likelihood that more of our customers could become delinquent on their obligations to us or go bankrupt, which, in turn, could result in a higher level of charge-offs and provision for credit losses, all of which would adversely affect our earnings. Uncertainty created by the long-term effects of volatile oil prices, the global economic slowdown, continuation of the global credit crisis, the war in the Middle East, terrorist activities, potential pandemics, natural disasters and related uncertainties and risks and other geopolitical issues may impact the purchasing decisions of current or potential customers. Because of these factors, we believe the level of demand for our products and services, and projections of future revenue and operating results, will continue to be difficult to predict. If economic conditions in the United States and other key markets deteriorate further or do not show improvement, we may experience material adverse impacts to our business and operating results.

On November 10, 2008, Circuit City, a customer representing less than 5% of our sales, filed for Chapter 11 bankruptcy. We have assessed the impact of this bankruptcy filing on our business and accordingly recorded a charge to bad debt expense of $465,000 for the fiscal year ended March 31, 2009 in relation to this account.

Natural disasters or other events outside of our control may damage our facilities or the facilities of third parties on which we depend for the manufacture and distribution of our products.

Our North American distribution center and operational headquarters are located in California near major earthquake faults that have experienced earthquakes in the past. All of our facilities may be subject to a variety of natural or man-made disasters. An earthquake or other event outside our control, such as power shortages, floods, fires, monsoons, other severe weather conditions, terrorism or other similar events, could disrupt our operations or damage or destroy our facilities. Any of these disruptions could impair the manufacture or distribution of products, damage inventory, interrupt critical functions or otherwise affect our business negatively, harming our business operations and future financial condition, results of operations or liquidity. In addition, if the facilities of our third-

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party product manufacturers are affected by similar activities beyond our control, our ability to obtain sufficient manufactured products could suffer or be impaired.

Our operations are vulnerable because we have limited redundancy and backup systems. Any failure of our data information systems could negatively impact our financial results.

Our internal order, inventory and product data management system is an electronic system through which we manage customer orders and product pricing, shipment, returns, among other matters. The continued and uninterrupted performance of our information systems is critical to our day-to-day business operations. Despite our precautions, unanticipated interruptions in our computer and telecommunications systems have, in the past, caused problems or stoppages in this electronic system. These interruptions, and resulting problems, could occur in the future. We have extremely limited ability and personnel to process purchase orders and manage product pricing and other matters in any manner other than through this electronic system. Any interruption or delay in the operation of this electronic system could cause a significant decline in our sales and profitability.

Our business is seasonal and our financial results vary from period to period.

The videogame and PC accessories industry is highly seasonal and our operating results vary substantially from period to period. We generate a substantial portion of our sales during the holiday season. The high level of seasonality causes us to take significant risks in the purchase of inventory for the holiday season. There can be no guarantee that our customers or we will sell all of our inventories. Excess inventory at year-end may result in financial losses from obsolescence, reserves, returns and markdowns.

Moreover, if expenses remain relatively fixed, but our revenues are less than anticipated in any quarter, our operating results would be adversely affected for that quarter. In addition, incurring unexpected expenses could adversely affect operating results for the period in which such expenses are incurred. Failure to achieve periodic revenue, earnings and other operating and financial results as anticipated by brokerage firms or industry analysts could result in an immediate and adverse effect on the market price of our common shares. We may not discover, or be able to confirm, revenue or earnings shortfalls until the end of a quarter, which could result in a greater immediate and adverse effect on the share price.

We are constantly looking for opportunities to grow our business and diversify our product line. If we fail to successfully manage the expansion of our business, our sales may not increase commensurately with our capital investments, which would cause our profitability to decline.

The industry in which we compete is highly competitive. As a result, we look for opportunities to grow our business, including through the expansion of our product offerings. We plan to continue the diversification of our product line. Our new product offerings, including our complete lines of products for each of the next generation gaming systems, have required and will continue to require significant resources and management’s close attention. In offering new products, our resources are likely to be strained because we have less experience in the new product categories. Our failure to successfully manage our planned product expansion could result in our sales not increasing commensurately with our capital investments, causing a decline in our profitability.

We may pursue additional acquisitions, which would subject our business to the risks associated with acquiring new business.

We may expand our operations or product offerings through the acquisition of additional businesses, products or technologies. Recent examples are the acquisitions of the Joytech assets and the Saitek business. There can be no assurance that we will be able to identify, acquire or profitably manage additional businesses or successfully integrate any acquired businesses, products or technologies into our Company without substantial expenses, delays or other operational or financial problems. Acquisitions involve a number of risks, some or all which could have a material adverse effect on our acquired businesses, products or technologies. Furthermore, there can be no assurance that any acquired business, product, or technology will be profitable or achieve anticipated revenues and income. Our failure to manage our acquisition strategy successfully could have a material adverse effect on our business, results of operations and financial condition.

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Our operating results are exposed to changes in exchange rates.

We have net monetary asset and liability balances in foreign currencies other than the U.S. dollar, including the Pound Sterling, the Euro, the Canadian dollar, the Hong Kong dollar and the Chinese Yuan Renminbi (“CNY”). International sales primarily are generated by our subsidiaries in the United Kingdom, Germany and Canada, and are denominated typically in their local currency. The expenses incurred by these subsidiaries are also denominated in the local currency. As a result, our operating results are exposed to change in exchange rates between the U.S. dollar and the Pound Sterling, the Euro, the Canadian dollar, the Hong Kong dollar and the CNY. We do not currently hedge our foreign exchange risk, which historically has not been significant. We will continue to monitor our exposure to currency fluctuations, and, where appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, which may be significant from time to time.

Possible increase in value to Chinese currency vis-à-vis U.S. currency could have a material impact on the cost of our products.

Historically China’s currency, the CNY, has been pegged to the U.S. dollar. On July 21, 2005, the government of China announced that the exchange rate of the CNY was appreciating against the U.S. dollar and that the CNY would thereafter have a more flexible exchange rate within a 0.3% band that would float against a basket of unidentified foreign currencies. On May 18, 2007, the People’s Bank of China updated this policy and announced its decision to enlarge the floating band of the CNY trading prices against the U.S. dollar in the inter-bank spot foreign exchange market from 0.3% to 0.5%. The administrative rules governing the floating band of the CNY trading prices against non-US dollar currencies in the inter-bank spot foreign exchange market and the spread between the CNY/U.S. dollar selling and buying prices quoted by the foreign exchange-designated banks remain unchanged.

The Chinese government may decide to change or abandon this new policy at its sole discretion at any time in the future. The recent appreciation of the CNY against the U.S. dollar and any additional appreciation in the exchange rate of the CNY against the U.S. dollar will increase our factory and production costs, including labor and certain raw materials that could have a material impact on the cost of our products and our results of operations.

Failure to attract, retain and motivate skilled personnel would have a material adverse effect on our results of operations, financial condition or liquidity.

Our ability to achieve our revenue and operating performance objectives will depend in large part on our ability to attract and retain qualified and highly skilled sales, marketing, operations, logistics, management, engineering and finance personnel. We compete for our personnel with other companies, and competition for such personnel is intense and is expected to remain so for the foreseeable future, particularly for those with relevant technical expertise. Failure to retain and expand our key employee population could adversely affect our business and operating results.

We are heavily dependent upon our senior management team. The continued availability of this team will be a major contributing factor to our future growth. In the event that any member of senior management becomes unavailable for any reason, we could be materially and adversely affected. We do not maintain key-man life insurance on our senior management.

Competition for market acceptance and retail shelf space and pricing competition affects our revenue and profitability.

The videogame and PC accessory market is highly competitive and the barriers to entry are low. Only a small percentage of products introduced in the market achieve any degree of sustained market acceptance. If our products are not successful, our operations and profitability will be negatively impacted. Competition in the videogame accessory industry is based primarily upon:

•  the availability of significant financial resources;

•  the quality of products;

•  reviews received for products from independent reviewers;

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•  access to retail shelf space;

•  the success of the game console for which the products were developed;

•  the price at which the products are sold; and

•  the number of other competing products for the system for which the products were developed.

Some of our competitors, particularly the first-party manufacturers, enjoy competitive advantages over us, such as longer operating histories, larger technical staffs, more established and larger sales and marketing organizations, significantly greater financial and other resources, ability to respond more quickly to new or emerging technologies and changes in customer requirements or ability to establish or strengthen cooperative relationships with retailers, distributors and other marketers.

Increased competition from these and other sources could require us to respond to competitive pressures by establishing pricing, marketing and other programs or seeking out additional acquisitions that may be less favorable than what we could otherwise establish or obtain, and thus could have a material adverse effect on our business, financial condition and results of operations. No assurance can be given that we will be able to compete effectively in our markets.

Any future terrorist attacks and other acts of violence or war may affect the demand for videogame and PC accessories, which may negatively affect our operations and financial results.

The continued threat of terrorism within the United States, Europe and the Middle East and the military action and heightened security measures in response to such threat may cause significant disruption to commerce throughout the world. To the extent that such disruptions result in delays or cancellations of customer orders, a general decrease in the demand for videogame accessories, or our inability to effectively market our products, our business and results of operations could be materially and adversely affected. We are unable to predict whether the threat of terrorism or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term material adverse effect on our business, results of operations, financial condition and liquidity.

Volatility in the mass-market and consumer electronic retail sectors could have a material adverse effect on our sales.

We sell our products through a network of domestic and international mass-market and consumer electronics retailers, as well as some distributors, and our success depends on the continued viability and financial stability of these customers. The retail industry has historically been characterized by significant volatility, including periods of widespread financial difficulties and consolidations, and the emergence of alternative distribution channels. While we attempt to minimize the risks associated with this industry volatility, there is always a risk that one or more of our customers will experience economic difficulties or be acquired by competitors. If any of our customers cease doing business, it could have a material adverse effect on our sales and could significantly harm our business, financial condition and operating results.

Risk Factors Related to Our Internal Controls

If we fail to maintain an adequate system of internal controls, we may not be able to accurately report our financial results, which could cause current and potential shareholders to lose confidence in our financial reporting and in turn affect the trading price of our common stock.

Section 404 of the Sarbanes-Oxley Act and the related regulations require the management of public companies in the United States to evaluate and report on the companies’ systems of internal control over financial reporting. In addition, our independent registered public accountants will be required to attest to and report on our management’s evaluation beginning with our 2010 fiscal year. We have and will continue to incur significant expenses and management resources to comply with the requirements of Section 404 on an ongoing basis. We cannot be certain that the measures we have taken to assess, document, improve and validate through testing the adequacy of our internal control process over financial reporting will ensure that we maintain such adequate

23

controls over our financial reporting process in the future. Failure to implement required new controls could cause us to fail to meet reporting obligations, which in turn could cause current and potential shareholders to lose confidence in our financial reporting. Inferior internal controls or the determination that our internal control over financial reporting is not effective might cause investors to lose confidence in our reported financial information, which could cause volatility in the market price of our shares.

Risk Factors Related to Our Shares

Penny stock rules may negatively impact the liquidity of our common stock.

Our common stock is subject to rules promulgated by the United States Securities and Exchange Commission (the “SEC”) relating to “penny stocks,” which apply to certain companies whose shares trade at less than $5.00 per share and which do not meet certain other financial requirements specified by the SEC. These rules require brokers who sell “penny stocks” to persons other than established customers and “accredited investors” to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in such penny stocks. These rules may discourage or restrict the ability of brokers to sell our common stock and may affect the secondary market for our common stock. These rules could also have a detrimental effect upon our ability to raise funds through an offering of our common stock.

Volatility of share price and absence of dividends.

The market price of our common stock has been and is likely to be highly volatile. Many factors could have a significant adverse impact on the market price of our common stock, including:

•  our or our competitors’ announcements of technological innovations or new products by us or our competitors;

•  governmental regulatory actions;

•  developments with our strategic alliances and collaborators;

•  developments concerning our proprietary rights or the proprietary rights of our competitors (including litigation);

•  period-to-period fluctuations in our operating results;

•  changes in estimates of our performance by securities analysts;

•  market conditions for consumer technology stocks in general; and

•  other factors not within our control.

We have never paid cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

There can be no assurance that the holders or purchasers of our common stock will be able to resell their shares at prices equal to or greater than their cost.

The market price of our common stock could be subject to significant fluctuations in response to quarterly variations in our operating results, announcements of technological innovations through new products by us or our competitors, changes in financial estimates by securities analysts or other events or factors, many of which are beyond our control. In addition, the stock markets have experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of many companies whose businesses are dependent on technology and that often have been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock. There can be no assurance that the holders or purchasers of our common stock will be able to resell their shares at prices equal to or greater than their cost.

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Investors may not be able to secure foreign enforcement of civil liabilities against management.

The enforcement by investors of civil liabilities under the federal securities laws of the United States may be adversely affected by the fact that we are organized under the laws of Canada, that some of our officers and directors are residents of a foreign country and that all, or a substantial portion, of such persons’ assets are located outside of the United States. As a result, it may be difficult for holders of our common stock to affect service of process on such persons within the United States or to realize in the United States upon judgments rendered against them.

Item 1B.   Unresolved Staff Comments

None.

Item 2.   Properties

MCI leases 16,000 square feet of office space for its headquarters at 7480 Mission Valley Road, Ste. 101, San Diego, California, 92108-4406. The lease is scheduled to expire on September 30, 2013.

MCI also leases a 95,000 square foot warehouse located at 12160 Philadelphia Street, Mira Loma, California, 91752-1188. The lease is scheduled to expire on June 30, 2009.

In March 2009, MCI entered into a lease for a 101,000 square foot warehouse located at 490 Nevada Street, Redlands, California, 92373 which will commence on July 1, 2009 and is scheduled to expire on June 30, 2015. This warehouse will replace the Mira Loma warehouse, whose lease will not be renewed upon expiration.

MCE leases business premises located at Office Unit 31 Shenley Pavilions, Shenley Wood, Milton Keynes, Buckinghamshire MK5 6LB. The lease is scheduled to expire on November 30, 2009.

MCE leases business premises in the United Kingdom located at Unit 4, West Point Row Great Park Road, Almondsbury, Bristol BS32 4QG. The lease is scheduled to expire on November 25, 2009. Part of the premises is subleased to a third party. The sublease is scheduled to expire on November 24, 2009.

MCIA leases business premises located at 138 ShaTin Rural Committee Road, Unit 1717-21, 17^th Floor, Grand Central Plaza, Tower 2, ShaTin, New Territories, Hong Kong. The lease is scheduled to expire on September 30, 2011.

MCTD leases business premises in China located at 17/F., Jinwei Building, Shenzhen, Guangdong Province, PRC. The lease is scheduled to expire on February 14, 2010.

MCTD leases business premises in China located at Room 2201-2208, 22/F., GuanLiDa Mansion, 269 QianJin 1st Road, District 30, Bao An, Shenzhen, P.R.C. The lease is scheduled to expire on February 14, 2010.

Saitek Elektronik Vertriebs GmbH leases business premises in Germany located at Landsberger Str. 400, 81241 München. The lease is scheduled to expire on March 31, 2011.

Saitek SA leases business premises in France located at 21 Rue d’Hauteville Bte B 75010 Paris. The lease is scheduled to expire on June 23, 2011.

Management believes that our leased facilities are adequate for the near term. At present management is unaware of any environmental issues affecting any of our premises.

Item 3.   Legal Proceedings

On or about January 23, 2009, Michele Graham, a former employee of MCI, filed an action in the Superior Court of California in the County of San Diego, styled, Michele Graham v. Mad Catz, Inc., Case No. 37-2009-00081888 CU-WT-CTL. In her complaint, Ms. Graham claims she was improperly terminated based on her age. Ms. Graham has requested $73,500 in special damages and $5.65 million in punitive damages. Mad Catz disputes Ms. Graham’s claims and intends to vigorously defend the action.

On or about March 5, 2009, Immersion Corporation filed an action against MCI alleging underpayment of royalties pursuant to several license agreements. The action was filed in the Superior Court of California in the

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County of Santa Clara and is styled, Immersion Corporation v. Mad Catz, Inc., Case No. 109 CV 136562. Immersion claimed MCI owed unpaid royalties. Immersion and MCI agreed to settle the dispute for $300,000 to be paid out over a one year time period, and this amount was recorded in accrued liabilities as of March 31, 2009.

We may at times be involved in litigation in the ordinary course of business. We will also, from time to time, when appropriate in management’s estimation, record reserves in our financial statements for pending litigation. Litigation is expensive and is subject to inherent uncertainties, and an adverse result in any such matters could adversely impact our operating results or financial condition. Additionally, any litigation to which we may become subject could also require significant involvement of our senior management and may divert management’s attention from our business and operations.

Item 4.   Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2009.

PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock commenced trading on the Toronto Stock Exchange (“TSX”) in December 1995 under the symbol “GTR.” Our common stock began trading on the American Stock Exchange (“AMEX”) in the United States in September 1999 under the symbol “GIG.” In September 2001, our common stock began trading on both the AMEX and the TSX under the symbol “MCZ” to reflect our name change to Mad Catz Interactive, Inc. The following table sets forth, for the fiscal quarters indicated, the high and low market prices for the Company’s common stock on the AMEX and TSX:

	American Stock Exchange				Toronto Stock Exchange
	(U.S. $)				(Canadian $)
	High		Low		High		Low
Fiscal 2009
Fourth Quarter	$	0.45	$	0.15	$	0.50	$	0.20
Third Quarter		0.61		0.25		0.62		0.25
Second Quarter		0.80		0.45		0.85		0.48
First Quarter		0.81		0.55		0.85		0.55
Fiscal 2008
Fourth Quarter		1.23		0.56		1.20		0.53
Third Quarter		1.39		0.95		1.32		0.92
Second Quarter		1.50		0.86		1.56		0.87
First Quarter		1.65		0.76		1.75		0.83

Holders

The closing sales price of our common stock on the American Stock Exchange was $0.35 on June 23, 2009, and there were approximately 225 shareholders of record of our common stock as of that date.

Dividends

We have never declared or paid any dividends and do not expect to pay any dividends in the foreseeable future.

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Issuer Purchases of Equity Securities

Neither our Company nor any affiliated purchaser repurchased any of our equity securities during fiscal 2009.

The graph below compares the cumulative total shareholder return on the Common Stock of the Company from March 31, 2004 through and including March 31, 2009 with the cumulative total return on the S&P/TSX Composite Total Return Index, the AMEX Market Index and the stocks included in the Morningstar database under the Standard Industrial Code 3944 (Games & Toys, except Bicycles). The graph assumes the investment of $100 in the Company’s Common Stock and in each of the indexes on March 31, 2004 and reinvestment of all dividends. Unless otherwise specified, all dates refer to the last day of each year presented. The stock price information shown on the graph below is not necessarily indicative of future price performance.

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

AMONG MAD CATZ INTERACTIVE, INC., AMEX MARKET

NDEX, S&P/TSX COMPOSITE INDEX AND SIC CODE INDEX

ASSUMES $100 INVESTED ON MAR. 31, 2004
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 31, 2009

	Fiscal Year Ended
	3/31/2004		3/31/2005		3/31/2006		3/31/2007		3/31/2008		3/31/2009
Mad Catz Interactive, Inc.	$	100.00	$	225.00	$	77.78	$	115.28	$	86.11	$	43.19
SIC Code Index		100.00		107.70		101.10		130.59		116.41		77.93
AMEX Market Index		100.00		104.76		128.58		138.27		135.45		88.87
S&P/TSX Composite Total Return		100.00		113.93		146.32		163.04		169.56		114.58

Companies included in the Standard Industrial Code 3944 peer group include: Action Products International, Inc.; Corgi International Ltd. ADS; Exx Inc. (Class A and Class B Shares); GameTech International, Inc.; Gaming Partners; Hasbro, Inc.; Jakks Pacific, Inc.; LeapFrog Enterprises, Inc.; Mad Catz Interactive, Inc.; Mattel, Inc.; and RC2 Corporation.

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Item 6.   Selected Financial Data

The summary of financial information set forth below is derived from and should be read in conjunction with the financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

The selected financial and operating data presented below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” appearing elsewhere in this Annual Report on Form 10-K. Our statements of operations data for the years ended March 31, 2009, 2008 and 2007, and the balance sheet data at March 31, 2009 and 2008 are derived from the audited financial statements included elsewhere in this Annual Report on Form 10-K. The statements of operations data for the years ended March 31, 2006 and 2005 and the balance sheet data at March 31, 2007, 2006 and 2005 are derived from our audited financial statements that do not appear herein. Because of our acquisition of Saitek in November 2007, the consolidated statement of operations for the year ended March 31, 2008 only includes the results of the operations of Saitek since the date of the acquisition. Our historical results are not necessarily indicative of our results of operations to be expected in the future.

	Years Ended March 31,
	2009			2008			2007			2006			2005
	(In thousands of U.S. dollars, except share and per share data)
Consolidated Statements of Operations Data:
Net sales	$	112,563		$	87,737		$	99,797		$	100,945		$	112,146
Cost of sales		80,558			58,841			74,703			88,147			85,225
Gross profit		32,005			28,896			25,094			12,798			26,921
Operating expenses:
Sales and marketing		13,216			10,304			8,923			12,252			10,053
General and administrative		14,968			11,004			8,244			7,915			6,998
Research and development		1,076			1,516			1,406			1,605			897
Goodwill impairment		27,887			—			—			—			—
Amortization		2,344			987			—			—			—
Total operating expenses		59,491			23,811			18,573			21,772			17,948
Operating income (loss)		(27,486	)		5,085			6,521			(8,974	)		8,973
Interest expense, net		(2,094	)		(1,156	)		(1,109	)		(1,395	)		(1,203	)
Foreign exchange gain (loss), net		(462	)		1,703			256			(765	)		(582	)
Other income		361			280			262			307			127
Income (loss) before income taxes		(29,681	)		5,912			5,930			(10,827	)		7,315
Income tax (expense) benefit		(2,933	)		(2,744	)		(2,225	)		4,174			(2,733	)
Net income (loss)	$	(32,614	)	$	3,168		$	3,705		$	(6,653	)	$	4,582
Net income (loss) per share — basic	$	(0.59	)	$	0.06		$	0.07		$	(0.12	)	$	0.09
Net income (loss) per share — diluted	$	(0.59	)	$	0.06		$	0.07		$	(0.12	)	$	0.08
Shares used in calculation:
Basic		55,088,960			54,843,688			54,244,383			54,244,383			53,506,289
Diluted		55,088,960			55,314,438			55,036,591			54,244,383			54,481,162
Consolidated Selected Balance Sheet Data:
Cash	$	2,890		$	5,230		$	2,350		$	1,607		$	1,085
Working capital		4,697			8,789			14,351			6,089			15,601
Goodwill and intangible assets, net		13,585			44,024			19,331			24,997			24,893
Total assets		55,601			91,321			55,218			68,735			79,136
Bank loan		13,272			11,470			1,345			8,581			12,100
Convertible notes payable including interest		16,051			14,901			—			—			—
Total shareholders’ equity		6,417			41,315			37,227			36,852			42,903

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EBITDA RECONCILIATION (Unaudited)

EBITDA, a non-GAAP financial measure, represents net income before interest, taxes, depreciation and amortization. Prior to the third quarter of fiscal 2009, we had not recorded any goodwill impairment charges. To address the goodwill impairment charge recorded in fiscal 2009, we modified the calculation to exclude this non-operating, non-cash charge and defined the result as “Adjusted EBITDA”. We believe this to be a more meaningful measurement of performance than the previously calculated EBITDA. Adjusted EBITDA is not intended to represent cash flows for the period, nor is it being presented as an alternative to operating or net income as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. As defined, Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. We believe, however, that in addition to the performance measures found in our financial statements, Adjusted EBITDA is a useful financial performance measurement for assessing our Company’s operating performance. Our management uses Adjusted EBITDA as a measurement of operating performance in comparing our performance on a consistent basis over prior periods, as it removes from operating results the impact of our capital structure, including the interest expense resulting from our outstanding debt, and our asset base, including depreciation and amortization of our capital and intangible assets. In addition, Adjusted EBITDA is an important measure for our lender. We calculate Adjusted EBITDA as follows (in thousands):

	Years Ended March 31,
	2009			2008		2007		2006			2005
	(In thousands of US dollars)
Net income (loss)	$	(32,614	)	$	3,168	$	3,705	$	(6,653	)	$	4,582
Adjustments:
Interest expense		2,094			1,156		1,109		1,395			1,203
Income tax expense (benefit)		2,933			2,744		2,225		(4,174	)		2,733
Depreciation and amortization		4,193			2,910		1,938		1,904			1,852
EBITDA		(23,394	)		9,978		8,977		(7,528	)		10,370
Goodwill impairment		27,887			—		—		—			—
Adjusted EBITDA	$	4,493		$	9,978	$	8,977	$	(7,528	)	$	10,370

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section contains forward-looking statements involving risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors including those set out in Part I General Information, Item 1A Risk Factors elsewhere in this Annual Report. The following discussion should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this Annual Report.

Overview

Our Business

We are a leading provider of videogame accessories, PC game accessories, PC input devices, multimedia audio products, chess and intelligent games and videogames primarily marketed under the Mad Catz, Saitek, GameShark and Joytech brands. We also produce for selected customers a limited range of products which are marketed on a “private label” basis. We design, manufacture (primarily through third parties in Asia), market and distribute accessories for all major videogame platforms, the PC and, to a lesser extent the iPod and other audio devices. Our products include control pads, steering wheels, joysticks, memory cards, video cables, light guns, dance pads, microphones, car adapters, carry cases, mice, keyboards and headsets. We also market videogame enhancement products and publish videogames.

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In September 2007, we acquired certain assets of Joytech from Take-Two Interactive Software, Inc. (NASDAQ: TTWO) for approximately $3 million. The assets acquired included inventories, property and equipment and intangible assets such as trademarks, customer relationships and product lines.

In November 2007, we acquired all of the outstanding stock of a private holding company that owns Saitek, a leading provider of PC game accessories, PC input devices, multimedia audio products, chess and intelligent games, for approximately $33.5 million, including transaction costs and restructuring accruals totaling $3.2 million. We acquired all of Saitek’s net tangible and intangible assets, including trademarks, tradenames, customer relationships and product lines.

Seasonality and Fluctuation of Sales

We generate a substantial percentage of our net sales in the last three months of every calendar year, our fiscal third quarter. Our quarterly results of operations can be expected to fluctuate significantly in the future, as a result of many factors, including: seasonal influences on our sales; unpredictable consumer preferences and spending trends; the introduction of new videogame platforms; the need to increase inventories in advance of our primary selling season; and timing of introductions of new products. See further discussion and sales by quarter under “Net Sales” below.

Foreign Currency

Approximately 42% of our annual sales are transacted outside the United States. The majority of our international business is presently conducted in currencies other than the U.S. dollar. Foreign currency transaction gains and losses arising from normal business operations are credited to or charged against earnings in the period incurred. As a result, fluctuations in the value of the currencies in which we conduct our business relative to the U.S. dollar will cause currency transaction gains and losses, which we have experienced in the past and continue to experience. Due to the substantial volatility of currency exchange rates, among other factors, we cannot predict the effect of exchange rate fluctuations upon future operating results. There can be no assurances that we will not experience currency losses in the future. To date we have not hedged against foreign currency exposure and we cannot predict the effect foreign currency fluctuations will have on us in the future.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting periods. The policies discussed below are considered by management to be critical because they are not only important to the portrayal of our financial condition and results of operations but also because application and interpretation of these policies requires both judgment and estimates of matters that are inherently uncertain and unknown. As a result, actual results may differ materially from our estimates.

Revenue Recognition

We evaluate the recognition of revenue based on the applicable provisions of Staff Accounting Bulletin No. 104, Revenue Recognition. Accordingly, we recognize revenue when each of the following have occurred (1) there is persuasive evidence that an arrangement with our customer exists, which is generally a customer purchase order, (2) the products are delivered, which generally occurs when the products are shipped and risk of loss has been transferred to the customer, (3) the selling price is fixed or determinable and (4) collection of the customer receivable is deemed reasonably assured. Our payment arrangements with customers typically provide net 30 and 60-day terms. All of our arrangements are single element arrangements and there are no undelivered elements after the point of shipment.

Revenues from sales to authorized resellers are subject to terms allowing price protection, certain rights of return and allowances for volume rebates and cooperative advertising. Allowances for price protection are recorded when the price protection program is offered. Allowances for estimated future returns and cooperative advertising

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are provided for upon recognition of revenue. Such amounts are estimated and periodically adjusted based on historical and anticipated rates of returns, inventory levels and other factors and are recorded as either operating expenses or a reduction of sales in accordance with EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

Customer Marketing Programs

We record allowances for customer marketing programs, including certain rights of return, price protection, volume-based cash incentives and cooperative advertising. The estimated cost of these programs is accrued as a reduction to revenue or as an operating expense in the period we sell the product or commit to the program. Significant management judgments and estimates must be used to determine the cost of these programs in any accounting period.

We grant limited rights of return for certain products. Estimates of expected future product returns are based on analyses of historical returns and information regarding inventory levels and the demand and acceptance of our products by the end consumer.

Consistent with industry standards and practices, on a product-by-product basis by customer, we allow price protection credits to be issued to retailers in the event of a subsequent price reduction. In general, price protection refers to the circumstances when we elect to decrease the price of a product as a result of reduction in competitive prices and issue credits to our customers to protect the customers from lower profit margins on their then current inventory of the product. The decision to effect price reductions is influenced by retailer inventory levels, product lifecycle stage, market acceptance, competitive environment and new product introductions. Credits are issued based upon the number of units that customers have on hand at the date of the price reduction. Upon approval of a price protection program, reserves for the estimated amounts to be reimbursed to qualifying customers are established. Reserves are estimated based on analyses of qualified inventories on hand with retailers and distributors.

We enter into cooperative advertising arrangements with many of our customers allowing customers to receive a credit for various advertising programs. The amounts of the credits are based on specific dollar-value programs or a percentage of sales, depending on the terms of the program negotiated with the individual customer. The objective of these programs is to encourage advertising and promotional events to increase sales of our products. Accruals for the estimated costs of these advertising programs are recorded based on the specific negotiations with individual customers in the period in which the revenue is recognized. We regularly evaluate the adequacy of these cooperative advertising program accruals.

We also offer volume rebates to several of our customers and record reserves for such rebates as a reduction of revenue at the time revenue is recognized. Estimates of required reserves are determined based on programs negotiated with the specific customers.

Future market conditions and product transitions may require us to take action to increase customer programs and incentive offerings that could result in incremental reductions to revenue or increased operating expenses at the time the incentive is offered.

Allowance for Doubtful Accounts

We sell our products in the United States and internationally primarily through retailers. We generally do not require any collateral from our customers. However, we seek to control our credit risk through ongoing credit evaluations of our customers’ financial condition and by purchasing credit insurance on European accounts receivable balances.

We regularly evaluate the collectability of our accounts receivable, and we maintain an allowance for doubtful accounts which we believe is adequate. The allowance is based on management’s assessment of the collectability of specific customer accounts, including their credit worthiness and financial condition, as well as historical experience with bad debts, receivables aging and current economic trends.

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Our customer base is highly concentrated and a deterioration of a significant customer’s financial condition, or a decline in the general economic conditions could cause actual write-offs to be materially different from the estimated allowance. As of March 31, 2009, one customer, Gamestop, represented 33% of total accounts receivable. The customers comprising the ten highest outstanding trade receivable balances accounted for approximately 76% of total accounts receivables as of March 31, 2009. If any of these customer’s receivable balances should be deemed uncollectible, we would have to make adjustments to our allowance for doubtful accounts, which could have a significant adverse effect on our financial condition and results of operations in the period the adjustments are made.

Inventory Valuation

We value inventories at the lower of cost or market value. If the estimated market value is determined to be less than the recorded cost of the inventory, a provision is made to reduce the carrying amount of the inventory item. Determination of the market value may be complex, and therefore, requires management to make assumptions and to apply a high degree of judgment. In order for management to make the appropriate determination of market value, the following items are commonly considered: inventory turnover statistics, inventory quantities on hand in our facilities and customer inventories, unfilled customer order quantities, forecasted consumer demand, current retail prices, competitive pricing, seasonality factors, consumer trends and performance of similar products or accessories. Subsequent changes in facts or circumstances do not result in the reversal of previously recorded reserves.

We have not made any significant changes in the methodology or assumptions used to establish our inventory reserves as reported during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a significant change in the future methodology or assumptions we use to calculate our inventory reserves. However, if our estimates regarding market value are inaccurate, or changes in consumer demand affect specific products in an unforeseen manner, we may be exposed to additional increases in our inventory reserves that could be material.

Valuation of Goodwill

In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), we perform an annual impairment review at the reporting unit level during the fourth quarter of each fiscal year or more frequently if we believe indicators of impairment are present. SFAS No. 142 requires that goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. We performed step one of the annual goodwill impairment test in the fourth quarter of fiscal year 2008 and determined that the fair value of our reporting unit exceeded its net book value. Therefore, step two was not required. Given a prolonged decline in the market capitalization of the Company, an additional goodwill impairment test was performed in the third quarter of fiscal year 2009 at which time it was determined impairment did exist. Accordingly, the Company performed the step two analysis and recorded an impairment charge of $27.9 million during the year ended March 31, 2009. Significant judgments are required to estimate the fair value of our reporting unit and we assess its fair value based on a review of our market capitalization and control premium, as well as a discounted cash flow model, for which the key assumptions include revenue growth, gross profit margins, operating expense trends and our weighted average cost of capital.

Share-Based Payments

Effective April 1, 2006, we adopted the provisions of SFAS No. 123R, Share-Based Payment, which established accounting for share-based awards exchanged for employee services and requires companies to

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expense the estimated fair value of these awards over the requisite employee service period. Accordingly, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the employee’s requisite service period.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The expected life of the options is based on a number of factors, including historical exercise experience, the vesting term of the award, the expected volatility of our stock and an employee’s average length of service. The expected volatility is estimated based on the historical volatility (using daily pricing) of our stock. The risk-free interest rate is determined on a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the stock options. In accordance with SFAS No. 123R, we reduce the calculated Black-Scholes value by applying a forfeiture rate, based upon historical pre-vesting option cancellations. Estimated forfeitures are reassessed at each balance sheet date and may change based on new facts and circumstances.

Valuation of Deferred Income Taxes

We record valuation allowances to reduce our deferred tax assets to an amount that we believe is more likely than not to be realized. We consider estimated future taxable income and ongoing prudent and feasible tax planning strategies, including reversals of deferred tax liabilities, in assessing the need for a valuation allowance. If we were to determine that we will not realize all or part of our deferred tax assets in the future, we would make an adjustment to the carrying value of the deferred tax asset, which would be reflected as income tax expense. Conversely, if we were to determine that we will realize a deferred tax asset, which currently has a valuation allowance, we would reverse the valuation allowance which would be reflected as an income tax benefit or as an adjustment to stockholders’ equity, for tax assets related to stock options, or goodwill, for tax assets related to acquired businesses.

In determining taxable income for financial statement reporting purposes, we must make certain estimates and judgments. These estimates and judgments are applied in the calculation of certain tax liabilities and in the determination of the recoverability of deferred tax assets, which arise from temporary differences between the recognition of assets and liabilities for tax and financial statement reporting purposes. In the ordinary course of our business, there are many transactions and calculations where the tax law and ultimate tax determination is uncertain. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate prior to the completion and filing of tax returns for such periods. This process requires estimating both our geographic mix of income and our uncertain tax positions in each jurisdiction where we operate. These estimates involve complex issues and require us to make judgments about the likely application of the tax law to our situation, as well as with respect to other matters, such as anticipating the positions that we will take on tax returns prior to our actually preparing the returns and the outcomes of disputes with tax authorities. The ultimate resolution of these issues may take extended periods of time due to examinations by tax authorities and statutes of limitations. In addition, changes in our business, including acquisitions, changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective income tax rate.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax rules and the potential for future adjustment of our uncertain tax positions by the Internal Revenue Service or other taxing jurisdiction. If our estimates of these taxes are greater or less than actual results, an additional tax benefit or charge will result.

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RESULTS OF OPERATIONS

Fiscal Year Ended March 31, 2009 Compared to Fiscal Year Ended March 31, 2008

Net Sales

From a geographical perspective, our net sales for the fiscal years ended March 31, 2009 and 2008 were as follows (in thousands):

	Year Ended					Year Ended
	March 31, 2009					March 31, 2008					$			%
	Net Sales		% of Total			Net Sales		% of Total			Change			Change
United States	$	65,003		58	%	$	52,129		59	%	$	12,874			24.7	%
Europe		41,442		37	%		31,257		36	%		10,185			32.6	%
Canada		1,974		2	%		2,806		3	%		(832	)		(29.7	)%
Other countries		4,144		3	%		1,545		2	%		2,599			168.2	%
Consolidated net sales	$	112,563		100	%	$	87,737		100	%	$	24,826			28.3	%

Net sales in fiscal 2009 increased 28.3% from fiscal 2008. Net sales in the United States increased $12.9 million over the prior year primarily due to a full year of sales related to the Saitek acquisition being included in the fiscal 2009 results and the release of new products. Due to the cyclical nature of the gaming console industry we believe that the sales of current generation accessories will continue to increase compared to the prior generation products as current generation consoles reach full adoption and more demand is driven by the release of current generation games. In fiscal year 2009 we did not have a license to manufacture wireless control pads for the Xbox 360 or controllers for Nintendo’s Wii, the leading console gaming platforms. As a result of this circumstance, sales of control pads decreased both in absolute dollars and as a percentage of sales. In the United States sales of products for the PlayStation 2 and Xbox have declined in fiscal 2009 compared to fiscal 2008, partially offset by an increase in sales of products for the Xbox 360, PlayStation 3 and the Wii. Net sales in Europe increased $10.2 million primarily due to a full year of sales related to the acquisition of Saitek being included in the fiscal 2009 results. Sales also increased due to the continued expansion of market penetration of our console videogame peripherals products.

Net sales in Canada declined by $0.8 million primarily due to a decline in core product sales (primarily non-licensed control pads) to existing customers, as well as the Company’s elimination of low margin and unprofitable product placements.

Net sales to other countries increased by $2.6 million, primarily due to a full year of sales related to the acquisition of Saitek being included in the fiscal 2009 results.

Our sales by quarter were as follows (in thousands):

	Year Ended					Year Ended
	March 31, 2009					March 31, 2008
	Net Sales		% of Total			Net Sales		% of Total
1st quarter	$	23,226		21	%	$	14,631		17	%
2nd quarter		25,750		23	%		16,876		19	%
3rd quarter		40,817		36	%		34,316		39	%
4th quarter		22,770		20	%		21,914		25	%
Total	$	112,563		100	%	$	87,737		100	%

In fiscal 2009, first quarter sales included the launch of the Wii Fit silicone cover, second quarter sales included the launch of the Rock Band Fender Precision bass replica for the Xbox 360, third quarter sales included the launch of the universal Rock Band 2 Double Cymbal expansion pack and fourth quarter included the launch of the Fight Pad, Fight Stick and Tournament Edition Fight Stick for use with the Street Fighter IV games. In fiscal 2008, first quarter sales included the launch of the Bluetooth headset for the PlayStation 3, second quarter sales included Halo 3 licensed products, third quarter sales included the launch of our racing wheel for the PlayStation 3, as well as

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licensed products for Assassin’s Creed and Mass Effect and the fourth quarter did not include any material new product launches.

Our sales by product group are as follows:

	Year Ended March 31,
	2009			2008
PC		31	%		15	%
Xbox 360		19	%		17	%
Handheld Consoles(a)		17	%		18	%
Wii		15	%		6	%
PlayStation 3		8	%		13	%
PlayStation 2		3	%		12	%
GameCube		2	%		7	%
Xbox		1	%		4	%
All others		4	%		8	%
Total		100	%		100	%

(a) Handheld consoles include Sony PSP and Nintendo Game Boy Advance, Game Boy Advance SP, DS, DS Lite and Micro.

Our sales by product category are as follows:

	Year Ended March 31,
	2009			2008
Personal computer products		31	%		15	%
Accessories		29	%		17	%
Control pads		23	%		30	%
Bundles		7	%		14	%
Games(b)		1	%		4	%
Steering wheels		1	%		3	%
Memory		1	%		3	%
All others		7	%		14	%
Total		100	%		100	%

(b) Games category includes GameShark videogame enhancement products in addition to videogames with related accessories.

Gross Profit

Gross profit is defined as net sales less cost of sales. Cost of sales consists of product costs, cost of licenses and royalties, cost of freight-in and freight-out and distribution center costs, including depreciation and other overhead costs.

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The following table presents net sales, cost of sales and gross profit for fiscal years ended March 31, 2009 and 2008 (in thousands):

	Year Ended March 31,
	2009					2008
			% of					% of			$		%
	Amount		Net Sales			Amount		Net Sales			Change		Change
Net sales	$	112,563		100.0	%	$	87,737		100.0	%	$	24,826		28.3	%
Cost of sales		80,558		71.6	%		58,841		67.1	%		21,717		36.9	%
Gross profit	$	32,005		28.4	%	$	28,896		32.9	%	$	3,109		10.8	%

Gross profit in fiscal 2009 increased 10.8% from fiscal 2008, and gross profit as a percentage of net sales decreased to 28.4% in fiscal 2009 from 32.9% in fiscal 2008. The decrease in gross profit margin was predominately due the increased value of the U.S. dollar which decreased gross margin by approximately 4.4 percentage points. The remaining decrease in gross margin is attributable to a variety of small factors. Absent significant change in the value of the U.S. dollar, we expect our gross profit margin to stay within a reasonable range of plus or minus two and one-half points of our fiscal 2009 gross margin.

Operating Expenses

Operating expenses for fiscal years ended March 31, 2009 and 2008 were as follows (in thousands):

	March 31,		% of			March 31,		% of			$			%
	2009		Net Sales			2008		Net Sales			Change			Change
Sales and marketing	$	13,216		11.7	%	$	10,304		11.8	%	$	2,912			28.3	%
General and administrative		14,968		13.3	%		11,004		12.5	%		3,964			36.0	%
Research and development		1,076		1.0	%		1,516		1.7	%		(440	)		(29.0	)%
Goodwill impairment		27,887		24.8	%		—		—			27,887			100.0	%
Amortization of intangibles		2,344		2.1	%		987		1.1	%		1,357			137.5	%
Total operating expenses	$	59,491		52.9	%	$	23,811		27.1	%	$	35,680			149.8	%

Sales and Marketing Expenses.  Sales and marketing expenses consist primarily of payroll, commissions, participation at trade shows and travel costs for our worldwide sales and marketing staff, advertising and costs of operating our GameShark.com website. The increase in sales and marketing expense of $2.9 million is primarily due to a full year of expense related to the Saitek and Joytech operations being included in the fiscal 2009 results, which accounted for $2.9 million of the increase, and the fact that a significant portion of sales and marketing expense is variable to sales. Sales and marketing expenses as a percentage of net sales remained relatively flat from fiscal year 2008 to fiscal year 2009. We expect sales and marketing expenses as a percentage of net sales in fiscal 2010 to decline modestly.

General and Administrative.  General and administrative expenses include salaries and benefits for our executive and administrative personnel, facilities costs and professional services, such as legal and accounting, and bad debt expense. The increase in general and administrative expenses of $4.0 million is primarily due to a full year of expense related to the Saitek operations being included in the fiscal 2009 results which accounted for $2.2 million of the increase, increased employee related expenses at our U.S. subsidiary which accounted for $0.7 million of the increase, higher accounting fees which accounted for $0.5 million of the increase and bad debt expense, principally related to the Circuit City bankruptcy, which accounted for $0.5 million of the increase. We expect general and administrative expenses as a percentage of net sales in fiscal 2010 to decline.

Research and Development.  Research and development expenses include the costs of developing and enhancing new and existing products in addition to the costs of developing games. The decrease in research and development is primarily due to decreased videogame development costs as we had no videogame game titles in development during the period.

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Goodwill Impairment.  Given a prolonged decline in the market capitalization of the Company noted through the third quarter of fiscal year 2009, which is the Company’s strongest quarter given its seasonality, a goodwill impairment test was performed, at which time it was determined an impairment did exist. Accordingly, the Company performed the step two analysis and recorded an impairment charge of $27.9 million during the year ended March 31, 2009.

Amortization of Intangibles.  Amortization of intangibles increased due to a full year of amortization of the Joytech and Saitek intangibles being recorded in fiscal 2009.

Interest Expense, Foreign Exchange Gain and Other Income

Interest expense, foreign exchange gain (loss) and other income for fiscal years ended March 31, 2009 and 2008 was as follows (in thousands):

	March 31,			% of			March 31,			% of			$			%
	2009			Net Sales			2008			Net Sales			Change			Change
Interest expense	$	(2,094	)		1.9	%	$	(1,156	)		1.3	%	$	(938	)		(81.1	)%
Foreign exchange (loss) gain	$	(462	)		0.4	%	$	1,703			1.9	%	$	(2,165	)		(127.1	)%
Other income	$	361			0.3	%	$	280			0.3	%	$	81			28.9	%

Interest expense in fiscal 2009 increased from the prior year due to an increase in total debt outstanding attributable to financing the Saitek acquisition, partly offset by a decline in the line of credit interest rate during the period. The foreign exchange loss in fiscal 2009 compared to the fiscal 2008 gain resulted primarily from the loss in relative value between the British pound and the Euro against the U.S. dollar. Other income primarily consisted of advertising income from our GameShark.com website. Other income is materially consistent year to year.

Provision for Income Taxes

Income tax expense for fiscal years ended March 31, 2009 and 2008 was as follows (in thousands):

March 31,	Effective	March 31,	Effective	$	%
2009	Tax Rate	2008	Tax Rate	Change	Change
$2,933	(9.9)%	$2,744	46.4%	$189	6.9%

The Company’s effective tax rate is a blended rate for different jurisdictions in which the Company operates. Our effective tax rate fluctuates depending on the composition of our taxable income between the various jurisdictions in which we do business, including our U.S. operating company, and our Canadian and French entities for which we provide full valuation allowances against their losses. The decrease in effective tax rate in fiscal 2009 versus fiscal 2008 is primarily a result of the impact of the non-deductible goodwill impairment charge and the recognition of a valuation allowance on our U.S. deferred tax assets in fiscal 2009.

Fiscal Year Ended March 31, 2008 Compared to Fiscal Year Ended March 31, 2007

Net Sales

From a geographical perspective, our net sales for the fiscal years ended March 31, 2008 and 2007 were as follows (in thousands):

	Year Ended					Year Ended
	March 31, 2008					March 31, 2007					$			%
	Net Sales		% of Total			Net Sales		% of Total			Change			Change
United States	$	52,129		59	%	$	71,168		71	%	$	(19,039	)		(26.8	)%
Europe		31,257		36	%		22,163		22	%		9,094			41.0	%
Canada		2,806		3	%		6,355		7	%		(3,549	)		(55.8	)%
Other countries		1,545		2	%		111		0	%		1,434			1,291.9	%
Consolidated net sales	$	87,737		100	%	$	99,797		100	%	$	(12,060	)		(12.1	)%

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Net sales in fiscal 2008 decreased 12.1% from fiscal 2007. Net sales in the United States decreased $19.0 million over the prior year primarily due to our continuing efforts to reduce sales of low margin and unprofitable products and declines in sales of accessories relating to the prior generation videogame console platforms. The sales decline was partially offset by increased sales of accessories relating to current generation videogame console platforms. Due to the cyclical nature of the gaming console industry we believe that the sales of current generation accessories will continue to increase compared to the prior generation products as current generation consoles reach full adoption and more demand is driven by the release of current generation games. We do not currently have a license to manufacture wireless control pads for the Xbox 360 or controllers for Nintendo’s Wii, to date the leading console gaming platforms. As a result, sales of control pads decreased both in absolute dollars and as a percentage of sales. In the United States sales of products for the PlayStation 2 and Xbox declined, partially offset by an increase in sales of products for the Xbox 360, PlayStation 3 and the Wii. The decline in consolidated net sales was also partially offset by a 16.3% increase in sales due to the Saitek acquisition.

Net sales in Europe increased $9.1 million primarily due to the acquisition of Saitek, which accounted for 73% of the increase. Sales also increased due to the continued expansion of market penetration by the Mad Catz and Joytech product lines.

Net sales in Canada declined by $3.5 million primarily due to a decline in core product sales (primarily non-licensed control pads) to existing customers, as well as the Company’s elimination of low margin and unprofitable product placements.

Net sales to other countries increased by $1.4 million, primarily due to the acquisition of Saitek which accounted for 106% of the increase offset by a decrease of 6% attributable to MCI.

Our sales by quarter were as follows (in thousands):

	Year Ended					Year Ended
	March 31, 2008					March 31, 2007
	Net Sales		% of Total			Net Sales		% of Total
1st quarter	$	14,631		17	%	$	18,163		18	%
2nd quarter		16,876		19	%		25,797		26	%
3rd quarter		34,316		39	%		36,474		37	%
4th quarter		21,914		25	%		19,363		19	%
Total	$	87,737		100	%	$	99,797		100	%

In fiscal 2008, first quarter sales included the launch of the Bluetooth headset for the PlayStation 3, second quarter sales included Halo 3 licensed products, third quarter sales included the launch of our racing wheel for the PlayStation 3, as well as licensed products for Assassin’s Creed and Mass Effect and fourth quarter did not include any material new product launches. In fiscal 2007, first quarter sales included the launch of the Real World Golf 2 videogame and accessory, third quarter sales included the Gears of War faceplate accessory and fourth quarter sales included the launch of our wireless control pads for PlayStation 3.

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Our sales by product group are as follows:

	Year Ended March 31,
	2008			2007
PlayStation 2		12	%		27	%
PlayStation 3		13	%		4	%
Xbox		4	%		11	%
Xbox 360		17	%		16	%
GameCube		7	%		11	%
Wii		6	%		2	%
Handheld Consoles(a)		18	%		14	%
PC		15	%		0	%
All others		8	%		15	%
Total		100	%		100	%

(a) Handheld consoles include Sony PSP and Nintendo Game Boy Advance, Game Boy Advance SP, DS, DS Lite and Micro.

Our sales by product category are as follows:

	Year Ended March 31,
	2008			2007
Control pads		30	%		41	%
Bundles		14	%		10	%
Games(b)		4	%		13	%
Accessories		17	%		13	%
Steering wheels		3	%		5	%
Memory		3	%		3	%
Personal computer products		15	%		0	%
All others		14	%		15	%
Total		100	%		100	%

(b) Games includes GameShark videogame enhancement products in addition to videogames with related accessories.

Gross Profit

Gross profit is defined as net sales less cost of sales. Cost of sales consists of product costs, cost of licenses and royalties, cost of freight-in and freight-out and distribution center costs, including depreciation and other overhead costs.

The following table presents net sales, cost of sales and gross profit for fiscal years ended March 31, 2008 and 2007 (in thousands):

	Year Ended March 31,
	2008					2007
			% of					% of			$			%
	Amount		Net Sales			Amount		Net Sales			Change			Change
Net sales	$	87,737		100.0	%	$	99,797		100.0	%	$	(12,060	)		(12.1	)%
Cost of sales		58,841		67.1	%		74,703		74.9	%		(15,862	)		(21.2	)%
Gross profit	$	28,896		32.9	%	$	25,094		25.1	%	$	3,802			15.2	%

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Gross profit in fiscal 2008 increased 15.2% from fiscal 2007, and gross profit as a percentage of net sales increased to 32.9% in fiscal 2008, from 25.1% in fiscal 2007. The increase in gross profit margin was largely due to a reduction in sales of low margin and unprofitable products and an increase in sales of higher margin products, which increased margins by approximately 8 percentage points. A reduction in royalty and license expenses increased profit margin by approximately 1 percentage point. A reduction in freight expense due to a higher mix of direct imports to customers and renegotiated shipping rates increased profit margin by approximately 1 percentage point. These increases in profit margin were partially offset by a reduction in cost credits received due to a decrease in goods returned to vendors in fiscal 2008, which decreased profit margin by approximately 2 percentage points. The increases were further reduced by a rise in distribution handling cost in Europe causing a 1 percentage point decrease in profit margin and an increase of obsolete and scrap inventory expense decreased profit margin by half of a percentage point. There was an increase in the gross profit margin of approximately 1 percentage point due to the Saitek acquisition, as Saitek’s products historically have generated a higher gross profit margin than Mad Catz.

Operating Expenses

Operating expenses for fiscal years ended March 31, 2008 and 2007 were as follows (in thousands):

	March 31,		% of			March 31,		% of			$		%
	2008		Net Sales			2007		Net Sales			Change		Change
Sales and marketing	$	10,304		11.8	%	$	8,923		8.9	%	$	1,381		15.5	%
General and administrative		11,004		12.5	%		8,244		8.3	%		2,760		33.5	%
Research and development		1,516		1.7	%		1,406		1.4	%		110		7.8	%
Amortization of intangibles		987		1.1	%		—		0.0	%		987		100	%
Total operating expenses	$	23,811		27.1	%	$	18,573		18.6	%	$	5,238		28.2	%

Sales and Marketing Expenses.  Sales and marketing expenses consist primarily of payroll, commissions, promotions, participation at trade shows and travel costs for our worldwide sales and marketing staff, advertising and costs of operating our GameShark.com website. The increase in sales and marketing expense of 15.5% is due to the Saitek acquisition. The increase in sales and marketing expense as a percentage of net sales is due to an increase in the fixed portion of these expenses in a period in which sales declined on a year-over-year basis. Excluding the impact of the Saitek acquisition, sales and marketing expenses declined 9.1%, largely due to decreased cooperative advertising expenses which are formulaically tied to sales volume, partially offset by higher salary expenses relating to an increase in the Mad Catz European sales force and the hiring of a new Director of Marketing in the United States.

General and Administrative.  General and administrative expenses include salaries and benefits for our executive and administrative personnel, facilities costs and professional services, such as legal and accounting. The increase in general and administrative expenses of 33.5% is primarily due to the Saitek acquisition, which accounted for 69.7% of the increase. Also contributing to the increase were higher accruals pursuant to the executive and non-executive incentive compensation plans adopted by the Board of Directors, higher fees due to our first year of compliance with Sarbanes-Oxley and higher professional fees related to our integration of the Saitek acquisition. Offsetting these increases was a 1.1% decrease in general and administrative expenses due to lower legal expenses resulting from less litigation activity during fiscal 2008 compared to fiscal 2007.

Research and Development.  Research and development expenses include the costs of developing and enhancing new and existing products in addition to the costs of developing games. The increase in research and development is primarily a result of the acquisition of Saitek, partially offset by decreased videogame development costs as we had no videogame game titles in development during the period.

Amortization of Intangibles.  Amortization of intangibles increased due to the acquisitions of Joytech and Saitek.

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Interest Expense, Foreign Exchange Gain and Other Income

Interest expense, foreign exchange gain and other income for fiscal years ended March 31, 2008 and 2007 was as follows (in thousands):

	March 31,			% of			March 31,			% of			$			%
	2008			Net Sales			2007			Net Sales			Change			Change
Interest expense	$	(1,156	)		1.3	%	$	(1,109	)		1.1	%	$	(47	)		4.2	%
Foreign exchange gain	$	1,703			1.9	%	$	256			0.3	%	$	1,447			565.2	%
Other income	$	280			0.3	%	$	262			0.3	%	$	18			6.9	%

Interest expense in fiscal 2008 increased from the prior year due to an increase in total debt outstanding attributable to financing the Saitek acquisition, partly offset by a decline in the average balance of our line of credit for working capital needs and a decline in the line of credit interest rate during the period. The increase in foreign exchange gain in fiscal 2008 compared to fiscal 2007 results primarily from the gain in relative value between the British pound, the functional currency of our MCE entity, and the Euro, the currency used by a significant number of its customers. The currency fluctuations against the U.S. dollar during the year also contributed to this gain. Other income primarily consists of advertising income from our GameShark.com website.

Provision for Income Taxes

Income tax expense for fiscal years ended March 31, 2008 and 2007 was as follows (in thousands):

March 31,	Effective			March 31,		Effective			$		%
2008	Tax Rate			2007		Tax Rate			Change		Change
$2,744		46.4	%	$	2,225		37.5	%	$	519		23.3	%

The Company’s effective tax rate is a blended rate for different jurisdictions in which the Company operates. Our effective tax rate fluctuates depending on the composition of our taxable income between the various jurisdictions in which we do business, including our Canadian subsidiary and specific Saitek subsidiaries, for which we provide full valuation allowances against their losses. The increase in effective tax rate in fiscal 2008 versus fiscal 2007 is a direct reflection of having a higher mix of business in higher tax rate jurisdictions, as well as an increase in expenses at our Canadian holding company, which are not deductible for US financial reporting or tax purposes.

Impact of Recently Issued Accounting Standards

In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) FAS 157-2, which delays the effective date of Statement of Financial Accounting Standards (“SFAS”) No. 157 Fair Value Measurements (“SFAS No. 157”) for all non-recurring fair value measurements of non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008, which will be the Company’s fiscal year 2010. The Company is currently evaluating the financial impact that FSP FAS. 157-2 will have, but expects that the financial impact, if any, will not be material on its Consolidated Financial Statements.

In October 2008, the FASB issued FSP FAS 157-3, which clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 is effective upon its issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 did not have a material impact on the Company’s Consolidated Financial Statements.

In April 2009, the FASB issued FSP FAS 157-4, which provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset or liability has significantly decreased when compared with normal market activity for the asset or liability as well as guidance on identifying circumstances that indicate a transaction is not orderly. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009, which is the Company’s first quarter of fiscal 2010. The Company is currently evaluating the financial impact that FSP FAS. 157-4 will have, but expects that the financial impact, if any, will not be material on its Consolidated Financial Statements.

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In December 2007, the FASB issued SFAS No. 141R Business Combinations (“SFAS No. 141R”), which establishes the principles and requirements for how an acquirer in a business combination (1) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, (2) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and (3) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. In April 2009, the FASB issued FSP FAS 141R-1, which amends the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. SFAS No. 141R and FSP FAS 141R-1 are effective beginning with the Company’s fiscal 2010. The impact of the adoption of SFAS No. 141R and FSP FAS 141R-1 on the Company’s results of operations and financial position will depend on the nature and extent of business combinations that it completes, if any, in or after fiscal 2010.

In April 2008, the FASB issued FSP FAS 142-3, which amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008, which will be the Company’s fiscal year 2010. The impact of the adoption of FSP FAS 142-3 on the Company’s results of operations and financial position will depend on the nature and extent of business combinations that it completes, if any, in or after fiscal 2010.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, which extends the requirement for publicly traded companies to disclose the fair value of its financial instruments in interim periods or whenever it issues summarized financial information, as well as in its annual financial statements. FSP FAS 107-1 and APB 28-1 are effective for interim and annual periods ending after June 15, 2009, which is the Company’s first quarter of fiscal 2010. The Company is currently evaluating the financial impact that FSP FAS 107-1 and APB 28-1 will have, but expects that the financial impact, if any, will not be material on its Consolidated Financial Statements.

Liquidity and Capital Resources

Sources of Liquidity

Historically we have funded our operations primarily from cash generated from operations, a revolving line of credit (as discussed below) and proceeds from employee stock option exercises. At March 31, 2009, available cash was approximately $2.9 million compared to cash of approximately $5.2 million at March 31, 2008 and $2.4 million at March 31, 2007.

We maintain a Credit Facility (the “Credit Facility”) with Wachovia Capital Finance Corporation (Central) (“Wachovia”) under a revolving line of credit subject to the availability of eligible collateral (accounts receivable and inventories), which changes throughout the year. On June 23, 2009, we extended the term of the Credit Facility, due to expire on October 30, 2009, until October 31, 2012. As part of extending the term, the Company chose to reduce the amount of the Credit Facility from $35 million to $30 million. We believe the reduced amount provides us working capital sufficient for our foreseeable business needs and at the same time will reduce our closing and unused line fees costs associated with the loan. The line of credit accrues interest on the daily outstanding balance at the U.S. prime rate plus 0.75% per annum through June 30, 2009 after which interest will accrue at the U.S. prime rate plus 2.00% or, at the Company’s option, LIBOR plus 3.50% with a LIBOR floor of 1.50%. At March 31, 2009 the interest rate was 3.5%. The Company is also required to pay a monthly service fee of $1,000, increasing to $2,000 as of June 23, 2009, and an unused line fee equal to 0.25% of the unused portion of the loan, increasing to 0.50% on July 1, 2009. Borrowings under the Credit Facility are secured by a first priority interest in the inventories, equipment, accounts receivable and investment properties of Mad Catz, Inc. (“MCI”) and by a pledge of all of the capital stock of the Company’s subsidiaries and is guaranteed by the Company. See Note 7 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this Form 10-K.

On November 20, 2007, we issued to the seller of Saitek $14,500,000 of convertible notes (“Saitek Notes”) as part of the consideration relating to that acquisition. On June 24, 2009, the terms of the Saitek Notes were amended as follows. The maturity of the Saitek Notes was extended to March 31, 2019 with annual principal and interest payments of $2,400,000 due beginning March 31, 2011 until the Saitek Notes are retired. The Saitek Notes will bear interest at 7.5% through March 31, 2014 and 9.0% thereafter. Quarterly cash payments for partial interest in the

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amount of approximately $45,000 are due beginning June 30, 2009, in addition to an interest payment of $500,000 due on October 31, 2009, and an interest payment of $596,035 due on March 31, 2010. We believe that with this amendment we will be able to repay this debt through our earnings and capital availability without further modification. The Saitek Notes are convertible into Mad Catz common stock at the exercise price of $1.419 per share. See Note 8 to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data elsewhere in this Form 10-K.

Pursuant to the Saitek purchase agreement, a working capital adjustment in the amount of $847,000 was made to the purchase price based on the completion of the final balance sheet. The Company financed this amount with a note payable to The Winkler Atlantic Trust. The note is unsecured, was originally due August 1, 2011 including all accrued interest, and bears interest at 7% per annum compounded annually. As part of restructuring the Saitek Notes described above, we are required to repay this note in full, plus accrued interest, on March 31, 2010. The note was recorded as an increase to goodwill during the fiscal year ended March 31, 2009.

Net cash provided by (used in) operating activities was approximately ($2.1) million, $6.2 million and $8.4 million for the years ended March 31, 2009, 2008 and 2007, respectively. Net cash used in operating activities in 2009 is mainly related to an increase in accounts receivable and decreases in accounts payable and accrued expenses offset by a decrease in inventories, all in the context of a loss from operations. We will continue to focus on working capital efficiency, but there can be no assurance that income from operations will exceed working capital requirements and it is likely we will continue to rely on our credit facility to finance our working capital. Net cash provided by operating activities in 2008 reflects net income for the year and decreases in accounts receivable, net of sales reserves and inventories partially offset by decreases in accounts payable, accrued liabilities and prepaid expense and other current assets. Net cash provided by operating activities in 2007 reflects net income for the year and a reduction in inventories and income taxes receivable, offset by a decrease in accounts payable and an increase in accounts receivable.

Net cash used in investing activities was approximately $1.4 million, $14.0 million and $0.4 million for the years ended March 31, 2009, 2008 and 2007, respectively. Net cash used in investing activities in 2009 consisted of capital expenditures to support our operations. Net cash used in investing activities in 2008 was primarily due to the Saitek and Joytech acquisitions. Net cash used in investing activities in 2007 consisted of capital expenditures to support our operations. Capital expenditures planned for 2010 are approximately similar in total amount to that of fiscal 2009 and are discretionary in nature.

Net cash provided by (used in) financing activities was approximately $1.9 million, $10.3 million and ($7.3) million for the years ended March 31, 2009, 2008 and 2007, respectively. Net cash used in financing activities in each of these years consisted of net repayments under our line of credit.

At March 31, 2009, the outstanding balance on our line of credit was $13.3 million and our weighted average annual interest rate during fiscal 2009 was 4.5%. We are required to meet a quarterly covenant based on the Company’s fixed charge coverage ratio. The Company was in compliance with this covenant as of March 31, 2009.

At March 31, 2009, the outstanding balance and accrued interest on the Saitek convertible notes payable was $16.1 million.

We believe that our available cash balances, anticipated cash flows from operations and available line of credit will be sufficient to satisfy our operating needs for at least the next twelve months. However, we operate in a rapidly evolving and often unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. Accordingly, there can be no assurance that we may not be required to raise additional funds through the sale of equity or debt securities or from additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all. Furthermore, additional debt financing may contain more restrictive covenants than our existing debt.

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Contractual Obligations and Commitments

The following summarizes our contractual payment obligations at March 31, 2009:

	Payments Due ($000’s)
			Less Than						More Than
	Total		1 Year		1-3 Years		4-5 Years		5 Years
Bank loan (excludes interest — see Note 7 of Notes to Consolidated Financial Statements)	$	13,272	$	13,272	$	—	$	—		—
Convertible notes payable (excludes interest — see Note 8 of Notes to Consolidated Financial Statements)(1)		14,500		—		1,262		3,248		9,990
Saitek completion note (excludes interest — see Note 9 of Notes to Consolidated Financial Statements)(1)		847		847		—		—		—
Operating leases (see Note 12 of Notes to Consolidated Financial Statements)		4,561		1,254		1,804		1,080		423
Royalty & license guaranteed commitments (see Note 12 of Notes to Consolidated Financial Statements)		505		476		29		—		—
Total	$	33,685	$	15,849	$	3,095	$	4,328	$	10,413

(1) Amounts reflect the amended maturity terms of the Saitek Notes and Saitek completion note; See Notes 8 and 9 of Notes to Consolidated Financial Statements.

As of March 31, 2009 and 2008, we did not have any relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in such relationships.

Item 7A.   Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Market risk is the potential loss arising from changes in market rates and market prices. Our market risk exposure results primarily from fluctuations in foreign exchange rates and interest rates. Our views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated, based upon actual fluctuations in foreign currency exchange rates and interest rates and the timing of transactions.

Foreign Currency Exchange Rate Risk

A majority of our international business is presently conducted in currencies other than the U.S. dollar and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the CNY, the Pound Sterling, the Euro and the Canadian dollar. Foreign currency transaction gains and losses arising from normal business operations are credited to or charged against earnings in the period incurred. As a result, fluctuations in the value of the currencies in which we conduct our business relative to the U.S. dollar will cause currency transaction gains and losses, which we have experienced in the past and continue to experience. Due to the difficulty in determining and obtaining predictable cash flow forecasts in our foreign operations based on the overall challenging economic environment and associated contract structures, we do not currently utilize any derivative financial instruments to hedge foreign currency risks. The volatility of the CNY, the Pound Sterling, the Euro and the Canadian dollar (and any other applicable currencies) will be monitored frequently throughout the coming year. If appropriate, we may enter into hedging transactions in order to mitigate our risk from foreign currency fluctuations. Due to the substantial volatility of currency exchange rates, among other factors, we cannot predict the effect of exchange rate fluctuations upon future operating results. There can be no assurances that we will not

44

experience currency losses in the future. We estimate that an immediate 10% adverse change in foreign exchange rates not currently pegged to the U.S. dollar would decrease our reported net income by approximately $2.7 million for the year ended March 31, 2009.

Interest Rate Risk

We are exposed to interest rate risk on borrowings under the Credit Facility. Until June 30, 2009, funds advanced to us pursuant to the Credit Facility will bear interest at the U.S. prime rate plus 0.75%. Beginning July 1, 2009, interest will accrue at the U.S. prime rate plus 2.00% or, at the Company’s option, LIBOR plus 3.50% with a LIBOR floor of 1.50%. We do not hedge our exposures to interest rate risk. We estimate that an increase of 1.0% in the interest rate under our Credit Facility would decrease our reported net income by approximately $0.2 million for the year ended March 31, 2009.

Item 8.   Financial Statements and Supplementary Data

The Consolidated Financial Statements and Supplementary Data required by this Item, together with the reports of our independent registered public accounting firm, are set forth at the pages indicated on the Index to the Financial Statements on Page F-l included in Item 15 of this report.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures. As required by Securities and Exchange Commission Rules 13a-15(b) we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (who is also the Chief Accounting Officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2009. In making its assessment, management used the framework set forth by the

45

Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based on its evaluation, management has concluded that, as of March 31, 2009, the Company’s internal control over financial reporting was effective based on these criteria and that we believe the material weakness that had been identified as of March 31, 2008 had been effectively remediated as described below.

Based on its evaluation as of March 31, 2008, management had concluded that the Company’s internal control over financial reporting had a material weakness related to our financial reporting process. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. The application of our policies and procedures did not provide for effective oversight and review of our financial reporting process. Specifically, (i) application of our policies and procedures did not include adequate management review of manually prepared schedules and (ii) our consolidation process was manually intensive and included a significant amount of top-sided journal entries. This material weakness resulted in material errors in our consolidated financial statements that were corrected prior to the issuance of our 2008 consolidated financial statements.

Management concluded that this material weakness largely resulted from the excessively manual-intensive nature of our consolidation process, exacerbated by insufficient resources relating to: the incremental reporting requirements resulting from the acquisition of Saitek in November 2007, and the ensuing integration of the financial operations of the five Saitek operating companies, including the need to develop controls and procedures consistent with public company standards for U.S. GAAP reporting in the Saitek operating entities, which previously were not subject to such reporting requirements.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

Except for the remediation of the 2008 material weakness described below, there has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal controls over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

Remediation of Material Weakness

Upon the recommendation of the Audit Committee, the Company formed a Remediation Committee comprised of certain positions within key functional areas of the Company, chaired by the Chief Financial Officer and reporting jointly to the President/Chief Executive Officer and the Chairman of the Audit Committee, to develop and implement a remediation plan to address the material weakness as well as other internal control deficiencies identified during the Company’s evaluation of internal controls over financial reporting.

To remediate the material weakness described above, the Company implemented the remedial measures described below. In addition, the Company plans to continue its evaluation of its controls and procedures and may, in the future, implement additional enhancements:

•  We developed and implemented new reporting instructions and checklists for the newly-acquired foreign subsidiaries’ accounting functions.

•  We increased the use of our information technology tools to minimize the manual process currently required to record, process, summarize and report information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended.

•  We retained additional senior accounting personnel with specific responsibilities to improve the oversight and review of financial reporting.

46

Although we believe we have remediated the 2008 material weakness, we have identified significant deficiencies in our internal control over financial reporting related to (1) our reviews over sales reserve estimates and (2) information technology general controls, and we will continue to implement further measures to remediate these deficiencies in fiscal 2010 and further improve our internal controls.

Item 9B.   Other Information

None

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

Certain information with respect to the executive officers of the Company is set forth in the section entitled “Executive Officers of the Registrant” in Part I of this Annual Report on Form 10-K.

The information required by this item with respect to the directors of the Company is incorporated herein by reference to the information under the caption “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” contained in the Company’s Management Proxy Circular for the Company’s 2009 Annual Meeting of Shareholders (the “Proxy Statement”).

We have adopted and maintain a code of business conduct and ethics that all executive officers and management employees must review and abide by (including our principal executive officer and principal financial officer), which we refer to as our Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics is available on our website at http://www.madcatz.com in the Investor Information section under the heading “Corporate Governance.”

Item 11.   Executive Compensation

The information required by Item 11 is incorporated herein by reference to the information in the Proxy Statement under the caption “Executive Compensation” specifically excluding the “Report of the Compensation Committee of the Board of Directors on Executive Compensation.”

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated herein by reference to the information in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The information required by Item 13 is incorporated herein by reference to the information in the Proxy Statement under the caption “Certain Transactions.”

Item 14.   Principal Accounting Fees and Services

The information required by Item 14 is incorporated herein by reference to the information in the Proxy Statement under the caption “Principal Accountant Fees and Services.”

PART IV

Item 15.   Exhibits, Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) Financial Statements

47

The financial statements of the Company are included herein as required under Item 8 of this report. See Index to Financial Statements on page F-1.

(2) Financial Statement Schedules

Years ended March 31, 2009, 2008 and 2007 — Schedule II Valuation and Qualifying Accounts Schedules not listed above have been omitted because information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

(3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)

The following exhibits are filed or incorporated by reference into this report.

2	.1(1)	Asset Purchase Agreement dated as of September 6, 2007, by and between Mad Catz Interactive, Inc. and Take-Two Interactive Software, Inc.
2	.2(2)	Stock Purchase Agreement dated as of November 14, 2007, by and between Guymont Services SA as trustee of The Winkler Atlantic Trust and Mad Catz Interactive, Inc.
3	.1(3)	Articles of Incorporation and Amendments thereto.
3	.2(4)	By-Laws of the Company, as amended to date.
3	.3(5)	Amendment to By-Law No. 2.
10	.1(6)	Guarantee dated September 25, 2000, by 1328158 Ontario Inc. in favor of Congress Financial Corporation (Canada).
10	.2(6)	General Security Agreement dated September 25, 2000, by Mad Catz, Inc. and FX Unlimited, Inc. in favor of Congress Financial Corporation (Central).
10	.3(6)	Guarantee dated September 25, 2000, by Mad Catz, Inc. in favor of Congress Financial Corporation (Central).
10	.4(7)	Amended and Restated General Security Agreement dated as of November 30, 2001, by Mad Catz, Inc. and FX Unlimited, Inc. in favor of Congress Financial Corporation (Central).
10	.5(7)*	Amended and Restated Incentive Stock Option Plan of Mad Catz Interactive, Inc.
10	.6(7)*	Form of Incentive Stock Option Plan.
10	.7(8)*	Employment Agreement dated May 18, 2000, by and between Mad Catz, Inc. and Darren Richardson.
10	.8(9)*	Amendment to Employment Agreement dated April 1, 2004, by and between Mad Catz Interactive, Inc. and Darren Richardson. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
10	.9(10)	Xenon Game Peripheral Licensing Certification Agreement dated May 12, 2005, by and between Mad Catz, Inc. and Microsoft Corporation. Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934.
10	.10(11)*	Employment Agreement dated January 16, 2007, by and between Mad Catz Interactive, Inc. and Stewart Halpern.
10	.11(12)*	Mad Catz Interactive, Inc. Stock Option Plan — 2007
10	.12(12)*	Stock Option Agreement under the Mad Catz Interactive, Inc. Stock Option Plan — 2007
10	.13(2)	Consideration Loan Note Instrument dated November 20, 2007, by Mad Catz Interactive, Inc. in favor of the Noteholders named therein.
10	.14(2)	First Amending Agreement dated as of November 20, 2007, by and between Mad Catz, Inc. and Wachovia Capital Finance Corporation (Central).
10	.15(2)	Pledge and Security Agreement dated November 20, 2007, by Winkler Atlantic Holdings Limited in favor of Wachovia Capital Finance Corporation (Central).
10	.16(2)	Guarantee dated November 20, 2007, by Saitek Industries Limited in favor of Wachovia Capital Finance Corporation (Central).
10	.17(2)	General Security Agreement dated November 20, 2007, by Saitek Industries Limited in favor of Wachovia Capital Finance Corporation (Central).

48

10	.18*	Amendment to Employment Agreement dated December 31, 2008, by and between Mad Catz Interactive, Inc. and Darren Richardson.
10	.19*	Amendment to Employment Agreement dated December 31, 2008, by and between Mad Catz Interactive, Inc. and Stewart Halpern.
10	.20*	Director Compensation Table
10	.21	Waiver and Amendment Letter Agreement dated March 18, 2009, by and between Mad Catz, Inc. and Wachovia Capital Finance Corporation (Central).
10	.22	Third Amended and Restated Loan Agreement dated as of June 23, 2009, by and between Mad Catz, Inc. and Wachovia Capital Finance Corporation (Central).
10	.23	General Security Agreement dated June 23, 2009, by Winkler Atlantic Holdings Limited in favor of and Wachovia Capital Finance Corporation (Central).
10	.24	Guarantee dated June 23, 2009, by Winkler Atlantic Holdings Limited in favor of Wachovia Capital Finance Corporation (Central).
10	.25	Negative Pledge Agreement dated June 23, 2009, by Saitek Elektronik Vertriebs Gmbh in favor of and Wachovia Capital Finance Corporation (Central).
10	.26	Guarantee dated June 23, 2009, by Saitek Elektronik Vertriebs Gmbh in favor of Wachovia Capital Finance Corporation (Central).
10	.27	First Amendment to Stock Pledge Agreement dated June 23, 2009, by and between Mad Catz, Inc. and Wachovia Capital Finance Corporation (Central).
10	.28	Amendment to Consideration Loan Note Instrument and Promissory Note dated June 24, 2009, by and between Mad Catz Interactive, Inc. and Guymont Services SA as trustee of The Winkler Atlantic Trust.
21	.1	Subsidiaries of the Company.
23	.1	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23	.2	Consent of BDO Stoy Hayward LLP, Independent Registered Public Accounting Firm.
31	.1	Certifications of Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31	.2	Certifications of Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	.1	Certifications of Registrant’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. These certifications are being furnished solely to accompany this Annual Report on Form 10-K and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company.
32	.2	Certifications of Registrant’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002. These certifications are being furnished solely to accompany this Annual Report on Form 10-K and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company.

(1)	This document was filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission for the fiscal year ended September 11, 2007 and incorporated herein by reference.
(2)	This document was filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission for the fiscal year ended November 20, 2007 and incorporated herein by reference.
(3)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2001 and incorporated herein by reference.
(4)	This document was filed as an exhibit to the Registrant’s Registration Statement on Form 20-F, dated June 1, 1999, filed with the Securities and Exchange Commission on June 3, 1999 and incorporated herein by reference.

49

(5)	This document was filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarterly period ended September 30, 2007 and incorporated herein by reference.
(6)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2000 and incorporated herein by reference.
(7)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2002 and incorporated herein by reference.
(8)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2003 and incorporated herein by reference.
(9)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 20-F filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2004 and incorporated herein by reference.
(10)	This document was filed as an exhibit to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended March 31, 2005 and incorporated herein by reference.
(11)	This document was filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarterly period ended December 31, 2006 and incorporated herein by reference.
(12)	This document was filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission for the fiscal year ended October 9, 2007 and incorporated herein by reference.
*	Denotes management contract or compensatory plan or arrangement.

50

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MAD CATZ INTERACTIVE, INC.

By:  /s/  Darren Richardson

Darren Richardson

President and Chief Executive Officer

Date: June 26, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Darren Richardson Darren Richardson	President and Chief Executive Officer (Principal Executive Officer)	June 26, 2009
/s/  Stewart Halpern Stewart Halpern	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	June 26, 2009
/s/  Thomas Brown Thomas Brown	Director	June 26, 2009
/s/  Robert Molyneux Robert Molyneux	Director	June 26, 2009
/s/  William Woodward William Woodward	Director	June 26, 2009

51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Index to Consolidated Financial Statements	F-1
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss)	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Mad Catz Interactive, Inc.:

We have audited the accompanying consolidated balance sheets of Mad Catz Interactive, Inc. and subsidiaries (the Company) as of March 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2009. In connection with our audits of the consolidated financial statements, we have also audited financial statement Schedule II. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement Schedule II based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mad Catz Interactive, Inc. and subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2009, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement Schedule II, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/  KPMG LLP

San Diego, California

June 26, 2009

F-2

MAD CATZ INTERACTIVE, INC.

Consolidated Balance Sheets

March 31, 2009 and 2008

	2009			2008
	(In thousands of U.S. dollars, except share data)
ASSETS
Current assets:
Cash	$	2,890		$	5,230
Accounts receivable, net of allowances of $5,926 and $4,514 at March 31, 2009 and 2008, respectively		15,524			14,567
Other receivables		471			583
Inventories		17,774			20,554
Deferred tax assets		19			1,591
Income tax receivable		759			—
Prepaid expense and other current assets		1,491			1,369
Total current assets		38,928			43,894
Deferred tax assets		484			978
Other assets		778			324
Property and equipment, net		1,826			2,101
Intangible assets, net		5,118			8,320
Goodwill		8,467			35,704
Total assets	$	55,601		$	91,321
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank loan	$	13,272		$	11,470
Accounts payable		13,528			16,280
Accrued liabilities		5,929			6,859
Note payable		847			—
Income taxes payable		655			496
Total current liabilities		34,231			35,105
Other long term liabilities		453			—
Convertible notes payable		14,500			14,901
Total liabilities		49,184			50,006
Shareholders’ equity:
Common stock, no par value, unlimited shares authorized; 55,098,549 and 54,973,549 shares issued and outstanding at March 31, 2009 and 2008, respectively		48,255			47,717
Accumulated other comprehensive income		101			2,923
Accumulated deficit		(41,939	)		(9,325	)
Total shareholders’ equity		6,417			41,315
Total liabilities and shareholders’ equity	$	55,601		$	91,321

See accompanying notes to consolidated financial statements.

F-3

MAD CATZ INTERACTIVE, INC.

Consolidated Statements of Operations

Years Ended March 31, 2009, 2008 and 2007

	2009			2008			2007
	(In thousands of U.S. dollars, except
	share and per share data)
Net sales	$	112,563		$	87,737		$	99,797
Cost of sales		80,558			58,841			74,703
Gross profit		32,005			28,896			25,094
Operating expenses:
Sales and marketing		13,216			10,304			8,923
General and administrative		14,968			11,004			8,244
Research and development		1,076			1,516			1,406
Goodwill impairment		27,887			—			—
Amortization of intangible assets		2,344			987			—
Total operating expenses		59,491			23,811			18,573
Operating income (loss)		(27,486	)		5,085			6,521
Interest expense, net		(2,094	)		(1,156	)		(1,109	)
Foreign exchange gain (loss), net		(462	)		1,703			256
Other income		361			280			262
Income (loss) before income taxes		(29,681	)		5,912			5,930
Income tax expense		(2,933	)		(2,744	)		(2,225	)
Net income (loss)	$	(32,614	)	$	3,168		$	3,705
Net income (loss) per share:
Basic	$	(0.59	)	$	0.06		$	0.07
Diluted	$	(0.59	)	$	0.06		$	0.07
Number of shares used in per share computations:
Basic		55,088,960			54,843,688			54,244,383
Diluted		55,088,960			55,314,438			55,036,591

See accompanying notes to consolidated financial statements.

F-4

MAD CATZ INTERACTIVE, INC.

Consolidated Statements of Shareholders’ Equity and Comprehensive Income (Loss)

Years Ended March 31, 2009, 2008 and 2007

					Accumulated
					Other						Total
	Common Stock				Comprehensive			Accumulated			Shareholders’
	Shares		Amount		Income (Loss)			Deficit			Equity
	(In thousands of U.S. dollars, except share data)
Balance at March 31, 2006		54,244,383		46,746		7,116			(17,010	)		36,852
Cumulative effect of adjustments from the adoption of SAB 108, net of taxes		—		—		(4,880	)		812			(4,068	)
Stock-based compensation		—		359		—			—			359
Comprehensive income:
Net income		—		—		—			3,705			3,705
Foreign currency translation adjustment		—		—		379			—			379
Total comprehensive income												4,084
Balance at March 31, 2007		54,244,383		47,105		2,615			(12,493	)		37,227
Stock option exercises		729,166		345		—			—			345
Stock-based compensation		—		267		—			—			267
Comprehensive income:
Net income		—		—		—			3,168			3,168
Foreign currency translation adjustment		—		—		308			—			308
Total comprehensive income												3,476
Balance at March 31, 2008		54,973,549	$	47,717	$	2,923		$	(9,325	)	$	41,315
Stock option exercises		125,000		57		—			—			57
Stock-based compensation		—		481		—			—			481
Comprehensive loss:
Net loss		—		—		—			(32,614	)		(32,614	)
Foreign currency translation adjustment		—		—		(2,822	)		—			(2,822	)
Total comprehensive loss												(35,436	)
Balance at March 31, 2009		55,098,549	$	48,255	$	101		$	(41,939	)	$	6,417

See accompanying notes to consolidated financial statements.

F-5

MAD CATZ INTERACTIVE, INC.

Consolidated Statements of Cash Flows

Years Ended March 31, 2009, 2008 and 2007

	2009			2008			2007
	(In thousands of U.S. dollars)
Cash flows from operating activities:
Net income (loss)	$	(32,614	)	$	3,168		$	3,705
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		4,193			2,910			1,938
Amortization of deferred financing fees		56			34			10
Increase in sales reserves		9,533			6,271			7,937
Stock-based compensation		481			267			359
Goodwill impairment		27,887			—			—
Provision (benefit) for deferred income taxes		2,657			1,489			1,592
Changes in operating assets and liabilities, net of effects of Joytech and Saitek acquisitions in 2008:
Accounts receivable		(11,921	)		1,194			(9,398	)
Other receivables		98			431			351
Inventories		2,401			146			5,912
Prepaid expense and other current assets		(15	)		(472	)		963
Other assets		(106	)		(147	)		—
Accounts payable		(3,127	)		(7,690	)		(6,133	)
Accrued liabilities		(1,443	)		(1,395	)		(522	)
Income taxes receivable/payable		(226	)		12			1,727
Net cash provided by (used in) operating activities		(2,146	)		6,218			8,441
Cash flows from investing activities:
Purchases of property and equipment		(1,403	)		(794	)		(385	)
Cash paid for Joytech acquisition		—			(2,983	)		—
Cash paid for Saitek acquisition		—			(10,214	)		—
Net cash used in investing activities		(1,403	)		(13,991	)		(385	)
Cash flows from financing activities:
Borrowings on bank loan		97,708			89,077			90,440
Repayments on bank loan		(95,906	)		(78,952	)		(97,676	)
Payment of financing fees		—			(125	)		(94	)
Proceeds from exercise of stock options		57			345			—
Net cash provided by (used in) financing activities		1,859			10,345			(7,330	)
Effects of foreign exchange on cash		(650	)		308			17
Net increase (decrease) in cash		(2,340	)		2,880			743
Cash, beginning of year		5,230			2,350			1,607
Cash, end of year	$	2,890		$	5,230		$	2,350
Supplemental cash flow information:
Income taxes paid	$	673		$	1,340		$	186
Interest paid	$	822		$	809		$	1,148
Supplemental disclosures of noncash investing and financing activities:
Convertible notes payable issued in conjunction with Saitek acquisition	$	—		$	14,500		$	—
Note payable issued		847			—			126
Fair value of assets acquired in acquisitions:
Accounts receivable and other assets		—			13,506			—
Inventories		—			7,896			—
Property and equipment		—			899			5
Deferred tax assets		1,031			248			—
Assumed liabilities		—			(13,553	)		—
In process research and development		—			—			121
Intangible assets		—			8,132			—
Goodwill		98			18,221			—
Restructuring and transaction costs		282			2,910			—

See accompanying notes to consolidated financial statements.

F-6

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements

(In U.S. dollars)

(1)   Organization and Description of Business

Mad Catz Interactive, Inc. (the “Company”) is a corporation incorporated under the Canada Business Corporations Act. The Company has the following operating subsidiaries: (i) Mad Catz, Inc. (“MCI”), a corporation incorporated under the laws of Delaware that acts as the Company’s primary operating subsidiary, (ii) 1328158 Ontario Inc. (“MCC”), a corporation incorporated under the laws of Canada that sells the Company’s products in Canada under the name Mad Catz Canada, (iii) Mad Catz Europe, Limited (“MCE”), a corporation incorporated under the laws of England and Wales that sells the Company’s products in Europe, (iv) Mad Catz Interactive Asia Limited (“MCIA”), a corporation incorporated under the laws of Hong Kong engaged in the engineering, design, contract manufacture and, to a lesser degree, sales of the Company’s products and (v) Mad Catz Technological Development (Shenzhen) Co., Ltd., a corporation incorporated under the laws of the People’s Republic of China engaged in the engineering, design, quality assurance and quality control of Mad Catz products. In November 2007, the Company acquired Winkler Atlantic Holdings Limited (“WAHL”), which was the holding company for five operating subsidiaries (“Saitek”) located in the United Kingdom, France, Germany, the United States and Hong Kong. The United States, the United Kingdom and Hong Kong entities no longer exist as they were merged into MCI, MCE and MCIA, respectively, during fiscal year 2009. The Company also beneficially owns, directly or indirectly, all of the issued and outstanding shares of the following companies that are currently inactive: FX Unlimited Inc., a corporation incorporated under the laws of Delaware, Xencet USA, Inc., a corporation incorporated under the laws of Delaware, Singapore Holdings Inc., a corporation incorporated under the laws of Delaware and Mad Catz Limited, a company incorporated under the laws of England and Wales.

The Company’s products are designed, manufactured (primarily through third parties), marketed and distributed for all major console based videogame systems. The Company’s products include videogame, PC and audio accessories, such as control pads, steering wheels, joysticks, memory cards, video cables, light guns, flight sticks, dance pads, microphones, car adapters, carry cases, mice, keyboards and headsets. The Company also markets GameShark videogame enhancement products and publishes videogames.

(2)   Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. On an ongoing basis, the Company evaluates its estimates, including those related to asset impairments, reserves for accounts receivable and inventory, contingencies and litigation, valuation and recognition of share-based payments and income taxes. Illiquid credit markets, volatile equity, foreign currency, and declines in customer spending have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. Actual results could differ from those estimates.

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

Concentration of Credit Risk

Credit risk is primarily concentrated in accounts receivable. The Company generally does not require collateral on accounts receivable because a majority of its customers are large, well capitalized, established retail entities with operations throughout the United States, Canada and Europe. The Company maintains an allowance for doubtful accounts. For the year ended March 31, 2009, sales to the largest customer constituted 29% of gross sales and represented 33% of accounts receivable at March 31, 2009. For the year ended March 31, 2008, sales to the largest customer constituted 33% of gross sales and represented 31% of accounts receivable at March 31, 2008. Accounts receivable balances generally are in proportion to the net sales percentages for the Company’s largest customers.

Fair Value of Financial Instruments

The carrying values of the Company’s financial instruments, including cash, accounts receivable, other receivables, accounts payable, accrued liabilities and income taxes receivable/payable approximate their fair values due to the short maturity of these instruments. The carrying value of the bank loan approximates its fair value as the interest rate and other terms are that which is currently available to the Company. The fair value of convertible notes and note payable cannot be reasonably estimated as the instrument’s interest rates are likely not comparable to rates currently offered for similar debt instruments of comparable maturity given the state of the current credit markets. These notes are between the company and the seller of Saitek (see Notes 8 and 9).

Revenue Recognition

The Company evaluates the recognition of revenue based on the applicable provisions of Staff Accounting Bulletin No. 104, Revenue Recognition, the Company recognizes revenue when (1) there is persuasive evidence that an arrangement with the customer exists, which is generally a customer purchase order, (2) the products are delivered, which occurs when the products are shipped and risk of loss has been transferred to the customer, (3) the selling price is fixed or determinable and (4) collection of the customer receivable is deemed reasonably assured. Our payment arrangements with customers typically provide net 30 and 60-day terms. All of our arrangements are single element arrangements and there are no undelivered elements after the point of shipment.

Revenues from sales to authorized resellers are subject to terms allowing price protection, certain rights of return and allowances for cooperative advertising. Allowances for price protection are recorded when the price protection program is offered. Allowances for estimated future returns and cooperative advertising are provided for upon recognition of revenue. Such amounts are estimated and periodically adjusted based on historical and anticipated rates of returns, inventory levels and other factors and are recorded as either operating expenses or as a reduction of sales in accordance with Emerging Issues Task Force Issue 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

Amounts billed to customers for shipping and handling are included in net sales, and costs incurred related to shipping and handling is included in cost of sales.

Allowance for Doubtful Accounts and Other Allowances

Accounts receivable are recorded net of an allowance for doubtful accounts and other sales related allowances. When evaluating the adequacy of the allowance for doubtful accounts, the Company analyzes known uncollectible accounts, the aging of accounts receivable, historical bad debts, customer credit-worthiness and current economic trends.

Other sales related allowances include those for sales returns, price protection, and cooperative advertising. When estimating future product returns, the Company makes an assessment of the rate and lag period by which customers will return the Company’s products by considering historical trends and information regarding inventory

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

levels and demand and acceptance of the Company’s products by the end consumer. Allowances for price protection and cooperative advertising are based upon programs negotiated with specific customers.

Inventories

Raw materials, packaging materials and accessories are valued at the lower of cost, determined by the first-in, first-out method, or market. Finished goods are valued at the lower of cost or market, with cost being determined on an average cost basis using the first-in, first-out method. The Company regularly reviews inventory quantities on hand and in the retail channel in order to recognize any loss of utility in the period incurred.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Molds	3 years
Computer equipment and software	3 years
Manufacturing and office equipment	3 - 5 years
Furniture and fixtures	5 years
Leasehold improvements	Shorter of estimated useful life or remaining life of lease

Major improvements and betterments are capitalized.

Intangible Assets

Intangible assets are stated at cost less accumulated amortization and are amortized over the estimated useful lives of the assets on a straight-line basis. The range of useful lives is one to 15 years.

	Useful Life
	(Years)
Trademarks		4 - 15
Customer relationships		3 - 6
Product lines		2 - 3
Copyrights		5
Website		4
Other		1 - 3

Goodwill

Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), prohibits amortization of goodwill and intangible assets with indefinite useful lives but instead requires testing for impairment at least annually. The Company reviews its goodwill for impairment as of the end of each fiscal year or when an event or a change in facts and or circumstances indicates the fair value of a reporting unit may be below its carrying amount.

SFAS No. 142 requires that goodwill and certain intangible assets be assessed for impairment using fair value measurement techniques. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is

F-9

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The Company determined that we have one reporting unit and we assess fair value based on a review of our market capitalization as well as a discounted cash flow model, for which the key assumptions include revenue growth, gross profit margins, operating expense trends and our weighted average cost of capital. Given the volatility of the Company’s stock price and market capitalization, which fluctuates significantly throughout the year, the Company does not believe that our market capitalization is necessarily the best indicator of the fair value of our Company at any moment in time. However, the Company has determined that market capitalization over a sustained period, when considered with other factors may be an appropriate indicator of fair value. Further, to the extent the carrying amount of our reporting unit exceeds its market capitalization over a sustained period, an impairment may exist and require us to test for impairment.

In 2009, the carrying amount of the Company’s reporting unit had exceeded its market capitalization over a sustained period, accordingly, the Company determined that a triggering event had occurred in the quarter ended December 31, 2008 and therefore recorded a goodwill impairment charge of $28.5 million at December 31, 2008, which represented management’s preliminary estimate of the goodwill impairment based on the fair value analysis as of such date. Management finalized its estimate during the quarter ended March 31, 2009, which resulted in a reduction of $0.6 million to the estimated third quarter impairment charge, resulting in a total impairment charge of $27.9 million for the year ended March 31, 2009. The Company also completed its annual assessment of impairment in accordance with SFAS No. 142 as of March 31, 2008 and 2007, which did not indicate any impairment of goodwill at such dates. No assurance can be given that the Company will not be required to record additional goodwill impairments in future periods.

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet. During the third quarter of 2009, the Company determined that a triggering event had occurred and performed the required analysis, which indicated that no impairment existed. There were no triggering events during the fourth quarter of 2009.

Royalties and Intellectual Property Licenses

Royalty and license expenses consist of royalties and license fees paid to intellectual property rights holders for use of their trademarks, copyrights, software, technology or other intellectual property or proprietary rights in the development or sale of our products. Royalty-based payments that are paid in advance are generally capitalized and expensed to cost of sales at the greater of the contractual or effective royalty rate based on net product sales.

Royalty payments to independent videogame developers and co-publishing affiliates are payments for the development of intellectual property related to the Company’s videogame titles. Payments made prior to the establishment of technological feasibility are expensed as research and development. Once technological feasibility has been established, payments made are capitalized and amortized upon release of the product. Additional royalty

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

payments due after the general release of the product are typically expensed as cost of sales at the higher of the contractual or effective royalty rate based on net product sales.

Advertising and Research and Development

Advertising costs and research and development are expensed as incurred. Advertising costs amounted to $3,796,000, $3,184,000, and $3,879,000 in 2009, 2008 and 2007, respectively. Cooperative advertising with retailers is recorded when revenue is recognized and such amounts are included in sales and marketing expense if there is a separate identifiable benefit with a fair value. Otherwise, such costs are recognized as a reduction of sales. Research and development costs amounted to $1,076,000, $1,516,000 and $1,406,000 for the years ended March 31, 2009, 2008 and 2007, respectively.

Income Taxes

Income taxes are accounted for using the asset and liability method. Under the asset and liability method of accounting for income taxes, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts and tax basis of assets and liabilities and for tax loss carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. To the extent that it is not “more likely than not” that a deferred tax asset will be realized, a valuation allowance is provided. Significant management judgment is required in assessing the realizability of the Company’s deferred tax assets. In performing this assessment, management considers whether it is more likely than not that some portion or all of the assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income in each tax jurisdiction during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred liabilities, projected future taxable income, and tax planning strategies in making this assessment.

April 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”) Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption did not have a material impact to the Company.

Foreign Currency Translation

For each of the Company’s foreign operating subsidiaries the functional currency is its local currency. Assets and liabilities of foreign operations are translated into U.S. dollars using month-end exchange rates, and revenue and expenses are translated into U.S. dollars using monthly average exchange rates. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in shareholders’ equity.

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency.

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding, increased by potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method and represent incremental shares issuable upon exercise of outstanding stock options. However, potentially dilutive securities are not included in the denominator of the diluted earnings per share calculation when inclusion of such shares would be anti-dilutive.

The following table sets forth the computation of diluted weighted average common and potential common shares outstanding for the years ended March 31, 2009, 2008 and 2007:

	Years Ended March 31,
	2009		2008		2007
Basic weighted average common shares outstanding		55,088,960		54,843,688		54,244,383
Effect of dilutive securities — options		—		470,750		792,208
Diluted weighted average common and potential common shares outstanding		55,088,960		55,314,438		55,036,591

Weighted average stock options to purchase of 5,565,653, 2,229,223, and 1,193,262 shares for the years ended March 31, 2009, 2008 and 2007, respectively, were excluded from calculation because of their anti-dilutive effect. Weighted average shares of 10,217,744 and 3,831,924 related to the convertible note payable were excluded from the calculation because of their anti-dilutive effect in fiscal year 2009 and 2008, respectively.

Stock-Based Compensation

The Company applies the provisions of SFAS No. 123R, Share-Based Payment (“SFAS No. 123R”) and records compensation expense associated with share-based awards made to employees and directors based upon their grant date fair value. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which ranges from zero to four years.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model, using the assumptions noted in Note 10 — Stock-Based Compensation. The expected life of the options is based a number of factors, including historical exercise experience, the vesting term of the award, the expected volatility of the Company’s stock and an employee’s average length of service. The expected volatility is estimated based on the historical volatility (using daily pricing) of the Company’s stock. The risk-free interest rate is determined based on a constant U.S. Treasury security rate with a contractual life that approximates the expected term of the stock options. In accordance with SFAS No. 123R, the Company reduces the calculated stock-based compensation expense for estimated forfeitures by applying a forfeiture rate, based upon historical pre-vesting option cancelations. Estimated forfeitures will be reassessed at each balance sheet date and may change based on new facts and circumstances.

See Note 10 — Stock-Based Compensation for additional information regarding our stock-based compensation plans.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and certain changes in equity that are excluded from net income (loss). Accumulated other comprehensive income represents net unrealized gains and losses from foreign currency translation adjustments.

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value using generally accepted accounting principles, and expands disclosures related to fair value measurements. Subsequent to the issuance of SFAS No. 157, the FASB issued FASB Staff Position 157-2 (“FSP 157-2”). FSP 157-2 delayed the effective date of the application of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. We adopted the provisions of SFAS No. 157 as of April 1, 2008 with the exception of the application of the statement to nonrecurring nonfinancial assets and nonfinancial liabilities. This adoption had no impact on our consolidated financial statements. We will adopt FSP 157-2 as of April 1, 2009 and are currently evaluating the impact of this pronouncement on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115 (“SFAS No. 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, applies to all entities with available-for-sale and trading securities. The fair value option established by SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. A business entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We adopted the provisions of SFAS No. 159 effective April 1, 2008, which adoption had no impact on our consolidated financial statements.

In April 2008, the FASB issued FSP FAS No. 142-3 (FSP FAS No. 142-3), Determination of the Useful Life of Intangible Assets. FSP FAS No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB 142, Goodwill and Other Intangible Assets, to include an entity’s historical experience in renewing or extending similar arrangements, adjusted for entity-specific factors, even when there is likely to be “substantial cost or material modifications.” FSP FAS No. 142-3 states that in the absence of historical experience an entity should use assumptions that market participants would make regarding renewals or extensions, adjusted for entity-specific factors. The guidance for determining the useful life of intangible assets included in this FSP will be applied prospectively to intangible assets acquired after the effective date of January 1, 2009. The impact of the adoption of FSP FAS 142-3, which was effective January 1, 2009, on the Company’s results of operations and financial position will depend on the nature and extent of business combinations that it completes, if any, in or after fiscal 2010.

(3)   Acquisitions

Saitek

On November 20, 2007, the Company acquired all of the outstanding stock of Winkler Atlantic Holdings Limited (“WAHL”), a private holding company that owned Saitek, a provider of PC games accessories, PC input devices, multimedia audio products, chess and intelligent games. The Company acquired Saitek to further diversify its products and geographic distribution capabilities. The strategic combination broadened the product lines the Company offers, expanded the Company’s geographic presence and allows the Company to provide a more comprehensive product suite to its customers. The acquisition was recorded using the purchase method of

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

accounting. Thus, the results of operations from Saitek are included in the Company’s consolidated financial statements from the date of acquisition.

Pursuant to the terms of the purchase agreement related to the WAHL acquisition, the Company paid to the former owner of WAHL $30.3 million of purchase consideration, which was comprised of $15.0 million of cash, funded from the Company’s cash on hand and borrowings under the existing credit facility, as well as the issuance of $14.5 million of convertible notes and $0.8 million of a non-convertible note. The total purchase price, including transaction costs of $2.3 million and restructuring costs of $0.9 million, was allocated to tangible and intangible assets acquired based on estimated fair values, with the remainder classified as goodwill. As management formulated the plan for the restructuring of Saitek at the time of the acquisition, the restructuring was recorded as purchase price, in accordance with EITF No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. As of March 31, 2009, all restructuring costs had been paid out.

The total purchase price of the acquisition was as follows (in thousands):

Cash paid	$	14,956
Issuance of convertible notes		14,500
Transaction costs		2,326
Issuance of completion note		847
Restructuring costs		866
Total purchase price	$	33,495

The transaction costs incurred by the Company primarily consist of fees for attorneys, financial advisors, accountants and other advisors directly related to the transaction.

The total purchase price has been allocated as follows based on the assets and liabilities acquired as of November 20, 2007 (in thousands):

Fair value of net tangible assets acquired and liabilities assumed:
Accounts receivable and other current assets, excluding inventories	13,506
Inventories	5,970
Property, plant & equipment	524
Deferred tax assets	1,279
Accounts payable and other liabilities	(13,553	)
	7,726
Fair value of identifiable intangible assets acquired:
Product lines	3,200
Customer relationships	3,100
Trademarks and tradenames	1,100
Other intangibles	50
	7,450
Goodwill	18,319
Total purchase price	33,495

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

Activities related to the Saitek acquisition restructuring plan are as follows for the year ended March 31, 2009 (in thousands):

	Severance			Lease Exit			Total
Balance at March 31, 2008	$	830		$	80		$	910
Payments		(786	)		(80	)		(866	)
Reversals		(44	)		—			(44	)
Balance at March 31, 2009	$	—		$	—		$	—

The accompanying consolidated statements of operations for the year ended March 31, 2008 includes the operations of Saitek from the date of acquisition. Assuming the acquisition of Saitek had occurred on April 1, 2007 and 2006, the pro forma unaudited results of operations would have been as follows (in thousands):

	Year Ended
	March 31,		March 31,
	2008		2007
Revenue	$	114,701	$	136,926
Net income		249		(160	)
Net income per share:
Basic	$	0.00	$	0.00
Diluted	$	0.00	$	0.00

The above pro forma unaudited results of operations do not include pro forma adjustments relating to costs of integration or post-integration cost reductions that were incurred or realized by the Company in excess of actual amounts incurred or realized through March 31, 2008.

Joytech

On September 7, 2007, the Company acquired certain assets of Joytech from Take-Two Interactive Software, Inc. (NASDAQ: TTWO) for approximately $3 million. Joytech manufactures third-party videogame peripherals and audiovisual accessories with retail distribution in Europe and North America. The acquisition was accounted for as an asset purchase.

Pursuant to the terms of the purchase agreement related to the Joytech acquisition, the Company acquired substantially all of Joytech’s assets for an aggregate purchase price of approximately $3 million, which was paid in cash, funded from the Company’s cash resources and borrowings under its existing credit facility. The total purchase price, including transaction costs of approximately $51,000, was allocated to tangible and intangible assets acquired based on estimated fair values.

The total purchase price of the acquisition was as follows (in thousands):

Cash paid for Joytech business	$	2,932
Transaction costs		51
Total purchase price	$	2,983

The transaction costs incurred by the Company primarily consist of fees for attorneys and travel expenses directly related to the transaction.

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

The total purchase price was allocated, using the relative fair value method, based on the fair value of the assets acquired as of September 7, 2007 as follows (in thousands):

Fair value of tangible assets acquired and liabilities assumed:
Property and equipment	$	375
Inventories		1,926
		2,301
Fair value of identifiable intangible assets acquired:
Product lines		61
Customer relationships		302
Trademarks		257
Other intangibles		62
		682
Total fair value of assets acquired	$	2,983

(4)   Inventories

Inventories consist of the following (in thousands):

	March 31,
	2009		2008
Raw materials	$	949	$	816
Finished goods		16,825		19,738
Inventories	$	17,774	$	20,554

(5)   Property and Equipment

Property and equipment consist of the following (in thousands):

	March 31,
	2009			2008
Molds	$	4,936		$	4,121
Computer equipment and software		2,382			2,264
Manufacturing and office equipment		854			1,181
Furniture and fixtures		338			406
Leasehold improvements		465			429
		8,975			8,401
Less: Accumulated depreciation and amortization		(7,149	)		(6,300	)
Property and equipment, net	$	1,826		$	2,101

Depreciation and amortization expense totaled $1,262,000, $1,250,000, and $1,152,000 for the years ended March 31, 2009, 2008 and 2007, respectively.

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MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

(6)   Intangible Assets and Goodwill

The Company’s acquired intangible assets are summarized as follows (in thousands):

					2009		2008
			Accumulated		Net Book		Net Book		Useful life
	Cost		Amortization		Value		Value		(Years)
Trademarks	$	5,474	$	3,723	$	1,751	$	2,467	4 - 15
Customer relationships		3,161		823		2,338		3,141	3 - 6
Product lines		3,185		2,182		1,003		2,647	2 - 3
Copyrights		514		514		—		—	5
Website		457		457		—		—	4
Other		110		84		26		65	1 - 3
Intangible assets	$	12,901	$	7,783	$	5,118	$	8,320

Amortization of intangible assets was approximately $2,931,000, $1,660,000 and $786,000 in fiscal 2009, 2008 and 2007, respectively.

As of March 31, 2009, the future estimated amortization expense for these acquired intangible assets for the next five years and thereafter is expected to be as follows (in thousands):

	Future
	Amortization
Year ending March 31, 2010		2,311
Year ending March 31, 2011		661
Year ending March 31, 2012		596
Year ending March 31, 2013		588
Year ending March 31, 2014		391
Thereafter		571
		5,118

The changes in the carrying amount of goodwill for the years ended March 31, 2009 and 2008 are as follows:

Balance at March 31, 2007	$	17,483
Aquisition of Saitek		18,221
Balance at March 31, 2008		35,704
Saitek purchase price adjustments:
Working capital adjustment		847
Adjustment to estimated transaction costs		282
Release of deferred tax asset valuation allowances upon merger of Saitek entities into Mad Catz entities		(1,031	)
Translation adjustment		552
Impairment charge		(27,887	)
Balance at March 31, 2009	$	8,467

F-17

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

(7)   Bank Loan

The Company has a Credit Facility with Wachovia Capital Finance Corporation (Central) (“Wachovia”) to borrow funds under a revolving line of credit subject to the availability of eligible collateral (accounts receivable and inventories), which changes throughout the year. At March 31, 2009, the amount outstanding under the line of credit was $13,272,000. On June 23, 2009, we extended the term of the Credit Facility, due to expire on October 30, 2009, until October 31, 2012. As part of extending the term, the Company chose to reduce the amount of the Credit Facility from $35.0 million to $30.0 million. The line of credit accrues interest on the daily outstanding balance at the U.S. prime rate plus 0.75% per annum through June 30, 2009 after which interest will accrue at the U.S. prime rate plus 2.00% or, at the Company’s option, LIBOR plus 3.50% with a LIBOR floor of 1.50%. At March 31, 2009 and 2008, the interest rate was 3.5% and 5.5%, respectively. The Company is also required to pay a monthly service fee of $1,000, increasing to $2,000 as of July 1, 2009, and an unused line fee equal to 0.25% of the unused portion of the loan, increasing to 0.50% on July 1, 2009. Borrowings under the Credit Facility are secured by a first priority interest in the inventories, equipment, accounts receivable and investment properties of Mad Catz, Inc. (“MCI”) and by a pledge of all of the capital stock of the Company’s subsidiaries and is guaranteed by the Company. The Company is required to meet a quarterly financial covenant based on the Company’s trailing four quarter’s coverage of fixed charges. We were in violation of a financial covenant as of December 31, 2008, which violation was waived by Wachovia. We were in compliance with the covenant as of March 31, 2009.

(8)   Convertible Notes Payable

On November 20, 2007, we issued to the seller of Saitek $14,500,000 of convertible notes (“Saitek Notes”) as part of the consideration relating to that acquisition. On June 24, 2009, the terms of the Saitek Notes were amended as follows. The maturity of the Saitek Notes was extended to March 31, 2019 with annual principal and interest payments of $2,400,000 due beginning March 31, 2011 until the Saitek Notes are retired. The Saitek Notes will bear interest at 7.5% through March 31, 2014 and 9.0% thereafter. Quarterly cash payments for partial interest in the amount of approximately $45,000 are due beginning June 30, 2009, in addition to an interest payment of $500,000 due on October 31, 2009, and an interest payment of $596,035 due on March 31, 2010. The Saitek Notes are convertible into Mad Catz Interactive, Inc. common stock at the exercise price of $1.419 per share. The conversion price represented a 15% premium to the average closing share price of the Company’s stock over the preceding 15 trading days prior to execution of the purchase agreement relating to the Saitek acquisition. If fully converted, the Notes would convert into approximately 10,217,744 shares of the Company’s common stock.

(9)   Saitek Completion Note

Pursuant to the Saitek purchase agreement, a working capital adjustment in the amount of $847,000 was made in fiscal 2009 to the purchase price based on the completion of the final balance sheet. The Company financed this amount with a note payable. The note is unsecured, was originally due August 1, 2011 including all accrued interest, and bears interest at 7% per annum compounded annually. As part of restructuring the Saitek Notes described above, the Company is required to repay this note in full, plus accrued interest, on March 31, 2010. The working capital adjustment was recorded as an increase to goodwill during the fiscal year ended March 31, 2009.

(10)   Stock-Based Compensation

The Company’s prior existing Amended and Restated Incentive Stock Option Plan (the “Prior Plan”) allowed the Company to grant options to purchase common stock to employees, officers and directors. In October 2007, the shareholders of the Company approved the Mad Catz Interactive, Inc., Stock Option Plan — 2007 (the “2007 Plan”). As a result, the 2007 Plan replaces the Prior Plan, and no grants will be made under the Prior Plan in the future. During fiscal years 2009 and 2008, no grants were issued from the Prior Plan. The Prior Plan allowed for a maximum of 6,000,000 shares of common stock to be issued pursuant to options granted. Options granted under the Prior Plan before fiscal year 2007 generally expired five years from the date of grant and generally vested over a

F-18

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

period of two years with one-third vesting immediately. Options granted during fiscal year 2007 vested either over four years or immediately upon grant. At March 31, 2009, a total of 2,417,500 options were outstanding and options to purchase 1,935,677 shares were exercisable.

The 2007 Plan allows the Company to grant options to purchase common stock to employees, officers and directors up to a maximum of 6,500,000 shares of common stock. Options granted under the 2007 Plan expire ten years from the date of grant and generally vest over a period of four years, with the first 25% vesting on the one-year anniversary of the grant date and the remainder vesting monthly over the remaining 36 months. At March 31, 2009, a total of 4,978,775 options were outstanding, options to purchase 599,325 shares were exercisable, and 1,150,000 shares were available for future grant under the 2007 Plan.

The Company’s options are denominated in U.S. dollars for options granted in fiscal years 2009 and 2008 and denominated in Canadian dollars for options granted prior to fiscal year 2008. For convenience, per share amounts stated below have been translated to U.S. dollars at the rate of exchange in effect at the balance sheet date. A summary of option activity for the years ended March 31, 2009, 2008 and 2007 is presented as follows:

	2009					2008					2007
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Options			Price		Options			Price		Options			Price
Outstanding, beginning of year		3,835,334		$	0.80		3,605,500		$	0.54		2,099,333		$	0.99
Granted		3,925,000			0.46		1,425,000			1.18		2,880,000			0.45
Exercised		(125,000	)		0.46		(729,166	)		0.49		—
Expired/canceled		(239,059	)		0.75		(466,000	)		0.97		(1,373,833	)		1.08
Outstanding, end of year		7,396,275		$	0.58		3,835,334		$	0.80		3,605,500		$	0.54
Exercisable, end of year		2,535,002		$	0.64		1,978,386		$	0.66		2,248,000		$	0.55
Vested and expected to vest, end of year		7,055,986		$	0.63		2,851,838		$	0.78		3,510,475		$	0.54

The following summarizes information about stock options outstanding as of March 31, 2009:

	Options Outstanding						Options Exercisable
			Weighted						Weighted
			Average		Weighted				Average		Weighted
			Remaining		Average				Remaining		Average
	Number		Contractual		Exercise		Number		Contractual		Exercise
Range of Exercise Price	Outstanding		Life in Years		Price		Exercisable		Life in Years		Price
$0.33 - 0.50		5,542,500		8.9	$	0.45		1,391,510		7.6	$	0.41
$0.62 - 0.92		833,775		3.2		0.73		664,429		2.0		0.73
$1.06 - 1.23		1,020,000		8.3		1.21		479,063		8.3		1.20
		7,396,275		8.2	$	0.58		2,535,002		6.3	$	0.64

There were no exercisable stock options that were in the money at March 31, 2009. As of March 31, 2009, the total unrecognized compensation cost related to unvested options was $1,532,000, which is expected to be recognized over a weighted-average period of 2.92 years. The weighted average remaining contractual term as of March 31, 2009 is 9.6 years.

The weighted average per share fair value of the options granted during the years ended March 31, 2009, 2008 and 2007 were $0.46, $0.65 and $0.25, respectively.

F-19

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

The total intrinsic value of options exercised during the year ended March 31, 2009 was $26,000 which was determined as of the date of exercise. The amount of cash received from the exercise of options was $57,000 for the year ended March 31, 2009. The weighted average grant date fair value of options exercised was $0.21 for the year ended March 31, 2009.

We estimated the fair value of each stock option grant on the date of grant using the Black-Scholes model with the following assumptions for the years ended March 31, 2009, 2008 and 2007:

	2009	2008	2007
Assumptions:
Expected volatility	74% - 75%	74% - 75%	72% - 76%
Risk-free interest rate	2.18% - 3.11%	4.37% - 4.78%	4.73% - 4.85%
Forfeitures	5%	7%	4%
Dividend yield	—	—	—
Expected term	1 - 5 years	1 - 4 years	2 - 4 years

The Company’s net income for the years ended March 31, 2009, 2008 and 2007 has been reduced by stock-based compensation expense, net of taxes, of approximately $0.3 million, $0.1 million and $0.2 million, respectively.

(11)   Income Taxes

Domestic and foreign income (loss) before income taxes and details of income tax expense (benefit) are as follows (in thousands):

	Years Ended March 31,
	2009			2008		2007
Income (loss) before income taxes:
Domestic (U.S.)	$	(16,563	)	$	3,987	$	3,865
Foreign		(13,118	)		1,925		2,065
	$	(29,681	)	$	5,912	$	5,930
Income tax expense (benefit):
Current:
Federal (U.S.)	$	(630	)	$	511	$	19
State (U.S.)		56			27		20
Foreign		850			717		594
Total current		276			1,255		633
Deferred:
Federal (U.S.)		2,467			884		1,200
State (U.S.)		459			538		354
Foreign		(269	)		67		38
Total deferred		2,657			1,489		1,592
Income tax expense	$	2,933		$	2,744	$	2,225

F-20

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

The difference between reported income tax expense (benefit) and the amount computed by multiplying income (loss) before income taxes by the Company’s applicable Canadian statutory tax rate of approximately 33%, 35% and 36% for the years ended March 31, 2009, 2008 and 2007, respectively, is reconciled as follows (in thousands):

	Years Ended March 31,
	2009			2008			2007
Income tax expense (benefit) using the Company’s Canadian statutory tax rates	$	(9,906	)	$	2,096		$	2,142
Income taxed in jurisdictions other than Canada		1,468			(174	)		(263	)
Goodwill impairment		7,511			—			—
Change in valuation allowance		3,665			1,054			346
Other		195			(232	)		—
	$	2,933		$	2,744		$	2,225

The sources of significant temporary differences that give rise to the deferred tax assets and liabilities are as follows (in thousands):

	March 31,
	2009			2008
Deferred tax assets:
Tax loss carryforwards	$	8,542		$	15,370
Difference between book and tax basis of inventories		789			809
Difference between book and tax basis of accounts receivables		424			487
Deferred fees not currently deductible		86			96
Accruals and reserves not currently deductible		552			687
Difference between book and tax basis if intangible assets, property & equipment		800			615
Unclaimed depreciation on property and equipment		278			339
Unclaimed scientific research expenditures		184			225
Other		205			390
		11,860			19,018
Less valuation allowance		(10,895	)		(15,217	)
Net deferred tax assets	$	965		$	3,801
Deferred tax liabilities:
Federal liability on state tax loss	$	231		$	82
Prepaid liabilities		24			258
Goodwill and intangibles		207			745
Other		—			147
Net deferred tax liabilities	$	462		$	1,232
Net deferred tax assets	$	503		$	2,569

F-21

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

The valuation allowance for deferred tax assets decreased $4.3 million from $15.2 million as of March 31, 2008 to $10.9 million as of March 31, 2009. The $4.3 million decrease was primarily due to the expiration of Canadian net operating loss carryforwards in the amount of $2.8 million, which were fully valued, and the release of $3.2 million of valuation allowances related to certain Saitek entities as a result of the merger of such Saitek entities into MadCatz entities in fiscal 2009. These decreases were partially offset by the recognition of new valuation allowances for tax losses (primarily in the U.S.), net of translation adjustments.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in each tax jurisdiction during the periods in which temporary differences in those jurisdictions become deductible. Management considers the scheduled reversal of deferred liabilities, projected future taxable income, and tax planning strategies in making this assessment.

With regards to the deferred tax assets of our Canadian entities, Mad Catz Interactive, Inc. (“MCII”), and MCC the Company believes there is insufficient evidence to conclude that realization of the benefit is more likely than not, and therefore the Company has provided a full valuation allowance against these assets. MCII is a corporate entity, which has no revenue or other income, and incurs corporate-related expenses. Taxable losses are incurred each year and MCII has a history of operating losses. MCC is a sales office, which has generated a minimal pretax book income in the three most recent years, but has a history of losses in prior year, and is projected to generate minimal taxable income in future years. These circumstances are not anticipated to change and therefore the Company does not expect MCII or MCC to generate sufficient taxable income in the foreseeable future to enable either entity to utilize their tax loss carryforwards. MCI is the Company’s main operating entity and corporate headquarters and also owns the Mad Catz intellectual property. Although MCI had reported pretax book income and taxable income in 2007 and 2008, MCI reported a pretax book loss (excluding the goodwill impairment charge) as well as a taxable loss in 2009, and is not projected to generate taxable income for the next five years. Accordingly, the Company believes there is insufficient evidence to conclude that realization of the deferred tax assets are more likely than not, and therefore recorded a full valuation allowance against these assets in fiscal 2009. With regard to Hong Kong, Germany, and the UK’s deferred tax assets, the Company believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets, and therefore no valuation allowance has been provided for these assets. These entities have historically realized pretax book income and taxable income and are projected to continue to do so for the foreseeable future.

MCI has U.S. federal and California tax losses of approximately $5.6 million, and $7.7 million, respectively, which may be carried forward to reduce future years’ taxable income. These losses begin to expire in 2023 and 2014 respectively. Saitek has foreign net operating loss carryforwards of approximately $15.3 million which may be carried forward indefinitely.

The total capital and non-capital income tax losses of MCII and MCC as of March 31, 2009 of $3.9 million, is based upon the total tax loss carry-forward amount in Canadian dollars of $16.8 million, translated into U.S. dollars at the March 31, 2009 exchange rate (1 Canadian dollar = 0.80074 U.S. dollar) and tax-effected at a 29% estimated rate. The gross tax loss carryfowards of Cdn.$16.8 million is made up of (i) MCII non-capital income tax losses of approximately Cdn.$12.9 million (U.S.$10.4 million), which expire from 2010 through 2029, (ii) MCII net capital tax losses of approximately Cdn.$3.2 million (U.S.$2.5 million), which are available indefinitely to offset taxable capital gains, and (iii) MCC non-capital income tax losses of approximately Cdn.$0.7 million (U.S.$0.5 million), which expire from 2010 through 2015. A full valuation allowance is provided against all these tax losses.

MCII does not record deferred income taxes on the undistributed earnings of its non-Canadian subsidiaries based upon the Company’s intention to permanently reinvest undistributed earnings. MCII may be subject to income and withholding taxes if earnings of the non-Canadian subsidiaries were distributed.

Effective April 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”) Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes

F-22

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

recognized in an entity’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption did not have a material impact to the Company and there was no cumulative effect related to the adoption of FIN 48.

Following is a tabular reconciliation of the Unrecognized Tax Benefits activity during 2009 (in thousands):

Unrecognized Tax Benefits — Opening Balance		—
Gross increases/(decreases) — tax positions in prior period		—
Gross increase — current-period tax positions	$	2,389
Settlements		—
Lapse of statute of limitations		—
Unrecognized Tax Benefits — Ending Balance	$	2,389

If recognized, the $2.4 million of unrecognized tax benefits would benefit the Company’s effective tax rate.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. There is no interest or penalties recorded on the FIN 48 balance as interest and penalties start to accrue upon filing of the tax returns, and the related tax assets for which the FIN 48 reserve was recorded have not yet been deducted on tax returns.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. The Company has no years under examination by any state or other foreign jurisdiction.

The Company’s historical tax years are subject to examination by the Internal Revenue Service and various state jurisdictions for fiscal years ended March 31, 2006 to the present. With few exceptions, the Company is no longer subject to foreign examinations by tax authorities for fiscal years ended before March 31, 2005. Effectively, all of the Company’s newly acquired foreign subsidiaries historical tax years are subject to examination by various foreign tax authorities due to the generation of net operating losses.

The Company does not foresee any material changes to unrecognized tax benefits within the next twelve months.

(12)   Commitments and Contingencies

Leases

The Company is obligated under certain non-cancelable operating leases, primarily for warehouses and office space. Rent expense for operating leases was approximately $1,624,000, $1,851,000 and $1,168,000 for the years

F-23

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

ended March 31, 2009, 2008 and 2007, respectively. Annual future minimum rental payments required under operating leases as of March 31, 2009 are as follows (in thousands):

Year ending March 31:
2010	$	1,254
2011		1,018
2012		786
2013		722
2014		358
Thereafter		423
	$	4,561

Royalty and License Agreements

The Company has license agreements to utilize existing design and utility technology with its products. The Company also has royalty agreements for use of licensed trademarks and celebrity endorsements. These agreements have royalty and license fees based on different percentages of certain types of sales or a predetermined amount per unit. Royalty and license expenses were $4,198,000, $2,086,000 and $3,537,000 for the years ended March 31, 2009, 2008 and 2007, respectively. Annual future minimum rental payments required under royalty and license agreements as of March 31, 2009 are as follows (in thousands):

Year ending March 31:
2010	$	476
Thereafter		29
	$	505

Legal Proceedings

On or about January 23, 2009, Michele Graham, a former employee of MCI, filed an action in the Superior Court of California in the County of San Diego, styled, Michele Graham v. Mad Catz, Inc., Case No. 37-2009-00081888 CU-WT-CTL. In her complaint, Ms. Graham claims she was improperly terminated based on her age. Ms. Graham has requested $73,500 in special damages and $5.65 million in punitive damages. Mad Catz disputes Ms. Graham’s claims and intends to vigorously defend the action.

On or about March 5, 2009, Immersion Corporation filed an action against MCI alleging underpayment of royalties pursuant to several license agreements. The action was filed in the Superior Court of California in the County of Santa Clara and is styled, Immersion Corporation v. Mad Catz, Inc., Case No. 109 CV 136562. Immersion claimed MCI owed unpaid royalties. Immersion and MCI have agreed to settle the dispute for $300,000 paid out over a one year time period, and this amount was recorded in accrued liabilities as of March 31, 2009.

(13)   Employee Savings Plan

MCI has an employee savings plan that permits eligible participants to make contributions by salary reduction pursuant to section 401(k) of the Internal Revenue Code. The Company matches 50% of the first 8% of compensation that is contributed by each participating employee to the plan. The Company’s contributions to the plan were $139,000, $136,000 and $112,000 for the years ended March 31, 2009, 2008 and 2007, respectively.

F-24

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

(14)   Geographic and Product Line Data

The Company’s sales are attributed to the following geographic regions (in thousands):

	2009		2008		2007
Net sales:
United States	$	65,003	$	52,129	$	71,168
Europe		41,442		31,257		22,163
Canada		1,974		2,806		6,355
Other countries		4,144		1,545		111
	$	112,563	$	87,737	$	99,797

Revenue is attributed to geographic regions based on the location of the customer. During the year ended March 31, 2009, one customer individually accounted for at least 10% of the Company’s gross sales, and this customer accounted for 29% of the Company’s gross sales. During the year ended March 31, 2008, one customer individually accounted for at least 10% of the Company’s gross sales, and this customer accounted for 33% of the Company’s gross sales. During the year ended March 31, 2007, two customers individually accounted for at least 10% of the Company’s gross sales, with one customer accounting for 32% and the second for 18% of the Company’s gross sales, for a combined total of 50% of consolidated gross sales.

The Company’s property and equipment are attributed to the following geographic regions (in thousands):

	2009		2008
Property and equipment:
United States	$	394	$	608
Europe		115		187
Canada		—		—
Other countries		1,317		1,306
	$	1,826	$	2,101

Our gross sales by product category are as follows:

	Year Ended March 31,
	2009		2008
Accessories	$	26,408	$	13,048
Personal computer products		40,173		14,277
Control pads		28,828		29,292
Batteries		10,582		3,504
Cables		9,100		11,619
Bundles		8,993		13,608
Games		1,695		4,202
Steering wheels		1,068		2,940
Memory		1,163		2,474
All others		209		3,807
Total	$	127,801	$	98,771

F-25

MAD CATZ INTERACTIVE, INC.

Notes to Consolidated Financial Statements — (Continued)

(15)   Quarterly Financial and Market Information (Unaudited)

	Quarter Ended
	June 30			Sept. 30			Dec. 31(A)			Mar 31(B)
	(Amounts in thousands, except per share data)
Fiscal 2009 Consolidated:
Net sales	$	23,226		$	25,750		$	40,817		$	22,770
Gross profit		8,194			7,823			10,548			5,440
Operating income (loss)		(884	)		(819	)		(26,413	)		629
Net loss		(777	)		(1,239	)		(26,907	)		(3,624	)
Net loss per share — basic		(0.02	)		(0.02	)		(0.49	)		(0.06	)
Net loss per share — diluted		(0.02	)		(0.02	)		(0.49	)		(0.06	)
Common stock price per share:
High		0.81			0.80			0.61			0.45
Low		0.55			0.45			0.25			0.15
Fiscal 2008 Consolidated:
Net sales	$	14,631		$	16,876		$	34,316		$	21,914
Gross profit		4,732			4,973			12,703			6,488
Operating income (loss)		(115	)		1,251			5,565			(1,615	)
Net income (loss)		(181	)		872			3,310			(832	)
Net income (loss) per share — basic		(0.00	)		0.02			0.06			(0.02	)
Net income (loss) per share — diluted		(0.00	)		0.02			0.06			(0.02	)
Common stock price per share:
High		1.65			1.50			1.39			1.23
Low		0.76			0.86			0.95			0.56

(A)	In the third quarter of fiscal year 2009, it was determined that goodwill had been impaired. Accordingly, the Company performed a valuation analysis and recorded a preliminary estimated impairment charge of $28.5 million.
(B)	In the fourth quarter of fiscal year 2009, the goodwill valuation analysis was finalized and a reduction to the previously estimated impairment charge in the amount of $0.6 million was recorded.

F-26

SCHEDULE II

Mad Catz Interactive, Inc.
Valuation and Qualifying Accounts
Years Ended March 31, 2009, 2008 and 2007

	Additions
	Balance at
	Beginning of			Revenue			Expenses and					Balance at
Description	Period			Reductions(A)			Other Costs(B)			Deductions(C)		End of Period
	(In thousands of U.S. dollars)
Year Ended March 31, 2009
Allowance for Doubtful Accounts, Cooperative Advertising, Price Protection and Sales Returns	$	(4,514	)	$	(6,084	)	$	(3,449	)	$	8,121	$	(5,926	)
Year Ended March 31, 2008
Allowance for Doubtful Accounts, Cooperative Advertising, Price Protection and Sales Returns	$	(3,583	)	$	(4,933	)	$	(3,271	)	$	7,273	$	(4,514	)
Year Ended March 31, 2007
Allowance for Doubtful Accounts, Cooperative Advertising, Price Protection and Sales Returns	$	(5,198	)	$	(5,426	)	$	(2,511	)	$	9,552	$	(3,583	)

(A)	Includes increases in allowances for sales returns, price protection and other sales allowances including volume discounts. Included in the additions in 2008 is $1,923,000, which represents the beginning balance of Saitek upon acquisition.
(B)	Includes increases in allowances for doubtful accounts and cooperative advertising that is awarded based on allowance. Amounts reflect the translation effect of using the average exchange rate for expense items and the year-end exchange rate for the balance sheet item (allowance account). Included in the additions in 2008 is $10,000, which represents the beginning balance of Saitek upon acquisition.
(C)	Includes actual write-offs of uncollectible accounts receivable, sales returns and price protection credits issued.

See accompanying report of independent registered public accounting firm.

F-27

EX-10.18

Exhibit 10.18

AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this “Amendment”) is made effective as of December 31, 2008, by and among Mad Catz, Inc., a Delaware corporation (“Mad Catz”), Mad Catz Interactive, Inc., a Delaware corporation (“Parent”), and Darren Richardson (“Executive”). Mad Catz and Parent are referred to herein collectively as the “Company.”

     WHEREAS, Mad Catz and Executive are parties to that certain Employment Agreement dated as of May 18, 2000, as amended by that certain Amendment to Employment Agreement dated as of April 1, 2004 between Parent and Executive (together, the “Agreement”).

     WHEREAS, the Company and Executive desire to amend the Agreement to ensure that the benefits to be provided by the Agreement comply with, or are exempt from, the provisions of Section 409A (“Section 409A”) of the United States Internal Revenue Code, as amended (together with the Department of Treasury regulations and other guidance promulgated thereunder, the “Code”).

     The parties further agree as follows:

     1. Amendment to Section 1.4 of the Agreement. The following language is hereby added to the end of Section 1.4 of the Agreement:

     “The Company shall be under no obligation to provide the payments and benefits described in this Section 1.4 unless you shall have executed the Release Agreement (and applicable revocation period thereunder shall have expired) within fifty-five (55) days following the date of your termination of employment. The payment of the severance amounts payable under this Section 1.4 shall be paid in a lump sum no later than sixty (60) days following the date of your termination of employment.”

     2. Amendment to Section 2.5 of the Agreement. The following language is hereby added to the end of Section 2.5 of the Agreement:

     “To the extent that any payments or reimbursements provided to you under this Agreement are deemed to constitute compensation to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to you promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and your right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.”

     3. New Section 10.6 of the Agreement. A new Section 10.6 is hereby added to the Agreement as follows:

          “10.6 Section 409A of the Code.

               (a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Department of Treasury regulations and other interpretive guidance issued thereunder.

               (b) Notwithstanding anything herein to the contrary, to the extent any of the amounts payable under Section 1.4 are treated as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no portion of such amounts shall be payable to you unless your termination of employment constitutes a “separation from service,” as defined in Treasury Regulation Section 409A-1(h) (and any successor provision thereto) (a “Separation from Service”), and (ii) if at the time of your Separation from Service you are determined by the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of any portion of the amounts payable under Section 1.4 is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the amounts payable under Section 1.4 shall not be provided to you prior to the earlier of (A) the expiration of the six-month period measured from the date of your Separation from Service, (B) the date of your death or (C) such earlier date as is permitted under Section 409A of the Code. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred shall be paid in a lump sum to you within thirty (30) days following such expiration, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. The determination of whether you are a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of your Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).”

     4. New Section 10.7. A new Section 10.7 is hereby added to the Agreement as follows:

          “10.7 Change in Control Payment. In the event of a Change in Control while you are still employed by the Company, the Company shall pay to you $100,000, payable in cash in a lump sum within ten (10) days following such Change in Control.”

     5. Miscellaneous. The Agreement, as amended by this Amendment, shall remain in full force and effect in accordance with the terms and conditions thereof. The formation, construction, and performance of this Amendment shall be construed in accordance with the laws of California, without regard to conflict of laws principles. This Amendment may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. In the event of any conflict between the original terms of the Agreement and this Amendment, the terms of this Amendment shall prevail.

2

THE PARTIES TO THIS AMENDMENT HAVE READ THE FOREGOING AMENDMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AMENDMENT ON THE DATES SHOWN BELOW.

		EXECUTIVE
Dated:	Dec 31, 2008	By:	/s/ Darren Richardson      Darren Richardson
		MAD CATZ, INC.
Dated:	12/31/08	By:	/s/ Stewart Halpern
		Name:
		Title:
		MAD CATZ INTERACTIVE, INC.
Dated:	12/31/08	By: Name:	/s/ Stewart Halpern
		Title:

3

EX-10.19

Exhibit 10.19

AMENDMENT TO EMPLOYMENT AGREEMENT

     This Amendment to Employment Agreement (this “Amendment”) is made effective as of December 31, 2008, by and among Mad Catz, Inc., a Delaware corporation (“Mad Catz”), Mad Catz Interactive, Inc., a Delaware corporation (“Parent”), and Stewart Halpern (“Executive”). Mad Catz and Parent are referred to herein collectively as the “Company.”

     WHEREAS, the Company and Executive are parties to that certain Employment Agreement dated as of January 16, 2007 (the “Agreement”).

     WHEREAS, the Company and Executive desire to amend the Agreement to ensure that the benefits to be provided by the Agreement comply with, or are exempt from, the provisions of Section 409A (“Section 409A”) of the United States Internal Revenue Code, as amended (together with the Department of Treasury regulations and other guidance promulgated thereunder, the “Code”).

     The parties further agree as follows:

     1. Amendment to Section 1.4 of the Agreement. The following language is hereby added to the end of Section 1.4 of the Agreement:

          “The Company shall be under no obligation to provide the payments and benefits described in this Section 1.4 unless you shall have executed the Release Agreement (and applicable revocation period thereunder shall have expired) within fifty-five (55) days following the date of your termination of employment. The payment of the severance amounts payable under this Section 1.4 shall be paid in a lump sum no later than sixty (60) days following the date of your termination of employment.”

     2. Amendment to Section 2.6 of the Agreement. The following language is hereby added to the end of Section 2.6 of the Agreement:

          “To the extent that any payments or reimbursements provided to you under this Agreement are deemed to constitute compensation to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to you promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and your right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.”

     3. New Section 10.6 of the Agreement. A new Section 10.6 is hereby added to the Agreement as follows:

          “10.6 Section 409A of the Code.

               (a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the Department of Treasury regulations and other interpretive guidance issued thereunder.

               (b) Notwithstanding anything herein to the contrary, to the extent any of the amounts payable under Section 1.4 are treated as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no portion of such amounts shall be payable to you unless your termination of employment constitutes a “separation from service,” as defined in Treasury Regulation Section 409A-1(h) (and any successor provision thereto) (a “Separation from Service”), and (ii) if at the time of your Separation from Service you are determined by the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of any portion of the amounts payable under Section 1.4 is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the amounts payable under Section 1.4 shall not be provided to you prior to the earlier of (A) the expiration of the six-month period measured from the date of your Separation from Service, (B) the date of your death or (C) such earlier date as is permitted under Section 409A of the Code. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred shall be paid in a lump sum to you within thirty (30) days following such expiration, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. The determination of whether you are a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of your Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).”

     4. Miscellaneous. The Agreement, as amended by this Amendment, shall remain in full force and effect in accordance with the terms and conditions thereof. The formation, construction, and performance of this Amendment shall be construed in accordance with the laws of California, without regard to conflict of laws principles. This Amendment may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. In the event of any conflict between the original terms of the Agreement and this Amendment, the terms of this Amendment shall prevail.

2

THE PARTIES TO THIS AMENDMENT HAVE READ THE FOREGOING AMENDMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AMENDMENT ON THE DATES SHOWN BELOW.

		EXECUTIVE
Dated:	12/31/08	By:	/s/ Stewart Halpern  Stewart Halpern
		MAD CATZ, INC.
Dated:	December 31, 2008	By: Name:	/s/ Darren Richardson
		Title:
		MAD CATZ INTERACTIVE, INC.
Dated:	December 31, 2008	By: Name:	/s/ Darren Richardson
		Title:

3

EX-10.20

Exhibit 10.20

MAD CATZ INTERACTIVE, INC. NON-EMPLOYEE BOARD COMPENSATION

Non-Employee Director — Annual	$	50,000
Non-Employee Director — Chairman of the Board Annual Retainer	$	20,000
Non-Employee Director — In-Person Meeting Attendance	$2,500 per meeting
Non-Employee Director — Telephonic Meeting Attendance	$1,000 per telephonic meeting lasting longer than two hours and $500 per telephonic meeting lasting less than two hours
Audit Committee — Attendance	$1,500 per meeting
Audit Committee — Chairman Annual Retainer	$	10,000

Each non-employee director receives a grant to purchase up to 25,000 shares of Company’s Common Stock on the date of the Company’s annual meeting of shareholders. The exercise price of the stock options is based on the fair value of the Company’s on the date of the Annual Meeting. The stock options are fully vested upon grant and expire 10 years after issuance.

EX-10.21

Exhibit 10.21

Wachovia Capital Finance Corporation
(Canada)
141 Adelaide Street West
Suite 1500
Toronto, ON M5H 3L5

[Wachovia Logo]

March 18, 2009

VIA EMAIL

Mad Catz, Inc.
7480 Mission Valley Road
Suite 101
San Diego, California
92108

Dear Mr. Darren Richardson:

Re:      Wachovia Capital Finance Corporation (Central) and Mad Catz, Inc.

     Reference is made to the second amended and restated loan agreement dated as of October 30, 2006 between Mad Catz, Inc. (the “Borrower”) and Wachovia Capital Finance Corporation (Central) (the “Lender”) as amended by a first amending agreement dated as of November 20, 2007 (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “Loan Agreement”).

1.	Definitions. In this letter, unless otherwise defined or the context otherwise requires, all capitalized terms shall have the respective meanings specified in the Loan Agreement.
2.	Waiver of Event of Default.

(a)	An Event of Default has occurred under Section 9.1(a) of the Loan Agreement as a result of the breach of the EBITDA covenant in Section 8.13 of the Loan Agreement. More specifically, the Borrower failed to cause MCII to maintain a minimum consolidated EBITDA of US$8,008,000 for the trailing four (4) Fiscal Quarter period ending on December 31, 2008 (the “Existing Event of Default”).
(b)	In the sole and absolute discretion of the Lender, and in reliance on the specific description of the Existing Event of Default, the Lender hereby waives the Existing Event of Default.
(c)	Notwithstanding the foregoing, the waiver by the Lender as set forth herein:

(i) shall not extend to any other Event of Default or any event, circumstance or omission which, with the giving of notice, a lapse of time or a failure to remedy the event, circumstance or omission within a lapse of time, would constitute an Event of Default (a “Default”);

Page 2

(iii)	is intended to be limited to the specific purpose and intent for which same has been provided and does not prejudice any right or rights that the Lender or the US Collateral Agent may have or may have in the future under or in connection with the Financing Agreements including, without limitation, the exercise of any rights and remedies of the Lender and the US Collateral Agent; and
(iv)	the Lender and the US Collateral Agent reserve their respective rights and remedies at any time and from time to time in connection with any Default or Event of Default now existing or hereafter arising, other than the Existing Event of Default specifically waived herein.

3. Amendment to Loan Agreement.

(a)

This letter is also an amendment to the Loan Agreement. Unless the context of this letter otherwise requires, the Loan Agreement and this letter shall be read together and shall have effect as if the provisions of the Loan Agreement and this letter were contained in one agreement. The term “Agreement” when used in the Loan Agreement means the Loan Agreement as amended by this letter, together with all amendments, modifications, supplements, extensions, renewals, restatements and replacements thereof from time to time.

(b)

The Loan Agreement is amended as follows:

(i)	Section 1.1 of the Loan Agreement is amended by adding the following new Section 1.26A:
	“1.26A “Fixed Charge Coverage Ratio”
	“Fixed Charge Coverage Ratio” shall mean, with respect to MCII and its subsidiaries on a consolidated basis for any trailing four (4) Fiscal Quarters (each a “Testing Period”) determined in accordance with GAAP, the quotient of, for each Testing Period, (a) EBITDA (defined as net income or net loss before interest, taxes, depreciation and amortization, excluding goodwill impairment or any other non-cash non-operating charges as approved by the Lender) minus unfunded CAPEX minus the sum of taxes paid in the period for which the test relates and taxes due in the period for which the test relates but which have not been paid at the time of the test minus distributions and dividends divided by (b) interest paid and interest due within the Fiscal Quarter that the test is being done but which has not been paid at the time of the test plus any principal due, excluding any balance outstanding under this Agreement. For the avoidance of doubt, the Lender and the Borrower agree that the compliance certificate attached hereto as Exhibit 1.26A accurately details the method for calculating the Fixed Charge Coverage Ratio.”

Page 3

(ii)	The definition of “Interest Rate” in Section 1.32 of the Loan Agreement is amended by deleting “one quarter of one percent (0.25%)” and replacing it with “three quarters of one percent (0.75%)”.
(iii)	Section 8.13 of the Loan Agreement is deleted and replaced with the following:
	“8.13 Fixed Charge Coverage Ratio
	Borrower shall cause MCII to maintain a Fixed Charge Coverage Ratio of not less then 1.5:1.0 calculated at the end of each Fiscal Quarter for each Testing Period.”

(c) The effective date of the amendment to the Loan Agreement provided in this letter is March 18, 2009.

4.	No Novations. Nothing in this letter, or in the Loan Agreement when read together with this letter, shall constitute a novation, payment, re-advance or reduction or termination in respect of any Obligations.
5.	Financing Agreement. This letter is a Financing Agreement.
6.	Amendment Fee. The Borrower shall pay to the Lender an amendment fee of US$50,000 which amendment fee shall be fully earned as of and payable on the date hereof.
7.	Expenses. The Borrower shall pay all fees, expenses and disbursements including, without limitation, legal fees, incurred by or payable to the Lender and US Collateral Agent in connection with the preparation, negotiation, completion, execution, delivery and review of this letter and all other documents and instruments arising therefrom and/or executed in connection therewith.
8.	Continuance of Loan Agreement and Security.

(a)

The Loan Agreement, as amended or modified by this letter, shall be and continue in full force and effect and is hereby confirmed and the rights and obligations of all parties thereunder shall not be affected or prejudiced in any manner except as specifically provided for herein. It is agreed and confirmed that after giving effect to this letter, all security delivered by the Borrower and the Obligors secures the payment of all of the Obligations including, without limitation, the obligations arising under the Loan Agreement, as amended or modified by the terms of this letter.

(b)

To induce the Lender to enter into this letter, the Borrower hereby confirms that after giving effect to this letter, (i) the Borrower and the Obligors are in compliance with all covenants in the Financing Agreements, (ii) all the representations and warranties set out in the Financing Agreements are true and accurate, and (iii) no Default or Event of Default has occurred or is continuing.

Page 4

9.	Counterparts. This letter may be executed in any number of separate original or facsimile counterparts, each of which shall be deemed an original and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
10.	Governing Law. The validity, interpretation and enforcement of this letter and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the laws of the State of California.
11.	Further Assurances. At the request of the Lender at any time and from time to time, each of the Borrowers and the Obligors shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be requested by the Lender to effectuate the provisions or purposes of this letter.
12.	Amendments and Waivers. Neither this letter nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of the Lender and the US Collateral Agent, and as to amendments, as also signed by an authorized officer of the Borrower and the Obligors. The Lender and the US Collateral Agent shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of the Lender and the US Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by the Lender or the US Collateral Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which the Lender or the US Collateral Agent would otherwise have on any future occasion, whether similar in kind or otherwise.
13.	Headings. The division of this letter into sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this letter.
14.	Successors and Assigns. This letter shall be binding upon and inure to the benefit of and be enforceable by the Lender, the US Collateral Agent, the Borrower and the Obligors and their respective successors and assigns.
15.	Partial Invalidity. If any provision of this letter is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this letter as a whole, but this letter shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.
16.	Acceptance. If the foregoing correctly sets out our agreement, please indicate your acceptance of this letter by signing below and returning an executed copy to us by no later than 5:00 p.m. on March 18, 2009 (the “Effective Date”). If not so signed and returned to us on the Effective Date, this letter shall be null and void.

Page 5

Yours truly,

US COLLATERAL AGENT AND LENDER:

WACHOVIA CAPITAL FINANCE
CORPORATION (CENTRAL)

By:		/s/ Bruno Mello
	Name:	Bruno Mello
	Title:	Assistant Vice President
		Wachovia Capital Finance of Canada
By:		/s/ Carmela Massari
	Name:	Carmela Massari
	Title:	First Vice President
		Wachovia Capital Finance of Canada

Agreed this 18^th day of March 2009.

BORROWER:

MAD CATZ, INC.
By:		/s/ Darren Richardson
	Name:	Darren Richardson
	Title:	President & CEO
By:		/s/ Stewart Halpern
	Name:	Stewart Halpern
	Title:	CFO

Page 6

OBLIGORS:

Each of the undersigned Obligors hereby:

(a)	acknowledges, confirms and agrees that such Obligor’s Financing Agreements (as each of the same may have been amended, modified, supplemented, extended, renewed, restated or replaced) remain in full force and effect as at the date hereof in respect of the Obligations under the Loan Agreement; and
(b)	acknowledges and confirms that such Obligor has received a copy of the Loan Agreement and this letter and understands and agrees to the terms thereof.

Dated as of the 18^th day of March, 2009.

MAD CATZ INTERACTIVE, INC.		1328158 ONTARIO INC.
By: Name:	/s/ Darren Richardson Darren Richardson	By: Name:	/s/ Darren Richardson Darren Richardson
Title:	President & CEO	Title:	President
By:	/s/ Stewart Halpern
Name: Title:	Stewart Halpern CFO
MAD CATZ (EUROPE) LIMITED		MAD CATZ LIMITED
By: Name:	/s/ Darren Richardson Darren Richardson	By: Name:	/s/ Darren Richardson Darren Richardson
Title:	Director	Title:	Director
By: Name:	/s/ Stewart Halpern Stewart Halpern	By: Name:	/s/ Stewart Halpern Stewart Halpern
Title:	Director	Title:	Director

Page 7

FX UNLIMITED, INC.		MAD CATZ INTERACTIVE
		ASIA LIMITED
By: Name:	/s/ Darren Richardson Darren Richardson	By: Name:	/s/ Darren Richardson Darren Richardson
Title:	President	Title:	Director
By: Name:	/s/ Whitney E. Peterson Whitney Peterson	By: Name:	/s/ Stewart Halpern Stewart Halpern
Title:	Secretary	Title:	Director

WINKLER ATLANTIC HOLDINGS
By: Name:	/s/ Darren Richardson Darren Richardson
Title:	Director
By: Name:	/s/ Stewart Halpern Stewart Halpern
Title:	Director
SAITEK ELECKTRONIK VERTRIEBS
GMBH
By: Name:	/s/ Darren Richardson Darren Richardson
Title:	Director
By: Name:	/s/ Stewart Halpern Stewart Halpern
Title:	Director

Page 8

SAITEK SA
By: Name:	/s/ Darren Richardson Darren Richardson
Title:	Director
By: Name:	/s/ Stewart Halpern Stewart Halpern
Title:	Stewart

Page 9

Exhibit 1.26A

[See attached]

MAD CATZ INTERACTIVE INC.
FCCR Compliance Certificate
For the four-quarter period ended            12/31/2008

	Qtr. Ended			Qtr. Ended			Qtr. Ended			Qtr. Ended		Trailing
	3/31/2008			6/30/2008			9/30/2008			12/31/2008		Four Quarters
EBITDA for period ending:	$	690		$	283		$	225		$	4,211	$	5,409
(minus) Unfunded CAPEX	$	34		$	275		$	575		$	277	$	1,161
(minus) Taxes Paid	$	910		$	178		$	231		$	160	$	1,479
(minus) Taxes Due	$	0		$	0		$	0		$	0	$	0
(minus) Distributions	$	0		$	0		$	0		$	0	$	0
(minus) Dividends	$	0		$	0		$	0		$	0	$	0
Sub-Total	$	(254	)	$	(170	)	$	(581	)	$	3,774	$	2,769
Divided by:
Interest Paid	$	319		$	177		$	196		$	216	$	908
(plus) Interest Due	$	0		$	0		$	0		$	0	$	0
(plus) Principal Payments	$	0		$	0		$	0		$	0	$	0
(plus) Principal Payments Due	$	0		$	0		$	0		$	0	$	0
Sub-Total	$	319		$	177		$	196		$	216	$	908
Actual FCCR		(0.80	)		(0.96	)		(2.96	)		17.47		3.05
										Required FCCR			1.50
										Compliance		YES

Name

Signature

Title

Date

EX-10.22

Exhibit 10.22

Third Amended and Restated Loan Agreement

between

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)

as Lender and US Collateral Agent

and

MAD CATZ, INC.

as Borrower

and

THE OBLIGORS NAMED HEREIN

as Obligors

June 23, 2009

THIRD AMENDED AND RESTATED LOAN AGREEMENT

TABLE OF CONTENTS

	Page
SECTION 1 DEFINITIONS		2
1.1 “Acceptable Liquidation Agreement”		3
1.2 “Accounts”		3
1.3 “Acquisition”		3
1.4 “Adjusted Libor Rate”		3
1.5 “Agent”		4
1.6 “Amendment to Consideration Loan Note Instrument and Promissory Note”		4
1.7 “Approved In-Transit Inventory”		4
1.8 “Availability Reserves”		4
1.9 “Bankruptcy Code”		4
1.10 “Blocked Accounts”		4
1.11 “Borrower General Security Agreement”		5
1.12 “Business Day”		5
1.13 “Canadian Collateral Agent”		5
1.14 “Code”		5
1.15 “Collateral”		5
1.16 “Completion Note”		5
1.17 “Consideration Loan Note Instrument”		5
1.18 “Default”		6
1.19 “EBITDA”		6
1.20 “Eligible Accounts”		6
1.21 “Eligible Inventory”		8
1.22 “EMU Legislation”		9
1.23 “Environmental Laws”		9
1.24 “Equipment”		9
1.25 “ERISA”		9
1.26 “ERISA Affiliate”		9
1.27 “Euro”		9
1.28 “Event of Default”		9
1.29 “Excess Availability”		10
1.30 “Financing Agreements”		10
1.31 “Fiscal Quarter”		10
1.32 “Fixed Charge Coverage Ratio”		10
1.33 “Funding Bank”		11
1.34 “GAAP”		11
1.35 “Gameshark Software”		11
1.36 “Governmental Authority”		11
1.37 “Hazardous Materials”		11
1.38 “High Selling Period”		12
1.39 “HK Hive Up Deed”		12

THIRD AMENDED AND RESTATED LOAN AGREEMENT

- ii -

	Page
1.40 “Inactive Subsidiaries”		12
1.41 “Information Certificates”		12
1.42 “Intellectual Property”		12
1.43 “Intellectual Property Security Agreements”		12
1.44 “Intercreditor Agreement”		13
1.45 “Interest Period”		13
1.46 “Interest Rate”		13
1.47 “Inventory”		14
1.48 “Letter of Credit Accommodations”		14
1.49 “Libor Rate”		14
1.50 “Libor Rate Loans”		14
1.51 “License Agreements”		14
1.52 “Lien”		14
1.53 “Low Selling Period”		15
1.54 “Material Adverse Change”		15
1.55 “Material Adverse Effect”		15
1.56 “Maximum Credit”		15
1.57 “Maximum Letter of Credit Facility”		15
1.58 “MCC”		15
1.59 “MCE”		15
1.60 “MCII”		15
1.61 “MCIA”		16
1.62 “Merger”		16
1.63 “Net Amount of Eligible Accounts”		16
1.64 “Net Orderly Liquidation Value”		16
1.65 “Obligations”		16
1.66 “Obligor”		17
1.67 “Participating Member State”		17
1.68 “Payment Account”		17
1.69 “Permitted Inter-Company Debt”		17
1.70 “Person”		17
1.71 “Pounds Sterling”		17
1.72 “PPSA”		17
1.73 “Prime Rate”		18
1.74 “Prime Rate Loans”		18
1.75 “Priority Payables Reserve”		18
1.76 “Records”		18
1.77 “Revolving Loans”		18
1.78 “Royalty Reserve”		18
1.79 “Royalty Reserve Report”		19
1.80 “Saitek HK”		19
1.81 “Secured Parties”		19
1.82 “Software”		19
1.83 “Software Inventory”		19
1.84 “Solvent”		19
1.85 “Swap Agreement”		20

THIRD AMENDED AND RESTATED LOAN AGREEMENT

- iii -

	Page
1.86 “Termination Date”		20
1.87 “Testing Period”		20
1.88 “UCC”		20
1.89 “UK Hive Up Agreement”		20
1.90 “United Kingdom”		20
1.91 “US Collateral Agent”		20
1.92 “US Reference Bank”		20
1.93 “Value”		21
1.94 “WAHL”		21
SECTION 2 CREDIT FACILITIES		21
2.1 Revolving Loans		21
2.2 Letter of Credit Accommodations		23
2.3 Availability Reserves		25
SECTION 3 INTEREST AND FEES		25
3.1 Interest		25
3.2 Intentionally Deleted		27
3.3 Closing Fee		27
3.4 Servicing Fee		27
3.5 Unused Line Fee		27
3.6 Currency of Payments		27
3.7 Increased Costs and Changes in Law		27
SECTION 4 CONDITIONS PRECEDENT		30
4.1 Conditions Precedent to Revolving Loans and Letter of Credit Accommodations		30
SECTION 5 COLLECTION AND ADMINISTRATION		30
5.1 Borrower’s Loan Account		30
5.2 Statements		31
5.3 Collection of Accounts		31
5.4 Payments		32
5.5 Authorization to Make Revolving Loans		33
5.6 Use of Proceeds		33
SECTION 6 COLLATERAL REPORTING AND COVENANTS		33
6.1 Collateral Reporting		33
6.2 Accounts Covenants		34
6.3 Inventory Covenants		35
6.4 Equipment Covenants		36
6.5 Power of Attorney		36
6.6 Right to Cure		37
6.7 Access to Premises		38
SECTION 7 REPRESENTATIONS AND WARRANTIES		38
7.1 Corporate Existence, Power and Authority; Subsidiaries		38

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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	Page
7.2 Financial Statements; No Material Adverse Change		39
7.3 Chief Executive Office; Collateral Locations		39
7.4 Priority of Liens; Title to Properties		39
7.5 Tax Returns		39
7.6 Litigation		40
7.7 Compliance with Other Agreements and Applicable Laws		40
7.8 Bank Accounts		40
7.9 Accuracy and Completeness of Information		40
7.10 Employee Benefits		41
7.11 Environmental Compliance		41
7.12 Survival of Warranties; Cumulative		42
7.13 Inactive Subsidiaries		42
7.14 Intellectual Property		42
7.15 Solvent		43
7.16 Transfer of Assets of Saitek HK		43
7.17 Transfer of Assets of Saitek PLC		43
SECTION 8 AFFIRMATIVE AND NEGATIVE COVENANTS		44
8.1 Maintenance of Existence		44
8.2 New Collateral Locations		44
8.3 Compliance with Laws, Regulations, Etc.		44
8.4 Payment of Taxes and Claims		46
8.5 Insurance		46
8.6 Financial Statements and Other Information		46
8.7 Sale of Assets, Consolidation, Merger, Amalgamation, Dissolution, Etc.		49
8.8 Encumbrances		49
8.9 Indebtedness		50
8.10 Loans, Investments, Guarantees, Etc.		51
8.11 Dividends and Redemptions		52
8.12 Transactions with Affiliates		52
8.13 Fixed Charge Coverage Ratio		53
8.14 Intellectual Property		53
8.15 Additional Bank Accounts		53
8.16 Compliance with ERISA		53
8.17 Costs and Expenses		54
8.18 Further Assurances		55
8.19 Change of Control		55
8.20 Software Expenditures		55
8.21 Inactive Subsidiaries		55
8.22 Corporate Structure Chart		55
8.23 Swap Agreements		56
SECTION 9 EVENTS OF DEFAULTS AND REMEDIES		56
9.1 Events of Default		56
9.2 Remedies		58

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	Page
SECTION 10 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW		60
10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver		60
10.2 Waiver of Notices		62
10.3 Amendments and Waivers		62
10.4 Waiver of Counterclaims		62
10.5 Indemnification		62
SECTION 11 TERM OF AGREEMENT; MISCELLANEOUS		63
11.1 Term		63
11.2 Notices		64
11.3 Partial Invalidity		64
11.4 Successors		64
11.5 Entire Agreement		65
11.6 Headings		65
11.7 Judgment Currency		65
11.8 Amended and Restatement; No Novation		65
11.9 Confirmation of Existing Security and Existing Security held for Obligations		66

THIRD AMENDED AND RESTATED LOAN AGREEMENT

INDEX TO EXHIBITS AND SCHEDULES

Exhibit A	Fixed Charge Coverage Ratio
Exhibit B	Information Certificates of Borrower and Obligors
Exhibit C	Closing Checklist
Exhibit D	Corporate Structure Chart
Schedule 7.4	Existing Liens
Schedule 7.7	Non-Compliance with Agreements
Schedule 7.8	Bank Accounts
Schedule 7.14	License Agreements and Material Intellectual Property
Schedule 7.16	MCIA Fixed Assets
Schedule 8.6(g)	Form of Compliance Certificate
Schedule 8.9	Existing Indebtedness
Schedule 8.10	Existing Loans, Advances and Guarantees

THIRD AMENDED AND RESTATED LOAN AGREEMENT

THIRD AMENDED AND RESTATED LOAN AGREEMENT

          This Third Amended and Restated Loan Agreement dated as of June 23, 2009 (this “Agreement”) is entered into by and between Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), an Illinois corporation (as lender, “Lender”; and as US collateral agent for and on behalf of the Secured Parties, “US Collateral Agent”), Mad Catz, Inc., a Delaware corporation (“Borrower”), and the Obligors signatories to this Agreement.

W I T N E S S E T H:

          WHEREAS Lender entered into certain financing arrangements with Borrower pursuant to which Lender made loans and provided other financial accommodations to Borrower on the terms and conditions set forth in a loan agreement dated September 25, 2000 (the “Original Loan Agreement”) made between Lender, US Collateral Agent and Borrower;

          AND WHEREAS Lender, US Collateral Agent and Borrower amended the Original Loan Agreement and, for ease of reference, restated such amended Original Loan Agreement in a first amended and restated loan agreement dated September 5, 2001 (the “First Amended and Restated Loan Agreement”) between Lender, US Collateral Agent and Borrower;

          AND WHEREAS Lender, US Collateral Agent and Borrower amended or extended, as the case may be, the First Amended and Restated Loan Agreement pursuant to:

(a)	an amending agreement dated June 18, 2002;
(b)	a second amending agreement dated January 22, 2003;
(c)	a renewal/extension letter dated July 23, 2003;
(d)	an acknowledgment letter dated September 22, 2003;
(e)	a renewal/extension letter dated July 27, 2004;
(f)	an amending and extension letter dated August 31, 2005;
(g)	a third amending agreement dated August 9, 2006;
(h)	an extension letter dated September 20, 2006;
(i)	an extension letter dated September 28, 2006; and
(j)	an extension letter dated October 16, 2006,

(the foregoing amendments and extensions together with the First Amended and Restated Loan Agreement, the “Amended First Amended and Restated Loan Agreement”);

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          AND WHEREAS Lender, US Collateral Agent and Borrower amended and restated, without novation, the Amended First Amended and Restated Loan Agreement in a second amended and restated loan agreement dated October 30, 2006 (as amended in a first amending agreement dated November 20, 2007 and in a letter dated March 18, 2009, the “Second Amended and Restated Loan Agreement”) made between Lender, US Collateral Agent and Borrower;

          AND WHEREAS pursuant to an agreement of merger dated April 3, 2008 Saitek Industries Ltd. and Borrower effected the Merger;

          AND WHEREAS Lender, US Collateral Agent, Borrower and Obligors have, without novation, agreed to amend and restate the Second Amended and Restated Loan Agreement as hereinafter provided;

          AND WHEREAS Lender, US Collateral Agent, Borrower and each Obligor have confirmed to each other that the security, guarantees and other agreements previously provided by Borrower and each Obligor in connection with the Original Loan Agreement, the First Amended and Restated Loan Agreement, the Amended First Amended and Restated Loan Agreement and the Second Amended and Restated Loan Agreement remain in full force and effect, and continue as security for the indebtedness and the obligations of Borrower and each Obligor to Lender under this Agreement and the other Financing Agreements;

          NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1 DEFINITIONS

          All terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. All references to Borrower, Lender and Agents pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. The word “including” when used in this Agreement shall mean “including, without limitation”. References herein to any statute or any provision thereof include such statute or provision as amended, revised, re-enacted, and/or consolidated from time to time and any successor statute thereto together with all rules, regulations and interpretations thereunder or related thereto. An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 10.3 hereof or is cured in a manner satisfactory to Lender, if such Event of Default is capable of being cured as determined by Lender. Any accounting term used herein unless otherwise defined in this Agreement shall have the meanings customarily given to such term in accordance with GAAP. The term “US Dollars” and the sign

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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“$” mean lawful money of the United States of America. The term “Canadian Dollars” and the sign “CDN$” mean lawful money of Canada. For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

1.1 “Acceptable Liquidation Agreement”

“Acceptable Liquidation Agreement” shall mean, with respect to any license of Intellectual Property between Borrower or any Obligor, as licensee, and the licensor of such Intellectual Property which pertains to any Collateral, (i) an agreement in form and substance satisfactory to Lender or (ii) an amendment to such license agreement in form and substance satisfactory to Lender, in each case permitting Lender to exercise its rights under the Financing Agreements with respect to such Collateral.

1.2 “Accounts”

“Accounts” shall mean all present and future rights of Borrower, MCE and MCC to payment for goods sold or leased or for services rendered, which are not evidenced by instruments or chattel paper, and whether or not earned by performance.

1.3 “Acquisition”

“Acquisition” shall mean any transaction whereby Borrower will acquire assets, shares or other equity interests, or a combination thereof, of a business identified by Borrower as a strategic acquisition target pursuant to terms and conditions acceptable to Lender and in respect of which Borrower has received the prior written consent of Lender.

1.4 “Adjusted Libor Rate”

“Adjusted Libor Rate” shall mean, with respect to each Interest Period for any Libor Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16^th) of one percent (1%)) determined by dividing:

(a)	the Libor Rate for such Interest Period by:
(b)	a fraction equal to:

(i)	one (1); minus
(ii)	the Reserve Percentage.

For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of US Dollars in a non-United States or an international banking office of the US Reference Bank, used to fund a Libor Rate Loan or any Libor Rate Loan made with the proceeds of such deposit, whether or not the US Reference Bank actually holds or has made any such deposits or loans. The Adjusted Libor Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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1.5 “Agent”

“Agent” shall collectively mean Canadian Collateral Agent and US Collateral Agent.

1.6 “Amendment to Consideration Loan Note Instrument and Promissory Note”

“Amendment to Consideration Loan Note Instrument and Promissory Note” shall mean the amendment to consideration loan note instrument and promissory note dated June 23, 2009 between MCII and Guymont Services SA as trustee of The Winkler Atlantic Trust.

1.7 “Approved In-Transit Inventory”

“Approved In-Transit Inventory” shall mean Inventory that is owned and insured by Borrower or MCE and is in transit from and is under the control of MCIA to premises located in North America or Europe that are owned or controlled by Borrower and in respect of which Lender has received sufficient documentation, including bills of lading and shipping contracts, in each case assigned to Lender, to confirm the foregoing; provided that the maximum value of such Inventory that is Eligible Inventory does not exceed $6,000,000 at any time during the High Selling Period and does not exceed $4,000,000 at any time during the Low Selling Period.

1.8 “Availability Reserves”

“Availability Reserves” shall mean, as of any date of determination, the Royalty Reserve and such amounts as Lender may from time to time establish and revise reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks (including anticipated seasonal variations in dilution of Accounts) which, as determined by Lender, do or may affect either (i) the Collateral or any other property which is security for the Obligations or its value, (ii) the assets, business or prospects of Borrower or any Obligor or (iii) the Liens and other rights of Lender and/or Agents in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Lender’s belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Lender determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default (including rents or other payments due and unpaid or which Lender reasonably expects will not be paid when due) or (e) to reflect Lender’s estimate of the amount of any Priority Payables Reserve.

1.9 “Bankruptcy Code”

“Bankruptcy Code” shall mean the United States Bankruptcy Code (11 U.S.C. § 101, et seq.).

1.10 “Blocked Accounts”

“Blocked Accounts” shall have the meaning set forth in Section 5.3 hereof.

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1.11 “Borrower General Security Agreement”

“Borrower General Security Agreement” shall mean the amended and restated general security agreement dated November 30, 2001 given by Borrower (and certain U.S. affiliates of Borrower named therein) in favor of US Collateral Agent in respect of the Obligations, as it now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.12 “Business Day”

“Business Day” shall mean a day (other than a Saturday, Sunday or statutory holiday in Ontario, Illinois, New York or London) on which Lender’s Chicago and Toronto office, the U.S. Reference Bank’s main office and banks in New York City, Toronto and London are open for business in the normal course.

1.13 “Canadian Collateral Agent”

“Canadian Collateral Agent” shall mean Wachovia Capital Finance Corporation (Canada), formerly known as Congress Financial Corporation (Canada), in its capacity as collateral agent for the Secured Parties.

1.14 “Code”

“Code” shall mean the Internal Revenue Code of 1986.

1.15 “Collateral”

“Collateral” shall mean, collectively, “Collateral” as such term is defined in the Borrower General Security Agreement and in the Intellectual Property Security Agreements and all assets and properties of Borrower and each Obligor in respect of which Lender and/or an Agent is or has been granted a Lien pursuant to any Financing Agreement.

1.16 “Completion Note”

“Completion Note” shall mean the completion note dated August 1, 2008 issued by MCII in favour of The Winkler Atlantic Trust in the principal amount of $847,286 as amended by the Amendment to Consideration Loan Note Instrument and Promissory Note and as hereafter amended, modified, supplemented, extended, renewed, restated or replaced.

1.17 “Consideration Loan Note Instrument”

“Consideration Loan Note Instrument” shall mean the consideration loan note instrument constituting $14,500,000 7.5% convertible unsecured loan notes 2010 and certificate no. 1 representing $14,500,000 nominal amount of loan notes issued thereunder each dated November 20, 2007 made by MCII in favour of Guymont Services SA as trustee of The Winkler Atlantic Trust as amended by the Amendment to Consideration Loan Note Instrument and Promissory Note and as hereafter amended, modified, supplemented, extended, renewed, restated or replaced.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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1.18 “Default”

“Default” shall mean an event, circumstance or omission which, with any of the giving of notice, a lapse of time or a failure to remedy the event, circumstance or omission within a lapse of time, would constitute an Event of Default.

1.19 “EBITDA”

“EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to the net income or net loss of such Person before interest, taxes, depreciation, amortization, goodwill impairment and any other non-cash non-operating charges as approved by Lender.

1.20 “Eligible Accounts”

“Eligible Accounts” shall mean Accounts created by Borrower, MCE or MCC which are and continue to be acceptable to Lender based on the criteria set forth below. In general, Accounts shall be Eligible Accounts if:

     (a) such Accounts arise from the actual and bona fide sale and delivery of goods by Borrower, MCE or MCC or rendition of services by Borrower, MCE or MCC in the ordinary course of their respective businesses which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

     (b) such Accounts are not unpaid more than ninety (90) days after the date of the original invoice for them and are not unpaid more than sixty (60) days past the due date thereof;

     (c) such Accounts comply with the terms and conditions contained in Section 6.2(c) of this Agreement;

     (d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

     (e) the chief executive office of the account debtor with respect to such Accounts is located in Canada, the United States of America or the United Kingdom or, if the chief executive office of the account debtor is not located in Canada, the United States of America or the United Kingdom, the Account is payable in Canadian Dollars, US Dollars, Pounds Sterling or Euro, and, at Lender’s option, if: (i) the account debtor has delivered to Borrower, MCE or MCC, as applicable, an irrevocable letter of credit issued or confirmed by a bank satisfactory to Lender and payable only in the United States of America in the currency in which the Account is denominated, sufficient to cover such Account, in form and substance satisfactory to Lender and, if required by Lender, the original of such letter of credit has been delivered to Lender or Lender’s agent and the issuer thereof notified of the assignment of the proceeds of such letter of credit to Lender, or (ii) such Account is subject to credit insurance payable to Lender issued by an insurer and on terms and in an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in all respects to Lender (subject to such lending formula with respect thereto as Lender may determine);

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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     (f) such Accounts do not consist of progress billings, bill and hold invoices or retainage invoices, except as to bill and hold invoices, unless Lender shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Lender, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

     (g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to, any right of setoff against such Accounts (but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by Borrower, MCE or MCC, as applicable, to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts);

     (h) there are no facts, events or occurrences which would impair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder;

     (i) such Accounts are subject to the first priority, valid and perfected Lien of Lender and/or Agents and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any Liens except those permitted in this Agreement;

     (j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee or agent of or affiliated with Borrower, MCE or MCC directly or indirectly by virtue of family membership, ownership, control, management or otherwise;

     (k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Lender’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Lender or a letter of credit has been provided with respect thereto on terms and conditions satisfactory to Lender;

     (l) there are no proceedings or actions which are threatened or pending against the account debtors with respect to such Accounts which might result in any material adverse change in any such account debtor’s financial condition;

     (m) such Accounts of a single account debtor or its affiliates do not constitute more than twenty-five percent (25%) of all otherwise Eligible Accounts or, with respect to each of Gamestop and Walmart, such Accounts do not constitute more than forty-five percent (45%) and forty percent (40%), respectively, or such higher percentage as may be agreed by Lender, of all otherwise Eligible Accounts or, with respect to such other account debtors as may from time to time be approved in writing by Lender on a case by case basis, such Accounts do not constitute more than such percentage in excess of twenty-five percent (25%) as may be agreed by Lender of all otherwise Eligible Accounts (but in each case the portion of the Accounts not in excess of such percentage may be deemed Eligible Accounts);

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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     (n) such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the date of the original invoice for them which constitute more than fifty percent (50%) of the total Accounts of such account debtor;

     (o) such Accounts are owed by account debtors whose total indebtedness to Borrower, MCE or MCC does not exceed the credit limit with respect to such account debtors as determined by Lender from time to time (but the portion of the Accounts not in excess of such credit limit may still be deemed Eligible Accounts); and

     (p) such Accounts are owed by account debtors deemed creditworthy at all times by Lender, as determined by Lender.

General criteria for Eligible Accounts may be established and revised from time to time by Lender. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral and subject to the Lien of Lender and/or Agents.

1.21 “Eligible Inventory”

“Eligible Inventory” shall mean Inventory consisting of finished goods held for resale in the ordinary course of the business of Borrower or MCE and raw materials (including electronic chips) for such finished goods, in each case which are acceptable to Lender in its absolute discretion based on the criteria set forth below. In general, Eligible Inventory shall not include (a) work-in-process; (b) components which are not part of finished goods; (c) spare parts for equipment; (d) packaging and shipping materials; (e) supplies used or consumed in Borrower’s or MCE’s business; (f) Inventory at premises which are not owned and controlled by Borrower or MCE, unless Lender has received an agreement in writing from the person in possession of such Inventory and/or the owner or operator of such premises in form and substance satisfactory to Lender acknowledging Agents’ first priority Lien in the Inventory, waiving or subordinating Liens by such person against the Inventory and permitting Lender and/or Agents access to, and the right to remain on, the premises so as to exercise Lender’s and/or Agents’ rights and remedies and otherwise deal with the Collateral, or unless such Inventory is Approved In-Transit Inventory; (g) Inventory subject to a Lien in favor of any person other than Agents and/or Lender except those permitted in this Agreement; (h) bill and hold goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which is not subject to the first priority, valid and perfected Lien of Agents and/or Lender; (k) damaged and/or obsolete and/or defective Inventory; (l) Inventory purchased or sold on consignment and (m) Inventory subject to a license agreement or other arrangement with a third party which, in Lender’s determination, restricts the ability of Lender and/or Agents to exercise their rights under this Agreement and the Financing Agreements with respect to such Inventory unless such third party has entered into an Acceptable Liquidation Agreement or Lender has otherwise agreed to allow such Inventory to be eligible in Lender’s sole discretion. General criteria for Eligible Inventory may be established and revised from time to time by Lender. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral and subject to the Lien of Lender and/or Agents.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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1.22 “EMU Legislation”

“EMU Legislation” shall mean legislative measures of the Council of European Union for the introduction of, change over to or operation of the Euro.

1.23 “Environmental Laws”

“Environmental Laws” shall mean with respect to any Person all federal (United States of America and Canada), state, provincial, district, local, municipal and foreign laws, statutes, rules, regulations, ordinances, orders, directives, permits, licenses and consent decrees relating to health, safety, hazardous, dangerous or toxic substances, waste or material, pollution and environmental matters, as now or at any time hereafter in effect, applicable to such Person and/or its business and facilities (whether or not owned by it), including laws relating to emissions, discharges, releases or threatened releases of pollutants, contamination, chemicals, or hazardous, toxic or dangerous substances, materials or wastes into the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals, or hazardous, toxic or dangerous substances, materials or wastes.

1.24 “Equipment”

“Equipment” shall mean all of Borrower’s now owned and hereafter acquired equipment, machinery, computers and computer hardware and software (whether owned or licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

1.25 “ERISA”

“ERISA” shall mean the United States Employee Retirement Income Security Act of 1974.

1.26 “ERISA Affiliate”

“ERISA Affiliate” shall mean any person required to be aggregated with Borrower or any of its affiliates under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

1.27 “Euro”

“Euro” means the single currency to which the Participating Member States of the European Union have converted.

1.28 “Event of Default”

“Event of Default” shall mean the occurrence or existence of any event or condition described in Section 9.1 hereof.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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1.29 “Excess Availability”

“Excess Availability” shall mean the amount in US Dollars, as determined by Lender, calculated at any time, equal to:

(a) the lesser of:

(i)

the amount of the Revolving Loans available to Borrower as of such time (based on the applicable lending formulas multiplied by the Net Amount of Eligible Accounts, the Value of Eligible Inventory (excluding Software Inventory), the Net Orderly Liquidation Value of Eligible Inventory (excluding Software Inventory), the Value of Software Inventory and the Net Orderly Liquidation Value of Software Inventory, all as determined by Lender) and subject to the sublimits and Availability Reserves from time to time established by Lender hereunder; and

(ii)

the Maximum Credit; minus

      (b)     the sum of: (i) the amount of all then outstanding and unpaid Obligations with respect to Revolving Loans and Letter of Credit Accommodations, plus (ii) the aggregate amount of all due but unpaid tax obligations, and trade payables of Borrower, MCE, MCC and MCII that are past due more than sixty (60) days.

1.30 “Financing Agreements”

“Financing Agreements” shall mean, collectively, this Agreement, the Borrower General Security Agreement, the Intellectual Property Security Agreements and all notes, guarantees, security agreements and other agreements, documents and instruments previously executed or now or at any time hereafter executed and/or delivered by Borrower or any Obligor in connection with this Agreement, the Original Loan Agreement, the First Amended and Restated Loan Agreement, the Amended First Amended and Restated Loan Agreement and the Second Amended and Restated Loan Agreement excluding any Swap Agreements, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.31 “Fiscal Quarter”

“Fiscal Quarter” shall mean any of the following three (3) month periods in any fiscal year of Borrower: April 1 to June 30, July 1 to September 30, October 1 to December 31 and January 1 to March 31.

1.32 “Fixed Charge Coverage Ratio”

“Fixed Charge Coverage Ratio” shall mean, with respect to MCII and its subsidiaries on a consolidated basis for any Testing Period, determined in accordance with GAAP, the quotient of, for each Testing Period:

     (a) EBITDA minus unfunded capital expenditures minus the sum of taxes paid in the period for which the test relates and taxes due in the period for which the test relates but which

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have not been paid at the time of the test (less tax refunds in cash received by MCII and its subsidiaries in the period for which the test relates) minus distributions and dividends; divided by:

     (b) interest paid and interest due within the period that the test is being done but which has not been paid at the time of the test plus any principal due, excluding any balance outstanding under this Agreement.

For the avoidance of doubt, Lender and Borrower agree that the compliance certificate attached hereto as Exhibit A accurately details the method for calculating the Fixed Charge Coverage Ratio.

1.33 “Funding Bank”

“Funding Bank” shall have the meaning set forth in Section 3.7 hereof.

1.34 “GAAP”

“GAAP” shall mean generally accepted accounting principles in Canada or the United States of America, as applicable, as in effect from time to time as set forth in the opinions and pronouncements of the relevant Canadian or American public and private accounting boards and institutes which are applicable to the circumstances as of the date of determination consistently applied.

1.35 “Gameshark Software”

“Gameshark Software” shall mean the video game enhancement software sold by Borrower and certain Obligors that enables video game players to access and take full advantage of the secret codes, short cuts, hints and cheats incorporated by video game publishers into their video game offerings.

1.36 “Governmental Authority”

“Governmental Authority” shall mean any government, parliament, legislature, municipal or local government, or any regulatory authority, agency, commission or board of any government, parliament, legislature, municipal or local government or any court or (without limitation to the foregoing) any other law, regulation or rule-making entity (including any central bank, fiscal or monetary authority regulating banks), having jurisdiction in the relevant circumstances, or any Person acting under the authority of any of the foregoing (including any arbitrator).

1.37 “Hazardous Materials”

“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances,

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materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).

1.38 “High Selling Period”

“High Selling Period” shall mean the period from and including July 1 through and including November 30.

1.39 “HK Hive Up Deed”

“HK Hive Up Deed” shall mean the Hive Up Deed relating to the transfer of the business and assets of Saitek Industries Limited dated October 1, 2008 between MCIA and Saitek HK.

1.40 “Inactive Subsidiaries”

“Inactive Subsidiaries” shall mean collectively Xencet US Inc., Singapore Holdings Inc., Saitek PLC, Saitek HK and Mad Catz Limited and “Inactive Subsidiary” shall mean any one of them.

1.41 “Information Certificates”

“Information Certificates” shall mean, collectively, the Information Certificates of Borrower and each Obligor constituting Exhibit B hereto as updated or provided from time to time, each containing material information with respect to such Person, its business, assets and properties provided by or on behalf of such Persons to Lender in connection with the preparation of this Agreement and amendments, modifications, supplements, extensions, renewals, restatements and replacements thereof from time to time and the other Financing Agreements and the financing arrangements provided for herein.

1.42 “Intellectual Property”

“Intellectual Property” shall mean Borrower’s and each Obligor’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement, if any, of the foregoing; all rights to inventories, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration and software and contract rights relating to computer software programs, in whatever form created or maintained.

1.43 “Intellectual Property Security Agreements”

“Intellectual Property Security Agreements” shall mean, collectively, (i) the Trademark Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US

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Collateral Agent, (ii) the Patent Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US Collateral Agent, and (iii) the Copyright Security Agreement dated as of September 25, 2000 and executed by Borrower in favor of US Collateral Agent, as each now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.44 “Intercreditor Agreement”

“Intercreditor Agreement” shall mean the intercreditor agreement dated November 14, 2007 between Guymont Services SA as trustee of The Winkler Atlantic Trust, MCII and Lender as amended and restated pursuant to the amended and restated intercreditor agreement dated June 23, 2009, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.45 “Interest Period”

“Interest Period” shall mean, for any Libor Rate Loan, a period of one (1), two (2), three (3) or six (6) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice of Lender; provided, that, Borrower may not elect an Interest Period which will end after the Termination Date or the then current term of this Agreement.

1.46 “Interest Rate”

“Interest Rate” shall mean:

     (a) for Prime Rate Loans, the Prime Rate plus two percent (2%) per annum;

     (b) for Libor Rate Loans, the Adjusted Libor Rate for the applicable Interest Period plus three and one-half percent (3.5%) per annum;

provided that the Interest Rate shall mean, at Lender’s option, without notice:

     (a) for Prime Rate Loans, the Prime Rate plus five percent (5%) per annum; and

     (b) for Libor Rate Loans, the Adjusted Libor Rate for the applicable Interest Period plus six and one-half percent (6.5%) per annum,

(i) on the non-contingent Obligations for (A) the period from and after the date of termination hereof until such time as Lender has received full and final payment of all such Obligations, and (B) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender (notwithstanding entry of any judgment against Borrower) and (ii) on the Revolving Loans at any time outstanding in excess of the amounts available to Borrower under Section 2 hereof (whether or not such excess(es), arise or are made with or without Lender’s knowledge or consent and whether made before or after an Event of Default).

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1.47 “Inventory”

“Inventory” shall mean all of Borrower’s and MCE’s now owned and hereafter existing or acquired raw materials, work in process, finished goods and all other inventory of whatsoever kind or nature, wherever located.

1.48 “Letter of Credit Accommodations”

“Letter of Credit Accommodations” shall mean the letters of credit, merchandise purchase or other guarantees denominated in Canadian Dollars or US Dollars which are from time to time either (a) issued or opened by Lender for the account of Borrower or any Obligor or (b) with respect to which Lender has agreed to indemnify the issuer or guaranteed to the issuer the performance by Borrower or any Obligor of its obligations to such issuer.

1.49 “Libor Rate”

“Libor Rate” shall mean, with respect to the Interest Period for a Libor Rate Loan, the rate of interest per annum (expressed as a percentage on the basis of a 360-day year) being the rate published as the London interbank offered rate in The Wall Street Journal, Eastern Edition, on the day which is two (2) Business Days before the first day of such Interest Period for offering deposits in US Dollars for a period comparable to the applicable Interest Period and, if for any reason, the London interbank offered rate is not available in the Wall Street Journal, Eastern Edition, then the Libor Rate will be the rate of interest per annum (expressed as a percentage calculated on the basis of a 360-day year) equal to the average (rounded upward to the nearest whole multiple of 1/16 of one percent (1%) per annum) of the rates per annum which leading banks in the London interbank markets are offering deposits in US Dollars and for a comparable amount of the proposed Libor Rate Loan and for a period equal to the relevant Interest Period appearing on the Reuters Screen LIBO Page (at or about 11:00 a.m. London time) on the day which is two (2) Business Days before the first day of such Interest Period; provided however that the Libor Rate shall at no time be less than one and one-half percent (1.5%) per annum

1.50 “Libor Rate Loans”

“Libor Rate Loans” shall mean any Revolving Loans or portions thereof denominated in US Dollars and upon which interest is payable based on the Libor Rate in accordance with the terms hereof.

1.51 “License Agreements”

“License Agreements” shall have the meaning set forth in Section 7.14 hereof.

1.52 “Lien”

“Lien” shall mean any mortgage, deed of trust, pledge, fixed or floating charge, lien, security interest, hypothec or encumbrance or security arrangement of any nature whatsoever, whether arising by written or oral agreement or by operation of law, including any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security.

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1.53 “Low Selling Period”

“Low Selling Period” shall mean the period from and including December 1 through and including June 30.

1.54 “Material Adverse Change”

“Material Adverse Change” shall mean, where used in relation to the affairs of Borrower or any Obligor, a change in the business, operations or capital of Borrower or such Obligor, as applicable, that, in the opinion of Lender, has or could be expected to have a Material Adverse Effect.

1.55 “Material Adverse Effect”

“Material Adverse Effect” shall mean (i) a material adverse effect on the assets or property of Borrower, any Obligor, their respective subsidiaries or the business or operations of any of them or all of them, taken as a whole, (ii) a material adverse effect on the condition or prospects, financial or otherwise, of Borrower, any Obligor and their respective subsidiaries or any of them or all of them, taken as a whole, (iii) a material adverse effect on the ability of Borrower or any Obligor to perform and discharge any of its obligations under the Financing Agreements, or (iv) a material adverse effect on the priority, effectiveness or enforceability of any Lien granted by Borrower or any Obligor in favor of Agents and/or Lender or the ability of Lender and/or Agents to enforce any Obligation or realize upon any Collateral or any other property securing the Obligations.

1.56 “Maximum Credit”

“Maximum Credit” shall mean the amount of $30,000,000.

1.57 “Maximum Letter of Credit Facility”

“Maximum Letter of Credit Facility” shall mean the amount of $1,000,000.

1.58 “MCC”

“MCC” shall mean 1328158 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario.

1.59 “MCE”

“MCE” shall mean Mad Catz Europe Limited, a company incorporated and existing under the laws of England and Wales.

1.60 “MCII”

“MCII” means Mad Catz Interactive, Inc., a corporation existing under the federal laws of Canada.

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1.61 “MCIA”

“MCIA” shall mean Mad Catz Interactive Asia Limited, a company incorporated under the laws of Hong Kong.

1.62 “Merger”

“Merger” means the merger of Saitek Industries Ltd. with Borrower to continue as Borrower effective April 3, 2008.

1.63 “Net Amount of Eligible Accounts”

“Net Amount of Eligible Accounts” shall mean the gross amount in US Dollars of Eligible Accounts less (a) sales, excise or similar taxes included in the amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect to such Eligible Accounts; provided that the amounts deducted under clause (a) shall not duplicate items for which Availability Reserves have been established by Lender.

1.64 “Net Orderly Liquidation Value”

“Net Orderly Liquidation Value” shall mean the amount in US Dollars to be realized from any orderly liquidation of Inventory, net of all liquidation costs, including deductions for all commissions and taxes, as evidenced by an appraisal of such Inventory conducted, at the cost of Borrower by Hilco Appraisal Services, LLC or such other appraiser as is acceptable to Lender, such appraisal to be in form, scope and methodology acceptable to Lender and addressed to Lender or upon which Lender is permitted to rely.

1.65 “Obligations”

“Obligations” shall mean any and all Revolving Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower or any Obligor to Lender, any Agent, their respective affiliates and/or owing to any financial institution under or in connection with a Swap Agreement, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement, the other Financing Agreements and any Swap Agreement, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any proceeding with respect to Borrower or any Obligor under the Bankruptcy Code or any similar statute in any jurisdiction (including the payment of interest and other amounts which would accrue and become due but for the commencement of such proceeding, whether or not such amounts are allowed or allowable in whole or in part in such proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender, any Agent, their respective affiliates and/or any financial institution under or in connection with a Swap Agreement.

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1.66 “Obligor”

“Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations including MCII, MCC, MCE, FX Unlimited, Inc., MCIA, WAHL and Saitek Elecktronik Vertriebs GmbH, other than Borrower.

1.67 “Participating Member State”

“Participating Member State” shall mean each state so described in any EMU Legislation.

1.68 “Payment Account”

“Payment Account” shall have the meaning set forth in Section 5.3 hereof.

1.69 “Permitted Inter-Company Debt”

“Permitted Inter-Company Debt” shall mean indebtedness owing by Borrower to any Obligor, by any Obligor to Borrower and/or by any Obligor to another Obligor provided that:

     (a) such indebtedness is incurred in the ordinary course of business of Borrower and/or such Obligor, as applicable, consistent with past practice;

     (b) all promissory notes and security agreements (if any) executed by Borrower or any Obligor in respect of such indebtedness shall be assigned to Agents in form and content satisfactory to Agents; and

     (c) if requested by Lender, such indebtedness is subordinated and postponed pursuant to subordination agreements in form and content satisfactory to Lender.

1.70 “Person”

“Person” or “person” shall mean any individual, sole proprietorship, partnership, limited partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

1.71 “Pounds Sterling”

“Pounds Sterling” shall mean, at any time of determination, the then official currency of the United Kingdom.

1.72 “PPSA”

“PPSA” shall mean the Personal Property Security Act (Ontario).

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1.73 “Prime Rate”

“Prime Rate” shall mean the rate from time to time publicly announced by the US Reference Bank, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank.

1.74 “Prime Rate Loans”

“Prime Rate Loans” shall mean any Revolving Loans or portions thereof denominated in US Dollars and on which interest is payable based on the Prime Rate in accordance with the terms hereof.

1.75 “Priority Payables Reserve”

“Priority Payables Reserve” shall mean, at any time, the full amount of the liabilities at such time which have a trust imposed to provide for payment or Lien ranking or capable of ranking senior to or pari passu with Liens securing the Obligations on any of the Collateral under Federal, provincial, State, county, municipal, or local law including to claims for unremitted and accelerated rents, taxes, wages, vacation pay, workers’ compensation obligations, government royalties or pension fund obligations, together with the aggregate value, determined in accordance with GAAP, of all Eligible Inventory which Lender considers may be or may become subject to a right of a supplier to recover possession thereof under any Federal, provincial, State, county, municipal or local law, where such supplier’s right may have priority over the Liens securing the Obligations including Eligible Inventory subject to a right of a supplier to repossess goods pursuant to the Bankruptcy Code or any applicable bankruptcy, reorganization or insolvency legislation.

1.76 “Records”

“Records” shall mean all of Borrower’s and each Obligor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower or any Obligor with respect to the foregoing maintained with or by any other person).

1.77 “Revolving Loans”

“Revolving Loans” shall mean the loans now or hereafter made by Lender to or for the benefit of Borrower on a revolving basis (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

1.78 “Royalty Reserve”

“Royalty Reserve” shall mean an amount equal to all accrued and unpaid royalty obligations owing by Borrower and MCE as set forth on the most recent Royalty Reserve Report, adjusted up or down as of any date of determination by Lender in its sole discretion based on Lender’s

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findings that such royalty obligations owing by Borrower and/or MCE have increased or decreased since the date of such Royalty Reserve Report.

1.79 “Royalty Reserve Report”

“Royalty Reserve Report” shall mean a report for the period since the date of the last such report delivered in accordance with Section 6.1 hereof which shall set forth (i) each license of Intellectual Property for which Borrower and/or MCE is licensee and for which it pays royalties, (ii) the licensor of each such license, (iii) the aggregate accrued and unpaid royalty obligations owing under each such license and (iv) the date such accrued and unpaid royalty obligations are due under each such license. Each Royalty Reserve Report shall be certified by the chief financial officer of the Borrower as being complete and accurate.

1.80 “Saitek HK”

“Saitek HK” shall mean Saitek Industries Limited, a corporation incorporated in Hong Kong.

1.81 “Secured Parties”

“Secured Parties” shall collectively mean Lender, Agents, their respective affiliates, any financial institution under or in connection with a Swap Agreement and any other person to which Obligations are owed or who is the beneficiary of or under a guarantee of the Obligations.

1.82 “Software”

“Software” shall mean all software and computer programs (regardless of form or format, DVD, disc or otherwise) and all packaging, containers, artwork, end-user guides or instructions, user manuals and related materials concerning the use and operation of such software and computer programs other than Gameshark Software.

1.83 “Software Inventory”

“Software Inventory” shall mean all Eligible Inventory consisting of Software.

1.84 “Solvent”

“Solvent” shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the assets and property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets and properties of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities (such as litigation, guarantees and pension plan liabilities) at any time shall be computed as the amount which, in light of all the facts and circumstances existing at the time,

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represents the amount which can be reasonably be expected to become an actual or matured liability.

1.85 “Swap Agreement”

“Swap Agreement” shall mean any swap agreement (as defined in 11 U.S.C. §101), interest rate swap, cap or collar agreement, interest rate future or option contract, currency swap agreement, currency future or option contract and other similar hedge or swap agreement between Borrower or any Obligor (or, with the prior written consent of Lender, in its sole discretion, Agents, or Lender or any of their respective affiliates on behalf of Borrower or any Obligor) as one counterparty and Agents, Lender or any of their respective affiliates (even if that counterparty should subsequently cease to be Agents, Lender or an affiliate thereof) and/or another financial institution as to the other counterparty; provided that the prior written consent of Lender is obtained (such consent to be provided in Lender’s sole discretion) as to such other financial institution and the Swap Agreement entered into with such other financial institution.

1.86 “Termination Date”

“Termination Date” shall have the meaning set forth in Section 11.1(a).

1.87 “Testing Period”

“Testing Period” shall mean any trailing four (4) Fiscal Quarters.

1.88 “UCC”

“UCC” shall mean the Uniform Commercial Code.

1.89 “UK Hive Up Agreement”

“UK Hive Up Agreement” shall mean the Hive Up Agreement relating to the transfer of the business and assets of Saitek PLC dated August 1, 2008 between MCE and Saitek PLC.

1.90 “United Kingdom”

“United Kingdom” shall mean the United Kingdom of Great Britain and Northern Ireland.

1.91 “US Collateral Agent”

“US Collateral Agent” shall mean Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), in its capacity as collateral agent for itself, as Lender.

1.92 “US Reference Bank”

“US Reference Bank” shall mean Wachovia Bank, National Association or such other major bank in the United States as Lender may from time to time designate in its discretion.

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1.93 “Value”

“Value” shall mean, as determined by Lender, with respect to Inventory, the lower of (a) cost computed on a first-in-first-out basis in accordance with GAAP and (b) net realizable value.

1.94 “WAHL”

“WAHL” shall mean Winkler Atlantic Holdings Limited, a company incorporated under the laws of the British Virgin Islands.

SECTION 2 CREDIT FACILITIES

2.1 Revolving Loans

     (a) Subject to and upon the terms and conditions contained herein, Lender agrees to make Revolving Loans to Borrower from time to time in amounts requested by Borrower up to the amount equal to the lesser of:

(i)	the Maximum Credit; and
(ii)	the sum of:

(A) seventy-five percent (75%) of the Net Amount of Eligible Accounts;

plus

(B) the lesser of :

(1)

(X) for any date of determination during the Low Selling Period, the lesser of (i) eighty-five percent (85%) of the Net Orderly Liquidation Value of Eligible Inventory (excluding Software Inventory) and (ii) fifty-five percent (55%) of the Value of Eligible Inventory (excluding Software Inventory); or (Y) for any date of determination during the High Selling Period, the lesser of (i) eighty-five percent (85%) of the Net Orderly Liquidation Value of Eligible Inventory (excluding Software Inventory) and (ii) sixty percent (60%) of the Value of Eligible Inventory (excluding Software Inventory); and

(2)

$15,000,000 (less the amount, if any, determined in accordance with Section 2.1(a)(ii)(C) below),

plus

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(C) the lesser of (i) twenty-five percent (25%) of the Value of Software Inventory, (ii) eighty-five percent (85%) of the Net Orderly Liquidation Value of Software Inventory and (iii) $1,000,000,

minus

(D) any Availability Reserves.

     (b) Lender may, in its discretion, from time to time, upon not less than five (5) days prior written notice to Borrower, (i) reduce the lending formula with respect to Eligible Accounts to the extent that Lender determines that: (A) the dilution with respect to the Accounts for any period (based on the ratio of (1) the aggregate amount of reductions in Accounts other than as a result of payments in cash to (2) the aggregate amount of total sales) has increased in any material respect or may be reasonably anticipated to increase in any material respect above historical levels or as a result of seasonal variations, or (B) the general creditworthiness of account debtors has declined or (ii) reduce the lending formula(s) with respect to Eligible Inventory to the extent that Lender determines that: (A) the number of days of the turnover of the Inventory for any period has changed in any material respect or (B) the Net Orderly Liquidation Value of the Eligible Inventory, or any category thereof, has decreased, or (C) the nature and quality of the Inventory has deteriorated. In determining whether to reduce the lending formula(s), Lender may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts, Eligible Inventory or in establishing Availability Reserves.

     (c) Except in Lender’s discretion, the aggregate amount of the Revolving Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit. In the event that the outstanding amount of any component of the Revolving Loans, or the aggregate amount of the outstanding Revolving Loans and Letter of Credit Accommodations, exceeds the amounts available under the lending formulas, the sublimits for Letter of Credit Accommodations set forth in Section 2.2(d) hereof or the Maximum Credit, as applicable, such event shall not limit, waive or otherwise affect any rights of Lender in that circumstance or on any future occasions and Borrower shall, upon demand by Lender, which may be made at any time or from time to time, immediately repay to Lender the entire amount of any such excess(es) for which payment is demanded.

     (d) For purposes only of applying the sublimit on Revolving Loans based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B)(2) hereof, Lender may treat the then undrawn amounts of outstanding Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Lender is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the Eligible Inventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Availability Reserves shall be attributed first to any components of the lending formulas in Section 2.1(a) hereof that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit.

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2.2 Letter of Credit Accommodations

     (a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Lender agrees to provide or arrange for Letter of Credit Accommodations for the account of Borrower containing terms and conditions acceptable to Lender and the issuer thereof. Any payments made by Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations shall constitute additional Revolving Loans to Borrower pursuant to this Section 2.2.

     (b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower shall pay to Lender a letter of credit fee at a rate equal to two and one-half percent (2.5%) per annum on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month, except that Borrower shall pay to Lender such letter of credit fee, at Lender’s option, without notice, at a rate equal to five and one-half percent (5.5%) per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Lender has received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Lender. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement.

     (c) No Letter of Credit Accommodations shall be available unless on the date of the proposed issuance of any Letter of Credit Accommodations, the Revolving Loans available to Borrower (subject to the Maximum Credit, the Maximum Letter of Credit Facility and any Availability Reserves) are equal to or greater than: (i) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and all negotiable documents of title with respect to such Eligible Inventory have been consigned to the issuer of the Letter of Credit Accommodation, the sum of (A) the percentage equal to one hundred (100%) percent minus the then applicable percentage set forth in Section 2.1(a)(ii)(B) above of the Value of such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which Lender estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States of America and (ii) if the proposed Letter of Credit Accommodation is for any other purpose, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Lender with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, an Availability Reserve shall be established in the applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii) hereof.

     (d) Except in Lender’s discretion, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Lender in connection therewith shall not at any time exceed the Maximum Letter of Credit Facility. At any time an Event of Default exists or has occurred and is continuing, upon Lender’s request, Borrower will either furnish cash collateral to secure the reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to Lender and/or US Collateral Agent for the Letter of Credit Accommodations, and in either case, the

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Revolving Loans otherwise available to Borrower shall not be reduced as provided in Section 2.2(c) hereof to the extent of such cash collateral.

     (e) Borrower shall indemnify and hold Lender harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation. Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s agent. Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower hereby releases and holds Lender harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall survive the payment of Obligations and the termination of this Agreement.

     (f) Nothing contained herein shall be deemed or construed to grant Borrower any right or authority to pledge the credit of Lender in any manner. Lender shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Lender unless Lender has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower shall be bound by any interpretation made by Lender, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrower. Lender shall have the sole and exclusive right and authority to, and Borrower shall not at any time while an Event of Default exists, (A) approve or resolve any questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection of any documents or goods, (C) execute any and all applications for steamship or airway guarantees, indemnities or delivery orders, (D) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, or (E) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Lender may take such actions either in its own name or in Borrower’s name.

     (g) Any rights, remedies, duties or obligations granted or undertaken by Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrower to Lender. Any duties or obligations undertaken by Lender to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Lender in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower to Lender and to apply in all respects to Borrower.

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2.3 Availability Reserves

          All Revolving Loans otherwise available to Borrower pursuant to the lending formulas and subject to the Maximum Credit, the Maximum Letter of Credit Facility and other applicable limits hereunder shall be subject to Lender’s continuing right to establish and revise Availability Reserves, upon not less than five (5) days’ prior written notice to Borrower.

SECTION 3 INTEREST AND FEES

3.1 Interest

     (a) Borrower shall pay to Lender interest on the outstanding principal amount of the non-contingent Obligations at the applicable Interest Rate.

     (b) Interest shall be payable by Borrower to Lender monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced. The increase or decrease shall be based on the Prime Rate in effect on the last day of the month in which any such change occurs. All interest accruing hereunder on and after an Event of Default or termination hereof shall be payable on demand. In no event shall charges constituting interest payable by Borrower to Lender exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

     (c) A certificate of an authorized signing officer of Lender as to each amount and/or each rate of interest payable hereunder from time to time shall be conclusive evidence of such amount and of such rate, absent manifest error.

     (d) For greater certainty, whenever any amount is payable under this Agreement or any Financing Agreement by Borrower as interest or as a fee which requires the calculation of an amount using a percentage per annum, each party to this Agreement acknowledges and agrees that such amount shall be calculated as of the date payment is due without application of the “deemed reinvestment principle” or the “effective yield method”. As an example, when interest is calculated and payable monthly, the rate of interest payable per month is one-twelfth (1/12th) of the stated rate of interest per annum.

     (e) Any Libor Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period unless Lender has received and approved a request to continue such Libor Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof. Any Libor Rate Loans shall, at Lender’s option, upon notice by Lender to Borrower, be subsequently converted to Prime Rate Loans upon the occurrence of any Default or Event of Default which is continuing and otherwise upon the Termination Date. Borrower shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge any loan account of Borrower), any amounts required to compensate Lender for any loss, costs or expense incurred by Lender as a result of the conversion of Libor Rate Loans to Prime Rate

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Loans pursuant to any of the foregoing. Upon the occurrence of a Default or an Event of Default that is continuing, or if Borrower repays or prepays a Libor Rate Loan on a day other than the last day of the applicable Interest Period, Borrower shall indemnify Lender for any loss or expense suffered or incurred by Lender including any loss of profit or expenses Lender incurs by reason of the liquidation or redeployment of deposits or other funds acquired by it to effect or maintain any and all Libor Rate Loans or any interest or other charges payable to lenders of funds borrowed by Lender in order to maintain such Libor Rate Loans together with any other charges, costs or expenses incurred by Lender relative thereto.

     (f) So long as no Default or Event of Default shall have occurred and be continuing, Borrower may from time to time request Libor Rate Loans or may request that Prime Rate Loans be converted to Libor Rate Loans or that any existing Libor Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Libor Rate Loans or the amount of the Prime Rate Loans to be converted to Libor Rate Loans or the amount of the Libor Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Libor Rate Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Lender of such a request from Borrower, such Libor Rate Loans shall be made or Prime Rate Loans shall be converted to Libor Rate Loans or such Libor Rate Loans shall continue, as applicable; provided, that:

(i)	no Default or Event of Default shall exist or have occurred and be continuing;
(ii)	no party hereto shall have sent any notice of termination of this Agreement;
(iii)	Borrower shall have complied with such customary procedures as are generally established by Lender for all customers and specified by Lender to Borrower from time to time for requests by Borrower for Libor Rate Loans;
(iv)	no more than six (6) Interest Periods (for all outstanding Libor Rate Loans) may be in effect at any one time;
(v)	the aggregate amount of the Libor Rate Loans must be in an amount not less than Five Million US Dollars ($5,000,000) or an integral multiple of One Million US Dollars ($1,000,000) in excess thereof;
(vi)	not more than eighty percent (80%) of the Obligations may be comprised of Libor Rate Loans at any time; and
(vii)	Lender shall have determined that the Interest Period or Adjusted Libor Rate is available to Lender and can be readily determined as of the date of the request for such Libor Rate Loan by Borrower.

     Any request by Borrower for Libor Rate Loans or to convert Prime Rate Loans to Libor Rate Loans or to continue any existing Libor Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Lender shall not be required to

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purchase US Dollar deposits in the London interbank market to fund any Libor Rate Loans, but the provisions hereof shall be deemed to apply as if the Lender had purchased such deposits to fund the Libor Rate Loans.

3.2 Intentionally Deleted

3.3 Closing Fee

          Borrower shall pay to Lender as a closing fee the amount of $150,000, which shall be fully earned as of and payable on the date hereof.

3.4 Servicing Fee

          Borrower shall pay to Lender a monthly servicing fee in an amount equal to $2,000 per month in respect of Lender’s services for each month (or part thereof) while this Agreement remains in effect and for so long thereafter as any of the Obligations are outstanding, which monthly fee shall be fully earned as of and payable in advance on the date of closing hereof and on the first day of each month thereafter.

3.5 Unused Line Fee

          Borrower shall pay to Lender a monthly unused line fee at a rate equal to one-half of one percent (0.5%) per annum calculated on the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) during which this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first day of each month.

3.6 Currency of Payments

          Unless otherwise specified by Lender, all interest, fees and other payments by Borrower hereunder shall be in the currency in which such Obligations are denominated.

3.7 Increased Costs and Changes in Law

(a) If, after the date hereof, either:

(i)	any change in, or in the interpretation of, any law or regulation is introduced, including with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom Lender borrows funds or obtains credit (a “Funding Bank”);
(ii)	a Funding Bank or Lender complies with any future guideline or request from any central bank or other Governmental Authority;
(iii)	a Funding Bank or Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any

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Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below or a Funding Bank or Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law where customarily complied with by responsible financial institutions) of any such Governmental Authority, central bank or comparable agency, and such adoption, change or compliance has, or would have, the direct or indirect effect of reducing the rate of return on Lender’s capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by Lender to be material,

and the result of any of the foregoing events described in clauses (i), (ii) and (iii) is, or results in, an increase in the cost to Lender of funding or maintaining the Loans and/or Letter of Credit Accommodations, then Borrower shall from time to time upon demand by Lender pay to Lender additional amounts sufficient to indemnify Lender against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate as to the amount of such increased cost shall be submitted to Borrower by Lender and shall be conclusive, absent manifest error.

(b) If, prior to the first day of any Interest Period:

(i)	Lender shall have determined (which determination shall be conclusive and binding upon Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Adjusted Libor Rate for such Interest Period;
(ii)	Lender has determined that the Adjusted Libor Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to Lender of making or maintaining Libor Rate Loans during such Interest Period; or
(iii)	US Dollar deposits in the principal amounts of the Libor Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market,

          Lender shall give notice thereof to Borrower as soon as practicable thereafter (which notice shall be withdrawn whenever such circumstances no longer exist). If such notice is given: (A) any Libor Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans; (B) any Revolving Loans that were to have been converted on the first day of such Interest Period to or continue as Libor Rate Loans shall be converted to or continued as Prime Rate Loans; and (C) each outstanding Libor Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Lender, no further Libor Rate Loans shall be made or

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continued as such, nor shall Borrower have the right to convert Prime Rate Loans to Libor Rate Loans.

     (c) Notwithstanding any other provision herein, if the adoption of, or any change in, any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Lender to make or maintain Libor Rate Loans as contemplated by this Agreement:

(i)	Lender shall promptly give written notice of such circumstances to Borrower (which notice shall be withdrawn whenever such circumstances no longer exits);
(ii)	the commitment of Lender hereunder to make Libor Rate Loans, continue Libor Rate Loans as such and convert Prime Rate Loans to Libor Rate Loans shall forthwith be cancelled and, until such time as it shall no longer be unlawful for Lender to make or maintain Libor Rate Loans, Lender shall then only have a commitment to make Prime Rate Loans when a Libor Rate Loan is requested; and
(iii)	the Revolving Loans then outstanding as Libor Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Revolving Loans or within such earlier period as required by law.

          If any such conversion of a Libor Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to Lender such amounts, if any, as may be required pursuant to Section 3.7(d) below.

     (d) Borrower shall indemnify Lender and shall hold Lender harmless from any loss or expense which Lender may sustain or incur as a consequence of:

(i)	default by Borrower in making a borrowing of, conversion into or extension of Libor Rate Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement;
(ii)	the making of a prepayment or conversion of any Libor Rate Loans on a day which is not the last day of an Interest Period with respect thereto.

          With respect to Libor Rate Loans such indemnification may include an amount equal to the greater of: (i) the excess, if any, of (1) the amount of interest which would have accrued on the amount so prepaid or converted, or not so borrowed, converted or extended, for the period from the date of such prepayment or conversion or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure), in each case at the applicable rate of interest for such Libor Rate Loans provided for herein over (2) the amount of interest (as determined by Lender) which would have accrued to Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the

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London interbank market and (ii) an amount equal to the interest that would have been payable if the Libor Rate Loans had been a Prime Rate Loan. This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

     (e) In the event that Borrower has hedged a Libor Rate Loan with an interest rate swap with Lender or any of its affiliates under which Borrower is to make its payments based on a fixed rate and Lender or any of its affiliates is to make its payments based on a rate equal to the Libor Rate, then the fallback rate (being the Prime Rate in the circumstances described in this Section 3) on any given day while the swap with Lender or any of its affiliates is in effect will be the sum of (i) the fallback floating rate payable by Lender or any of its affiliates that is in effect under the interest rate swap for that day (without regard to any interest rate spread added thereto under the terms of the interest rate swap) plus (ii) the percentage spread in the definition of Interest Rate applicable to Libor Rate Loans.

SECTION 4 CONDITIONS PRECEDENT

4.1 Conditions Precedent to Revolving Loans and Letter of Credit Accommodations

          This Agreement shall not be effective until each of the agreements or actions set out in the Closing Checklist attached hereto as Exhibit C have been executed, delivered or completed, as the case may be, to the satisfaction of Lender or waived in writing (in whole or in part) by Lender in its sole discretion and each of the following is a condition precedent to Lender continuing to make Revolving Loans and/or provide Letter of Credit Accommodations to Borrower hereunder:

     (a) all representations and warranties contained in this Agreement and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Revolving Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except with respect to those representations and warranties that were or are expressly made as of a particular date and except to the extent that there are changes with respect to matters referenced in such representations and warranties after the date thereof that do not and will not otherwise cause a Default or Event of Default hereunder, and

     (b) no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Revolving Loan or providing each such Letter of Credit Accommodation or after giving effect thereto.

SECTION 5 COLLECTION AND ADMINISTRATION

5.1 Borrower’s Loan Account

          Lender shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Revolving Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrower and (c) all other appropriate

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debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Lender’s customary practices as in effect from time to time.

5.2 Statements

          Lender shall render to Borrower each month a statement setting forth the balance in Borrower’s loan account(s) maintained by Lender for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Lender but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account stated except to the extent that Lender receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been mailed by Lender. Until such time as Lender shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Lender by Borrower.

5.3 Collection of Accounts

     (a) Borrower shall establish and maintain, at its expense, blocked accounts (“Blocked Accounts”) with such banks as are acceptable to Lender into which Borrower and Obligors shall, in accordance with Lender’s instructions, promptly deposit all payments on Accounts and all payments constituting proceeds of Inventory or other Collateral; provided that, prior to the occurrence and continuation of an Event of Default, Obligors agreement to deposit hereunder shall be limited to payments and proceeds received by such Obligor in Canada, the United States and the United Kingdom. Upon the occurrence and during the continuation of an Event of Default, Lender may, and Borrower and each Obligor shall upon Lender’s request, direct Borrower’s, and each Obligor’s account debtors to directly remit all payment on Accounts to the Blocked Accounts. The banks at which the Blocked Accounts are established shall enter into an agreement, in form and substance satisfactory to Lender, providing that all items received or deposited in the Blocked Accounts are the property of Lender, that the depository bank has no lien upon, or right to setoff against, the Blocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the depository bank will wire, or otherwise transfer, in immediately available funds, on a daily basis, all funds received or deposited into the Blocked Accounts to such bank account of Lender as Lender may from time to time designate for such purpose (“Payment Account”). Borrower and each Obligor agrees that all payments made to such Blocked Accounts or other funds received and collected by Lender, whether on the Accounts or as proceeds of Inventory or other Collateral or otherwise shall be subject to the security of Lender and/or Agents.

     (b) For purposes of calculating the amount of the Revolving Loans available to Borrower, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Lender of immediately available funds in a Payment Account provided such payments and notice thereof are received in accordance with Lender’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied

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(conditional upon final collection) to the Obligations on the date of receipt of immediately available funds by Lender in the applicable Payment Account provided such payments or other funds and notice thereof are received in accordance with Lender’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. If Lender receives funds in a Payment Account at any time at which no Obligations are outstanding or in excess of such outstanding Obligations, Lender shall transfer such funds to Borrower at such account as Borrower may direct; provided that Borrower shall, at Lender’s request, deposit such funds to an account maintained at the bank at which the Payment Accounts are maintained and, prior to such transfer, shall execute and deliver to Lender a cash collateral agreement in form and substance satisfactory to Lender providing to Lender and/or Agents a first priority Lien over such account.

     (c) Borrower and each Obligor and the shareholders, directors, employees and/or agents of Borrower and each Obligor shall, acting as trustee for Lender, receive, as the security of Lender and/or Agents, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Lender, but in no event shall any of the foregoing monies, checks, notes, drafts or any other such payment be commingled with Borrower’s or an Obligor’s other funds; provided that, prior to the occurrence and continuation of an Event of Default, Obligors (and the shareholders, directors, employees and/or agents of such Obligor) agreement to deposit and remit hereunder shall be limited to monies, checks, notes, drafts or any other payment and proceeds received by such Obligor in Canada, the United States and the United Kingdom. Borrower agrees to reimburse Lender on demand for any amounts owed or paid to any bank at which a Blocked Account is established or any other bank or person involved in the transfer of funds to or from the Blocked Accounts arising out of Lender’s payments to, or indemnification of, such bank or person (other than to the extent that such amount arises directly from Lender’s or such other party’s negligence or willful misconduct). The obligation of Borrower to reimburse Lender for such amounts pursuant to this Section 5.3 shall survive the termination of this Agreement.

5.4 Payments

          All Obligations shall be payable to the Payment Accounts as provided in Section 5.3 or such other place as Lender may designate from time to time. Lender may apply payments received or collected from Borrower or for the account of Borrower (including the monetary proceeds of collections or of realization upon any Collateral) to such of the Obligations, whether or not then due, in such order and manner as Lender determines. Payments and collections received in any currency other than US Dollars or Canadian Dollars will be accepted and/or applied at the sole discretion of Lender. At Lender’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrower. Borrower shall make all payments to Lender on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations

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intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and hold Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 5.4 shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section 5.4 shall survive the payment of the Obligations and the termination of this Agreement. Any payment of the Obligations or termination of this Agreement shall not affect Borrower’s or an Obligor’s obligation to continue making payments under any Swap Agreement, which shall remain in full force and effect notwithstanding such payment or termination, subject to the terms of such Swap Agreement.

5.5 Authorization to Make Revolving Loans

          Lender is authorized to make the Revolving Loans and provide the Letter of Credit Accommodations based upon telephonic instructions or instructions sent by courier, telecopier or by e-mail received from anyone purporting to be an officer of Borrower or other authorized person or, at the discretion of Lender, if such Revolving Loans are necessary to satisfy any Obligations. All requests for Revolving Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Revolving Loan or Letter of Credit Accommodations. Requests received after 11:00 a.m. Chicago time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Revolving Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrower when deposited to the credit of Borrower or otherwise disbursed or established in accordance with the instructions of Borrower or in accordance with the terms and conditions of this Agreement.

5.6 Use of Proceeds

          All Revolving Loans made or Letter of Credit Accommodations provided by Lender to Borrower pursuant to the provisions hereof shall be used by Borrower only for general operating, working capital and other proper corporate purposes of Borrower not otherwise prohibited by the terms hereof.

SECTION 6 COLLATERAL REPORTING AND COVENANTS

6.1 Collateral Reporting

          Borrower shall provide Lender with the following documents in a form satisfactory to Lender: (a) on a regular basis as required by Lender, a schedule of Accounts, sales made, credits issued and cash received; (b) on a monthly basis within twenty (20) days after each month end or more frequently as Lender may request, (i) perpetual inventory reports, (ii) inventory reports by category, including a separate itemized detailed breakdown of all Inventory that is in transit, (iii) agings of accounts payable and (iv) a Royalty Reserve Report; (c) upon Lender’s request, (i) copies of customer statements and credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (ii) copies of shipping and

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delivery documents, and (iii) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrower and MCE; (d) agings of accounts receivable on a monthly basis within twenty (20) days after each month end or more frequently as Lender may request; (e) no later than thirty (30) days after the end of each fiscal year of Borrower, financial projections for the next fiscal year, prepared on a monthly basis; and (f) such other reports as to the Collateral as Lender or Agents shall reasonably request from time to time. If any of Borrower’s or any Obligor’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, Borrower and each Obligor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Lender and to follow Lender’s instructions with respect to further services at any time that an Event of Default exists.

6.2 Accounts Covenants

     (a) Borrower shall notify Lender promptly of: (i) any material delay in any of Borrower’s, MCE’s or MCC’s performance of any of its obligations to any account debtor or the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information in Borrower’s knowledge relating to the financial condition of any account debtor and (iii) any event or circumstance which, to Borrower’s knowledge, would cause Lender to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Lender’s consent, except in the ordinary course of Borrower’s, MCE’s or MCC’s business in accordance with practices and policies previously disclosed in writing to Lender. So long as no Event of Default exists, Borrower, MCE or MCC shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists, Lender shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances.

     (b) Without limiting the obligation of Borrower to deliver any other information to Lender, Borrower shall promptly report to Lender any return of Inventory by any one account debtor if the Inventory so returned in such case has a value in excess of $250,000. At any time that Inventory is returned, reclaimed or repossessed, the Account (or portion thereof) which arose from the sale of such returned, reclaimed or repossessed Inventory shall not be deemed an Eligible Account. In the event any account debtor returns Inventory when an Event of Default exists, Borrower and each Obligor shall, upon Lender’s request, (i) hold the returned Inventory in trust for Lender, (ii) segregate all returned Inventory from all of its other property, (iii) dispose of the returned Inventory solely according to Lender’s instructions, and (iv) not issue any credits, discounts or allowances with respect thereto without Lender’s prior written consent.

     (c) With respect to each Account: (i) the amounts shown on any invoice delivered to Lender or schedule thereof delivered to Lender shall be true and complete in all material respects, (ii) no payments shall be made thereon except payments immediately delivered to Lender pursuant to the terms of this Agreement, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Lender in accordance with this Agreement and except for credits, rebates, price protection

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programs, early payment incentives, discounts, allowances or extensions made or given in the ordinary course of Borrower’s, MCE’s or MCC’s business in accordance with practices and policies previously disclosed to Lender, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto except as reported to Lender in accordance with the terms of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable federal, state or provincial laws or regulations applicable to Borrower or any Obligor, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors’ rights and the discretion of the court as to the granting of equitable remedies.

     (d) Lender shall have the right at any time or times, in Lender’s name or in the name of a nominee of Lender, to verify the validity, amount or any other matter relating to any Account or other Collateral, by mail, telephone, facsimile transmission or otherwise.

     (e) Borrower and each Obligor shall deliver or cause to be delivered to Agents, with appropriate endorsement and assignment, with full recourse to Borrower, all chattel paper and instruments which such Person now owns or may at any time acquire immediately upon such Person’s receipt thereof, except as Lender may otherwise agree.

     (f) Lender and/or Agents may, at any time or times that an Event of Default exists, (i) notify any or all account debtors that the Accounts have been assigned to Agents and that Agents have a Lien therein and Lender may direct any or all accounts debtors to make payment of Accounts directly to Lender, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Accounts or other obligations included in the Collateral and thereby discharge or release the account debtor or any other party or parties in any way liable for payment thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Accounts or such other obligations, but without any duty to do so, and Lender and/or Agents shall not be liable for their failure to collect or enforce the payment thereof nor for the negligence of their agents or attorneys with respect thereto and (iv) take whatever other action Lender and/or Agents may deem necessary or desirable for the protection of their interests. At any time that an Event of Default exists, at Lender’s and/or an Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agents and are payable directly and only to Lender and Borrower, MCE and MCC shall deliver to Lender such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Lender and/or Agents may require.

6.3 Inventory Covenants

          With respect to the Inventory: (a) Borrower shall at all times maintain inventory records satisfactory to Lender, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s or MCE’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a physical count of the Inventory at least once each year, but at any time or times as Lender may request while an Event of Default exists, and promptly following such physical inventory shall supply Lender with a report in the form and with such specificity as may be satisfactory to Lender concerning such

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physical count; (c) Borrower and MCE shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Lender, except for sales of Inventory in the ordinary course of Borrower’s or MCE’s business and except to move Inventory directly from one location set forth or permitted herein to another such location; (d) Borrower shall, at its expense, at Lender’s request, but no more than once in any three (3) month period if an Event of Default does not exist, and at any time or times as Lender may request after and while Event of Default exists, deliver or cause to be delivered to Lender written reports or appraisals as to the Inventory in form, scope and methodology acceptable to Lender and by an appraiser acceptable to Lender, addressed to Lender or upon which Lender is expressly permitted to rely; (e) Borrower and MCE shall produce, use, store and maintain the Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938); (f) Borrower and MCE assume all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (g) Borrower and MCE shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower or MCE to repurchase such Inventory, except in the ordinary course of business or unless such Inventory is not Eligible Inventory; (h) Borrower and MCE shall keep the Inventory in good and marketable condition; and (i) Borrower and MCE shall not, without prior written notice to Lender, acquire or accept any Inventory on consignment or approval.

6.4 Equipment Covenants

          With respect to the Equipment: (a) upon Lender’s request, Borrower shall, at its expense, at any time or times as Lender may request while an Event of Default exists, deliver or cause to be delivered to Lender written reports or appraisals as to the Equipment in form, scope and methodology reasonably acceptable to Lender and by an appraiser acceptable to Lender; (b) Borrower shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrower shall use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (d) the Equipment is and shall be used in Borrower’s business and not for personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained in the ordinary course of the business of Borrower or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrower in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrower shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrower assumes all responsibility and liability arising from the use of the Equipment.

6.5 Power of Attorney

          Borrower and each Obligor hereby irrevocably designates and appoints Lender and Agents (and all persons designated by Lender and Agents) as Borrower’s and such Obligor’s true and lawful attorney-in-fact, and authorizes Lender and Agents, in Borrower’s, such Obligor’s, Lender’s or an Agent’s name, to:

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     (a) at any time while an Event of Default exists (i) demand payment on Accounts or other proceeds of Inventory or other Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise, (iii) exercise all of Borrower’s and such Obligor’s rights and remedies to collect any Account or other Collateral, (iv) sell or assign any Account upon such terms, for such amount and at such time or times as Lender and Agents deem advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Account, (vii) prepare, file and sign Borrower’s or such Obligor’s name on any proof of claim in bankruptcy or other similar document against an account debtor, (viii) notify the post office authorities to change the address for delivery of Borrower’s or such Obligor’s mail to an address designated by Lender and/or Agents, and open and dispose of all mail addressed to Borrower and Obligors, and (ix) do all acts and things which are necessary, in Lender’s or Agents’ determination, to fulfill Borrower’s and Obligors’ obligations under this Agreement and the other Financing Agreements; and

     (b) at any time (i) take control in any manner of any item of payment or proceeds thereof, (ii) have access to any lockbox or postal box into which Borrower’s or such Obligor’s mail is deposited, (iii) endorse Borrower’s or such Obligor’s name upon any items of payment or proceeds thereof and deposit the same in Lender’s account for application to the Obligations, (iv) endorse Borrower’s or such Obligor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Account or any goods pertaining thereto or any other Collateral, (v) sign Borrower’s or such Obligor’s name on any verification of Accounts and notices thereof to account debtors and (vi) execute in Borrower’s or such Obligor’s name and file any UCC, PPSA or other financing statements or amendments thereto.

          Borrower and each Obligor hereby releases Lender and Agents and their officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Lender’s or an Agent’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

6.6 Right to Cure

          Lender may, at its option, (a) cure any default by Borrower or any Obligor under any agreement with a third party or pay or bond on appeal any judgment entered against Borrower or any Obligor, (b) discharge taxes or Liens at any time levied on or existing with respect to the Collateral and (c) pay any amount, incur any expense or perform any act which, in Lender’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agents and/or Lender with respect thereto. Lender may add any amounts so expended to the Obligations and charge Borrower’s account therefor, such amounts to be repayable by Borrower on demand. Lender shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability. Any payment made or other action taken by Lender under this Section 6.6 shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.

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6.7 Access to Premises

          From time to time as requested by Lender, at the cost and expense of Borrower or any Obligor, (a) Lender or its designee including Agents shall have complete access to all of Borrower’s and each Obligor’s premises during normal business hours and after reasonable notice to Borrower and such Obligor, or at any time and without notice to Borrower or such Obligor if an Event of Default exists, for the purposes of inspecting, verifying and auditing the Collateral and all of Borrower’s or such Obligor’s books and records including the Records, and (b) Borrower and each Obligor shall promptly furnish to Lender such copies of such books and records including the Records or extracts therefrom as Lender may request, and (c) Lender or its designee including Agents may use during normal business hours such of Borrower’s or any Obligor’s personnel, equipment, supplies and premises as may be necessary for the foregoing and, if an Event of Default exists, for the collection of Accounts and realization of other Collateral.

SECTION 7 REPRESENTATIONS AND WARRANTIES

          Borrower and each Obligor hereby represents and warrants to Lender the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Revolving Loans and providing Letter of Credit Accommodations by Lender to Borrower:

7.1 Corporate Existence, Power and Authority; Subsidiaries

          Borrower and each Obligor has been duly incorporated or organized and is validly existing under the laws of its jurisdiction of incorporation or organization, as the case may be, and is duly qualified or registered as a foreign or extra-provincial corporation in all provinces, states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets or properties makes such qualification necessary, except for those jurisdictions in which the failure to so qualify or register would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder are all within Borrower’s and each Obligor’s corporate powers, have been duly authorized and are not in contravention of law or the terms of Borrower’s or any Obligor’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Borrower or any Obligor is a party or by which Borrower or any Obligor or their respective property are bound except to the extent that certain Collateral may not be assignable by law. This Agreement and the other Financing Agreements to which it is a party constitute legal, valid and binding obligations of Borrower and each Obligor enforceable in accordance with their respective terms, except as the same is limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally, and the discretion of a court as to the granting of equitable remedies. Borrower does not have any subsidiaries or affiliates except as set forth on the corporate structure chart attached hereto as Exhibit D, which corporate structure chart is accurate and complete. The exact legal name of Borrower and each Obligor is as set forth on the signature page of this Agreement and its Information Certificate. Other than the acquisition by MCII of the entire share capital of WAHL in November 2007, the Merger and the transactions

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effected as set out in Sections 7.15 and 7.16, Borrower and each Obligor has not, during the past five (5) years, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all of substantially all of the assets and properties of any Person, or acquired any of its assets and properties out of the ordinary course of business, except as set forth in its Information Certificate. Borrower and each Obligor is an organization of the type and organized in the jurisdiction set forth in its Information Certificate.

7.2 Financial Statements; No Material Adverse Change

          All financial statements relating to Borrower or any Obligor which have been or may hereafter be delivered by or on behalf of Borrower or such Obligor to Lender have been or will be prepared in accordance with GAAP (when identified as such) and fairly present in all material respects the financial condition and the results of operations of Borrower or such Obligor as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by or on behalf of Borrower or any Obligor to Lender prior to the date of this Agreement, there has been no Material Adverse Change with respect to Borrower or any Obligor since the date of the most recent audited financial statements furnished by or on behalf of Borrower or any Obligor to Lender prior to the date of this Agreement.

7.3 Chief Executive Office; Collateral Locations

          The chief executive office of Borrower and Borrower’s Records concerning Accounts are located only at the address set forth below and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in its Information Certificate, subject to the right of Borrower to establish new locations in accordance with Section 8.2 below. The Information Certificates correctly identify the chief executive office of each Obligor and all other places of business and other locations, if any, at which each Obligor maintains any Collateral. The Information Certificates also correctly identify any of such locations which are not owned by Borrower or any Obligor and sets forth the owners and/or operators thereof and to the best of Borrower’s and each Obligor’s knowledge, the holders of any mortgages on such locations.

7.4 Priority of Liens; Title to Properties

          The Liens granted to Agents and/or Lender under this Agreement and the other Financing Agreements constitute valid and perfected first priority Liens in and upon the Collateral subject only to the Liens indicated on Schedule 7.4 hereto (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans hereunder) and the other Liens permitted under Section 8.8 hereof. Borrower and each Obligor has good and marketable title to all of its assets and properties subject to no Liens of any kind, except those granted to Agents and/or Lender and such others as are specifically listed on Schedule 7.4 hereof (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans hereunder) or permitted under Section 8.8 hereto.

7.5 Tax Returns

          Borrower and each Obligor has filed, or caused to be filed, in a timely manner all tax returns, reports and declarations which are required to be filed by it (without requests for

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extension except as previously disclosed in writing to Lender). All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower and each Obligor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and each Obligor and with respect to which adequate reserves have been set aside on its books. Adequate provision has been made for the payment of all accrued and unpaid federal, state, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

7.6 Litigation

          Except as set forth on the Information Certificates, there is no present investigation by any Governmental Authority pending, or to the best of Borrower’s and each Obligor’s knowledge threatened, against or affecting Borrower or any Obligor, their assets, properties or business and there is no action, suit, proceeding or claim by any Person pending, or to the best of Borrower’s knowledge threatened, against Borrower or any Obligor or their assets, properties or goodwill, or against or affecting any transactions contemplated by this Agreement, which if adversely determined against Borrower or any such Obligor would result in any Material Adverse Change in, or would have a Material Adverse Effect on, Borrower or any Obligor.

7.7 Compliance with Other Agreements and Applicable Laws

          Except as disclosed in Schedule 7.7 hereto, neither Borrower nor any Obligor is in default in any material respect under, or in violation in any material respect of any of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets or properties are bound and Borrower and each Obligor is in compliance in all material respects with all applicable provisions of laws, rules, regulations, licenses, permits, approvals and orders of any foreign, federal, state, provincial or local Governmental Authority.

7.8 Bank Accounts

          All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower or any Obligor maintained at any bank or other financial institution are set forth on Schedule 7.8 hereto, subject to the right of Borrower or any Obligor to establish new accounts in accordance with Section 8.15 hereof.

7.9 Accuracy and Completeness of Information

          All information furnished in writing by or on behalf of Borrower or any Obligor to Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby including all information on the Information Certificates is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. Since March 31, 2009, no event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect on Borrower or any Obligor which has not been fully and accurately disclosed to Lender in writing.

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7.10 Employee Benefits

     (a) Borrower has not engaged in any transaction in connection with which Borrower or any of its ERISA Affiliates could be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, including any accumulated funding deficiency described in Section 7.10(c) hereof and any deficiency with respect to vested accrued benefits described in Section 7.10(d) hereof.

     (b) No liability to the Pension Benefit Guaranty Corporation has been or is expected by Borrower to be incurred with respect to any employee benefit plan of Borrower or any of its ERISA Affiliates. There has been no reportable event (within the meaning of Section 4043(b) of ERISA) or any other event or condition with respect to any employee pension benefit plan of Borrower or any of its ERISA Affiliates which presents a risk of termination of any such plan by the Pension Benefit Guaranty Corporation.

     (c) Full payment has been made of all amounts which Borrower or any of its ERISA Affiliates is required under Section 302 of ERISA and Section 412 of the Code to have paid under the terms of each employee benefit plan as contributions to such plan as of the last day of the most recent fiscal year of such plan ended prior to the date hereof, and no accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any employee benefit plan, including any penalty or tax described in Section 7.10(a) hereof and any deficiency with respect to vested accrued benefits described in Section 7.10(d) hereof.

     (d) The current value of all vested accrued benefits under all employee benefit plans maintained by Borrower that are subject to Title IV of ERISA does not exceed the current value of the assets of such plans allocable to such vested accrued benefits, including any penalty or tax described in Section 7.10(a) hereof and any accumulated funding deficiency described in Section 7.10(c) hereof. The terms “current value” and “accrued benefit” have the meanings specified in ERISA.

     (e) Neither Borrower nor any of its ERISA Affiliates is or has ever been obligated to contribute to any “multiemployer plan” (as such term is defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.

7.11 Environmental Compliance

     (a) Neither Borrower nor any Obligor has generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or any license, permit, certificate, approval or similar authorization thereunder and the operations of Borrower and each Obligor comply in all material respects with all Environmental Laws and all licenses, permits, certificates, approvals and similar authorizations thereunder.

     (b) There has been no investigation, proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending, or to the best of Borrower’s and each Obligor’s knowledge threatened, with respect to any non-

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compliance with or violation of the requirements of any Environmental Law by Borrower or any Obligor or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which affects Borrower or any Obligor or their business, operations or assets or any properties at which Borrower or any Obligor has transported, stored or disposed of any Hazardous Materials.

     (c) Neither Borrower nor any Obligor has any material liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials.

     (d) Borrower and each Obligor has all licenses, permits, certificates, approvals or similar authorizations required to be obtained or filed in connection with the operations of Borrower and each Obligor under any Environmental Law and all of such licenses, permits, certificates, approvals or similar authorizations are valid and in full force and effect.

7.12 Survival of Warranties; Cumulative

          All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Lender on the date of each additional borrowing or other credit accommodation hereunder, except with respect to, and to the extent that, such representations and warranties are expressly made as of a particular date or there are changes with respect to the matters referenced in such representations and warranties after the date made that do not and will not otherwise cause a Default or Event of Default hereunder and such representations and warranties shall be conclusively presumed to have been relied on by Lender regardless of any investigation made or information possessed by Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower or any Obligor shall now or hereafter give, or cause to be given, to Lender.

7.13 Inactive Subsidiaries

          No Inactive Subsidiary has (a) any assets (other than Xencet US Inc. which owns all of the issued and outstanding shares of Singapore Holdings Inc.), (b) has any liabilities or (c) engages in any material business activities. Borrower and each applicable Obligor has taken action to wind-up and dissolve Saitek PLC, Saitek HK and Mad Catz Limited in accordance with applicable law.

7.14 Intellectual Property

          To the best of Borrower’s or any Obligor’s knowledge, Borrower and each Obligor owns or licences or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted. As of the date hereof, neither Borrower nor any Obligor has any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office, the Canadian Intellectual Property Office or any similar office or agency in the United States of America or Canada, any State or Province

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thereof, any political subdivision thereof or in any other country, other than those described in the Information Certificates. To the best of Borrower’s or any Obligor’s knowledge, no event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of Borrower’s or any Obligor’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by Borrower or any Obligor infringes any patent, trademark, service mark, trade name, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or threatened against or affecting Borrower or any Obligor contesting its right to sell or use any such Intellectual Property (other than those claims or litigation that Borrower has notified Lender of in writing or otherwise disclosed in publicly required filings). The Information Certificates and Schedule 7.14 attached hereto set forth all of the material agreements or other material arrangements of Borrower and any Obligors pursuant to which Borrower or any Obligor has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another Person as in effect on the date hereof and the dates of the expiration of such agreement or other arrangements of Borrower and any Obligor as in effect on the date hereof (collectively, together with such agreement or other arrangement as may be entered into by Borrower or any Obligor after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”) other than over-the-counter shrink-wrapped or “click-wrapped” software. No trademark, service mark, copyright or other Intellectual Property at any time used by Borrower or any Obligor which is owned by another Person, or owned by Borrower or any Obligor but subject to any Lien in favour of any Person other than Lender, is affixed to any Eligible Inventory, except (a) to the extent permitted under the terms of the License Agreements; and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by Borrower or any Obligor under applicable law. The material intellectual property of Borrower and Obligors is the Saitek, Mad Catz and Joytech names registered in China, Hong Kong, the United States of America, Canada, Germany, France and the United Kingdom.

7.15 Solvent

          Borrower and each Obligor is Solvent.

7.16 Transfer of Assets of Saitek HK

          Saitek HK transferred all of its assets and properties to MCIA and MCIA acquired all of such assets and properties on October 1, 2008 pursuant to the terms and conditions of the HK Hive UP Deed free and clear of all Liens and all conditions to such transfer and acquisition have been satisfied. Schedule 7.16 attached hereto is an accurate and complete description of the fixed assets of MCIA as of the date hereof.

7.17 Transfer of Assets of Saitek PLC

          Saitek PLC transferred all of its assets and properties to MCE and MCE acquired all of such assets and properties on August 1, 2008 pursuant to the terms and conditions of the UK Hive UP Agreement free and clear of all Liens and all conditions to such transfer and acquisition have been satisfied.

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SECTION 8 AFFIRMATIVE AND NEGATIVE COVENANTS

8.1 Maintenance of Existence

          Borrower and each Obligor shall at all times preserve, renew and keep in full, force and effect its corporate existence and rights and franchises with respect thereto and maintain in full force and effect all permits, licenses, trademarks, tradenames, approvals, authorizations, leases and contracts necessary to carry on the business as presently or proposed to be conducted. Borrower and each Obligor shall give Lender thirty (30) days prior written notice of any proposed change in its corporate name, which notice shall set forth the new name and Borrower or such Obligor shall deliver to Lender a certified copy of the Articles of Amendment (or other similar document appropriate for the particular jurisdiction) of Borrower or such Obligor providing for the name change immediately following its filing. Borrower and each Obligor shall not change its chief executive office or its mailing address or organizational identification number (or it does not have one, shall not acquire one) unless Lender shall have received not less than thirty (30) days prior written notice of such proposed change, which notice shall set forth such information with respect thereto as Lender may require and Lender shall have received such agreements and opinions as Lender may reasonably require in connection therewith. Borrower and each Obligor shall not change its type of organization, jurisdiction or organization or other legal structure.

8.2 New Collateral Locations

          Borrower or any Obligor may open any new location within Canada and continental United States of America provided Borrower or such Obligor (a) gives Lender thirty (30) days prior written notice of the intended opening of any such new location and (b) Borrower or such Obligor, as applicable, executes and delivers, or causes to be executed and delivered, to Lender such agreements, documents, and instruments as Lender may deem necessary or desirable to protect its and Agents’ interests in the Collateral at such location, including UCC, PPSA and other financing statements and such other evidence as Lender may require for the perfection of Agents’ or Lender’s first priority Liens where required by Lender.

8.3 Compliance with Laws, Regulations, Etc.

     (a) Borrower and each Obligor shall, at all times, comply in all material respects with all laws, rules, regulations, licenses, permits, approvals and orders applicable to it and duly observe all requirements of any federal, state, provincial or local Governmental Authority, including all statutes, rules, regulations, orders, permits and stipulations relating to environmental pollution and employee health and safety, including all of the Environmental Laws except for any matter that Borrower or an Obligor is contesting in good faith by appropriate proceedings diligently pursued and which is not reasonably expected to have a Material Adverse Effect on Borrower or any Obligor.

     (b) Borrower and each Obligor shall establish and maintain, at its expense, a system to assure and monitor its continued compliance with all Environmental Laws in all of its operations, which system shall include annual reviews of such compliance by employees or agents of Borrower or such Obligor, as applicable, who are familiar with the requirements of the

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Environmental Laws. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by Borrower and each Obligor to Lender. Borrower and each Obligor shall take prompt and appropriate action to respond to any non-compliance with any of the Environmental Laws and shall regularly report to Lender on such response.

     (c) Borrower and each Obligor shall give both oral and written notice to Lender immediately upon its receipt of any notice of, or its otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law by Borrower or any Obligor or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials that does not comply with Environmental Laws, or (D) the violation of any other environmental, health or safety matter, which may have a Material Adverse Effect on Borrower or any Obligor or their business, operations or assets or any properties at which Borrower or any Obligor transported, stored or disposed of any Hazardous Materials.

     (d) Without limiting the generality of the foregoing, whenever Lender determines that there is non-compliance, or any condition which requires any action by or on behalf of Borrower or any Obligor in order to avoid any material non-compliance, with any Environmental Law, Borrower and each Obligor shall, at Lender’s request and Borrower’s or each Obligor’s expense: (i) cause an independent environmental engineer acceptable to Lender to conduct such tests of the site where Borrower’s or such Obligor’s non-compliance or alleged non-compliance with such Environmental Laws has occurred and prepare and deliver to Lender a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Lender a supplemental report of such engineer whenever the scope of such non-compliance, or Borrower’s or such Obligor’s response thereto or the estimated costs thereof, shall change in any material respect.

     (e) Borrower and each Obligor shall indemnify and hold harmless Lender and Agents and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns (collectively, “Indemnified Persons”), from and against any and all losses, claims, damages, liabilities, costs, and expenses (including legal fees and expenses) incurred by any Indemnified Person, directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of Borrower or any Obligor and the preparation and implementation of any closure, remedial or other required plans; provided that such indemnity shall not apply to the extent that any such cost incurred by an Indemnified Person arises from the willful misconduct or gross negligence of any Indemnified Person.

     (f) All covenants and indemnifications in this Section 8.3 shall survive the payment of the Obligations and the termination of this Agreement.

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8.4 Payment of Taxes and Claims

          Borrower and each Obligor shall duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its assets or properties, except for taxes, assessments, contributions or governmental charges the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or such Obligor and with respect to which adequate reserves have been set aside on its books. Borrower shall be liable for any tax or penalties imposed on Lender as a result of the financing arrangements provided for herein and Borrower agrees to indemnify and hold Lender harmless with respect to the foregoing, and to repay to Lender on demand the amount thereof, and until paid by Borrower such amount shall be added and deemed part of the Revolving Loans; provided, that, nothing contained herein shall be construed to require Borrower to pay any income or franchise taxes attributable to the income of Lender from any amounts charged or paid hereunder to Lender. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement.

8.5 Insurance

          Borrower and each Obligor shall, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be satisfactory to Lender as to form, amount and insurer. Borrower and each Obligor shall furnish certificates, policies or endorsements to Lender as Lender shall require as proof of such insurance, and, if Borrower or an Obligor fails to do so, Lender is authorized, but not required, to obtain such insurance at the expense of Borrower and such Obligor. All policies shall provide for at least thirty (30) days prior written notice to Lender of any cancellation or reduction of coverage and that Lender may act as attorney for Borrower and each Obligor in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrower and each Obligor shall cause Lender to be named as a loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrower and each Obligor shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance satisfactory to Lender. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Lender as its interests may appear and further specify that Lender shall be paid regardless of any act or omission by Borrower, any Obligor or any of their respective affiliates. At its option, Lender may apply any insurance proceeds received by Lender at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations, whether or not then due, in any order and in such manner as Lender may determine or hold such proceeds as cash collateral for the Obligations.

8.6 Financial Statements and Other Information

     (a) Borrower and each Obligor shall keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of Borrower, each Obligor and their respective subsidiaries (if any) in accordance with GAAP and Borrower shall furnish or cause to be furnished to Lender:

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(i) within forty-five (45) days after the end of each fiscal month:

(A)	monthly unaudited financial statements of each of Borrower, MCE and MCC;
(B)	monthly unaudited consolidated financial statements of MCII (which shall include Borrower, Obligors and their respective subsidiaries),

	(including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of MCII, Borrower, MCE, MCC, Obligors and their respective subsidiaries, if any, as of the end of and through such fiscal month;
(ii)	within one hundred and twenty (120) days after the end of each fiscal year of MCII, audited consolidated financial statements of MCII (which shall include Borrower, Obligors and their respective subsidiaries) (including in each case balance sheets, statements of income and loss, statements of changes in financial position and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of the applicable Person and its subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent chartered accountants, which accountants shall be an independent accounting firm selected by MCII and reasonably acceptable to Lender, that such financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of the applicable Person and its subsidiaries as of the end of and for the fiscal year of MCII then ended; and
(iii)	no later than thirty (30) days after the end of each fiscal year of Borrower, annual financial projections for the next fiscal year of Borrower, which shall be approved by Lender (which approval shall not be unreasonably withheld or delayed) and shall include a projected balance sheet, income statement and statement of cash flow, prepared on a monthly basis for such fiscal year, proposed budgets for operating and capital expenditures, acquisitions and related financing costs for Borrower, details of all management salaries and bonuses, projections with respect to projected total consolidated EBITDA of MCII for such fiscal year and such other information as may be requested by Lender.

     (b) Borrower shall promptly notify Lender in writing of the details of (i) any material loss, damage, investigation, action, suit, proceeding or claim relating to the Collateral or any other assets or property which is security for the Obligations or any loss, damage, investigation,

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action, suit, proceeding or claim which would result in any Material Adverse Change in Borrower or any Obligor and (ii) the occurrence of any Default or Event of Default.

     (c) Borrower shall promptly after the sending or filing thereof furnish or cause to be furnished to Lender copies of all reports which Borrower or any Obligor sends to its shareholders generally and copies of all reports and registration statements which Borrower or any Obligor files with any securities commission or securities exchange.

     (d) Borrower shall furnish or cause to be furnished to Lender such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrower or any Obligor, as Lender may, from time to time, reasonably request and Lender is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrower or any Obligor to any court or other Governmental Authority as required by law or to any participant or assignee or prospective participant or assignee, provided that each such participant or assignee executes a confidentiality agreement acceptable to Lender which confidentiality agreement shall in any event provide that such participant or assignee shall maintain the confidential nature of such information in the same manner as such information is required to be maintained by Lender. Borrower and each Obligor hereby irrevocably authorizes and directs all accountants or auditors to deliver to Lender, at Borrower’s or such Obligor’s expense, copies of the financial statements of Borrower or such Obligor and any reports or management letters prepared by such accountants or auditors on behalf of Borrower or such Obligor and to disclose to Lender such information as they may have regarding the business of Borrower or such Obligor, subject to any applicable confidentiality restrictions in favor of third parties or any legal privileges that have not been waived and which are not within the control of Borrower or such Obligor to waive. Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender one (1) year after the same are delivered to Lender, except as otherwise designated by Borrower or any Obligor to Lender in writing.

     (e) Borrower shall within five (5) days after the end of each month provide a certificate of the chief financial officer of Borrower, in form and content satisfactory to Lender, certifying that Borrower has paid in full (i) all rent and other amounts due and payable with respect to any premises leased or occupied by Borrower or any Obligor during such month; and (ii) all payments and other amounts due and payable with respect to any employee benefit plan or pursuant to any material contract during such month.

     (f) Notwithstanding the foregoing, or any other provision in any Financing Agreement, Borrower and Obligors shall not be required to disclose any information reports or other documents or material to the extent that such disclosure would breach any applicable laws and the ability to avoid such breach is not within the control of Borrower or any Obligor.

     (g) Borrower shall, within thirty (30) days after the end of each month, provide a compliance certificate, in substantially the form attached hereto as Schedule 8.6(g), to Lender with respect to compliance by Borrower with the financial covenants set forth in Sections 8.13 and 8.20 and such other matters relating to Borrower and Obligors as Lender may from time to time request.

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8.7 Sale of Assets, Consolidation, Merger, Amalgamation, Dissolution, Etc.

          Borrower and each Obligor shall not, directly or indirectly, without the prior written consent of Lender:

     (a) merge or amalgamate with any other Person or permit any other Person to merge or amalgamate with it;

     (b) sell, assign, lease, transfer, abandon or otherwise dispose of any shares or indebtedness to any other Person or any of its assets to any other Person except for:

(i)	sales of Inventory in the ordinary course of business; and
(ii)	the disposition of worn-out or obsolete Equipment or Equipment no longer used in its business so long as (A) if an Event of Default exists, any proceeds are paid to Lender and (B) such sales do not involve Equipment having an aggregate fair market value in excess of $250,000 for all such Equipment disposed of in any fiscal year);

     (c) form or acquire any subsidiaries;

     (d) wind up, liquidate or dissolve; or

     (e) agree to do any of the foregoing.

     Notwithstanding the foregoing, nothing in this Agreement or in any of the Financing Agreements shall prohibit MCII from selling or issuing its securities, and unless an Event of Default has occurred and is continuing, none of the proceeds resulting from any such sale or issuance of securities, whether in the form of cash or otherwise, shall constitute security for any of the Obligations or any obligation of any Obligor under any Financing Agreement.

8.8 Encumbrances

          Borrower and each Obligor shall not create, incur, assume or suffer to exist any Lien of any nature whatsoever on any of its assets or properties, including the Collateral, except:

     (a) Liens of Agents and Lender;

     (b) Liens securing the payment of taxes, either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or any Obligor, as applicable, and with respect to which adequate reserves have been set aside on its books;

     (c) non-consensual statutory Liens (other than Liens securing the payment of taxes) arising in the ordinary course of Borrower’s or any Obligor’s business, as applicable, to the extent: (i) such Liens secure indebtedness which is not overdue or (ii) such Liens secure indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by

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appropriate proceedings diligently pursued and available to Borrower or such Obligor, as applicable, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books;

     (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property which do not interfere in any material respect with the use of such real property or ordinary conduct of the business of Borrower or such Obligor, as applicable, as presently conducted thereon or materially impair the value of the real property which may be subject thereto;

     (e) purchase money security interests in Equipment (including capital leases) and purchase money mortgages on real estate not to exceed, individually, $250,000 and, in the aggregate, $1,000,000 at anytime outstanding for Borrower and Obligors so long as such security interests and mortgages do not apply to any assets or property of Borrower or any Obligor other than the Equipment or real estate so acquired, and the indebtedness secured thereby does not exceed the cost of the Equipment or real estate so acquired, as the case may be;

     (f) the Liens set forth on Schedule 7.4 hereto (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans pursuant to this Agreement); and

     (g) Liens to secure Permitted Inter-Company Debt.

8.9 Indebtedness

          Borrower and each Obligor shall not incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any obligations or indebtedness except:

     (a) the Obligations;

     (b) trade obligations and normal accruals in the ordinary course of business not past due more than sixty (60) days, or with respect to which Borrower or such Obligor, as applicable, is contesting in good faith the amount or validity thereof by appropriate proceedings diligently pursued and available to Borrower or such Obligor, as applicable, and with respect to which adequate reserves have been set aside on its books;

     (c) purchase money indebtedness (including capital leases) to the extent not incurred or secured by Liens (including capital leases) in violation of any other provision of this Agreement;

     (d) the indebtedness set forth on Schedule 8.9 hereto;

     (e) Permitted Inter-Company Debt;

     (f) the indebtedness pursuant to the Consideration Loan Note Instrument;

     (g) the indebtedness pursuant to the Completion Note; and

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     (h) the indebtedness under or in connection with any Swap Agreement consented to in writing by Lender pursuant to Section 8.23;

provided that:

     (i) with respect to such indebtedness in Sections 8.9(d) and (e), Borrower or Obligors, as applicable, may only make regularly scheduled payments of principal and interest in respect of such indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such indebtedness as in effect on the date of this Agreement, subject to any subordination agreement among Lender, Borrower, Obligors and the holder of any such indebtedness, as applicable;

     (j) with respect to the indebtedness pursuant to the Consideration Loan Note Instrument and the Completion Note, Borrower or Obligors, as applicable, may only make payments of principal and interest in respect of such indebtedness in accordance with the terms of the Intercreditor Agreement; provided that Lender consents to Borrower or Obligors, as applicable, making up to $50,000 (not $44,880.71 as set out in the Intercreditor Agreement) under Section 1(b) of the Intercreditor Agreement subject to all the other terms of such section and the Intercreditor Agreement;

     (k) other than with respect to Swap Agreements, Borrower or Obligors, as applicable, shall not directly or indirectly, (A) amend, modify, alter or change the terms of such indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof, or (B) redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set aside or otherwise deposit or invest any sums for such purpose; and

     (l) Borrower shall furnish to Lender all notices or demands in connection with such indebtedness received by or on behalf of Borrower or any Obligor, as applicable, promptly after the receipt thereof, or sent by or on behalf of Borrower or any Obligor, as applicable, concurrently with the sending thereof, as the case may be.

8.10 Loans, Investments, Guarantees, Etc.

          Borrower and each Obligor shall not, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the shares or indebtedness or all or a substantial part of the assets or property of any person, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly) the indebtedness, performance, obligations or dividends of any Person or agree to do any of the foregoing, except:

     (a) endorsement of instruments for collection or deposit in the ordinary course of business;

     (b) investments in: (i) short-term direct obligations of the Canadian Government or the United States Government, (ii) negotiable certificates of deposit issued by any bank satisfactory to Lender, payable to the order of Borrower or such Obligor or to bearer and delivered to Lender, and (iii) commercial paper rated Al or P1; provided, that, as to any of the foregoing, unless waived in writing by Lender, Borrower and each Obligor shall take such

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actions as are deemed necessary by Lender and Agents to perfect the Lien of Agents and/or Lender in such investments;

     (c) Acquisitions;

     (d) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business of Borrower;

     (e) the loans, advances and other guarantees set forth on Schedule 8.10 hereto;

     (f) any unsecured guarantees issued in the ordinary course of business by Borrower or Obligors to their suppliers, vendors and lessors with respect to the obligations of Borrower or Obligors, as the case may be, to such suppliers, vendors and lessors; and

     (g) loans that constitute Permitted Inter-Company Debt;

provided, that, as to such loans, advances and guarantees, (i) Borrower and each Obligor shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such loans, advances or guarantees or any agreement, document or instrument related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase or otherwise acquire the obligations arising pursuant to such guarantees, or set aside or otherwise deposit or invest any sums for such purpose, and (ii) Borrower and each Obligor shall furnish to Lender all notices or demands in connection with such loans, advances or guarantees or other indebtedness subject to such guarantees either received by Borrower, each Obligor or on its behalf, promptly after the receipt thereof, or sent by Borrower, each Obligor or on its behalf, concurrently with the sending thereof, as the case may be.

8.11 Dividends and Redemptions

          Borrower shall be entitled from time to time to pay such dividends or redeem or repurchase shares if Borrower has Excess Availability of not less than $500,000 after giving effect to each such payment of dividends, redemption amount or repurchase amount and if no Event of Default exists at the time of, or will occur as a result of, any such payment of dividends, redemption amount or repurchase amount. Except as expressly permitted pursuant to the preceding sentence, Borrower and each Obligor shall not, directly or indirectly, declare or pay any dividends on account of any of its shares now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than common shares or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing.

8.12 Transactions with Affiliates

          Borrower and each Obligor shall not, directly or indirectly, (a) purchase, acquire or lease any asset or property from, or sell, transfer or lease any asset or property to, any officer, director, agent or other person affiliated with Borrower or such Obligor, except in the ordinary course of and pursuant to the reasonable requirements of Borrower’s or such Obligor’s business

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and upon fair and reasonable terms no less favorable to Borrower or such Obligor than Borrower or such Obligor would obtain in a comparable arm’s length transaction with an unaffiliated person or (b) make any payments of management, consulting or other fees for management or similar services, or of any indebtedness owing to any officer, employee, shareholder, director or other person affiliated with Borrower or such Obligor except (i) payments in respect of Permitted Inter-Company Debt provided that such payments are permitted pursuant to, and made in accordance with, the terms of the applicable subordination agreement executed by Borrower and/or such Obligor, as applicable, in favor of Lender in respect thereof and (ii) reasonable compensation to officers, employees and directors for services rendered to Borrower or such Obligor in the ordinary course of business.

8.13 Fixed Charge Coverage Ratio

          MCII shall maintain a Fixed Charge Coverage Ratio of not less than 1.5:1.0 for each Testing Period calculated at the end of each Fiscal Quarter; provided that, for the Fiscal Quarters ending June 30, 2009 and September 30, 2009 only, the amount of $676,000, being the aggregate amounts related to the Walmart pricing adjustment issue ($376,000) and the Immersion royalty settlement ($300,000), will be included in the EBITDA calculation when determining compliance with this Section 8.13.

8.14 Intellectual Property

          In the event Borrower or any Obligor obtains or applies for any material Intellectual Property rights or obtains any material licenses with respect thereto, Borrower and such Obligor shall immediately notify Lender thereof and shall provide to Lender copies of all written materials including applications and licenses with respect to such Intellectual Property rights. At Lender’s request, Borrower and such Obligor shall promptly execute and deliver to Lender and Agents an intellectual property security agreement granting to Agents a perfected Lien in such intellectual property rights in form and substance satisfactory to Lender.

8.15 Additional Bank Accounts

          Borrower and each Obligor shall not, directly or indirectly, open, establish or maintain any deposit account, investment account or any other account with any bank or other financial institution, other than the Blocked Accounts and the accounts set forth in Schedule 7.8 hereto, except: (a) as to any new or additional Blocked Accounts and other such new or additional accounts which contain any Collateral or proceeds thereof, with the prior written consent of Lender and subject to such conditions thereto as Lender may establish, and (b) as to any accounts used by Borrower or any Obligor to make payments of payroll, taxes or other obligations to third parties, after prior written notice to Lender.

8.16 Compliance with ERISA

          (a) Borrower shall not with respect to any “employee benefit plans” maintained by Borrower or any of its ERISA Affiliates: (i) terminate any of such employee benefit plans so as to incur any liability to the Pension Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction involving any of such employee benefit plans or any trust created thereunder which would subject Borrower or such ERISA

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Affiliate to a tax or penalty or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such employee benefit plan any contribution which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such employee benefit plan, (v) allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such employee benefit plan that is a single employer plan, which termination could result in any liability to the Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability with respect to any multiemployer pension plan.

     (b) As used in this Section 8.16, the terms “employee benefit plans”, “accumulated funding deficiency” and “reportable event” shall have the respective meanings assigned to them in ERISA, and the term “prohibited transaction” shall have the meaning assigned to it in Section 4975 of the Code and ERISA.

8.17 Costs and Expenses

          Borrower shall pay to Lender on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Lender’s and Agents’ rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including UCC and PPSA financing statement and other similar filing and recording fees and taxes, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) all insurance premiums, appraisal fees and search fees; (c) costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts and Payment Accounts, together with Lender’s customary charges and fees with respect thereto; (d) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (e) costs and expenses of preserving and protecting the Collateral; (f) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the Liens of Agents and/or Lender, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agents and/or Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (g) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Lender during the course of periodic field examinations of the Collateral and Borrower’s operations, plus a per diem charge at the rate of $1,200 per person per day for Lender’s examiners in the field and office; provided that such field examinations shall be limited to no more than once in any four (4) month period if an Event of Default does not exist with no such restriction if an Event of Default exists; and (h) the fees and disbursements of counsel (including legal assistants) to Lender and Agents in connection with any of the foregoing.

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8.18 Further Assurances

          At the request of Lender at any time and from time to time, Borrower and each Obligor shall, at its expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the Liens of Agents and Lender and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Lender may at any time and from time to time request a certificate from an officer of Borrower representing that all conditions precedent to the making of Revolving Loans and providing Letter of Credit Accommodations contained herein are satisfied. In the event of such request by Lender, Lender may, at its option, cease to make any further Revolving Loans or provide any further Letter of Credit Accommodations until Lender has received such certificate and, in addition, Lender has determined that such conditions are satisfied. Where permitted by law, Borrower and each Obligor hereby authorizes Lender to execute and file one or more UCC, PPSA or other financing statements or notices signed only by Lender or Agents’ representative.

8.19 Change of Control

          Borrower shall promptly provide Lender with written notice if, at any time, any person shall own more than twenty percent (20%) of the outstanding voting securities of MCII.

8.20 Software Expenditures

          Borrower and each Obligor shall not make or incur any expenditures with respect to the development of Software during any fiscal year of Borrower in the aggregate in respect of Borrower and each Obligor in excess of $1,000,000 without the prior written consent of Lender.

8.21 Inactive Subsidiaries

          (a) Borrower and each Obligor shall not allow or permit any Inactive Subsidiary to, and shall ensure that each Inactive Subsidiary does not (a) acquire any assets or properties, (b) incur any liabilities or (c) engage in any material business activities.

          (b) Borrower and each Obligor shall diligently cause Saitek PLC, Saitek HK and Mad Catz Limited to wind-up and dissolve and Borrower shall provide evidence of same to Lender promptly upon each such wind-up and dissolution.

8.22 Corporate Structure Chart

          Borrower and each Obligor shall not allow or permit any change to the ownership structure of Borrower and its affiliates from that set out in the corporate structure chart attached hereto as Exhibit D other than the dissolution and winding-up of Saitek PLC, Saitek HK and Mad Catz Limited in accordance with Section 8.21(b).

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8.23 Swap Agreements

          Borrower and each Obligor shall not enter into any Swap Agreement without the prior written consent of Lender (such consent to be provided in Lender’s sole discretion).

SECTION 9 EVENTS OF DEFAULTS AND REMEDIES

9.1 Events of Default

          The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

     (a) (i) Borrower fails to pay when due any of the Obligations or the Borrower or any Obligor fails to pay when due any amount owing under any Financing Agreement, or (ii) Borrower or any Obligor fails to perform any of the material terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements (other than as described in Section 9.1(a)(i)), or (iii) Borrower or any Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any other Financing Agreement (other than as described in Section 9.1(a)(i) or Section 9.1(a)(ii)) and such failure continues for more than ten (10) days after the Borrower receives written notice thereof from Lender;

     (b) any representation, warranty or statement of fact made by Borrower or any Obligor to Lender or Agents in this Agreement, the other Financing Agreements or any other agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect;

     (c) any Obligor (i) revokes, terminates or fails to perform any of the material terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Lender or Agents; or (ii) revokes, terminates or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Lender or Agents (other than as described in Section 9.1(c)(i)) and such default continues for more than ten (10) days after Borrower receives written notice thereof from Lender;

     (d) any judgment for the payment of money is rendered against Borrower or any Obligor in excess of $2,000,000 in the aggregate and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against Borrower or any Obligor or any of their assets or properties;

     (e) any Obligor (being a natural person or a general partner of an Obligor which is a partnership) dies or Borrower or any Obligor, which is a partnership, limited liability company, limited partnership, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business;

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     (f) Borrower or any Obligor becomes insolvent, makes an assignment for the benefit of creditors proposes to make, makes or sends notice of a bulk sale (as defined by applicable laws of the United States of America or Canada) or calls a meeting of its creditors or principal creditors;

     (g) a petition, case or proceeding under the bankruptcy laws of the United States, Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed or commenced against Borrower or any Obligor or all or any part of its assets or properties and such petition or application is not dismissed within sixty (60) days after the date of its filing or Borrower or any Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

     (h) a petition, case or proceeding under the bankruptcy laws of the United States, Canada or similar laws of any foreign jurisdiction now or hereafter in effect or under any insolvency, arrangement, reorganization, moratorium, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed or commenced by Borrower or any Obligor for all or any part of its assets or properties including if Borrower or any Obligor shall:

(i)	apply for or consent to the appointment of a receiver, trustee or liquidator of it or of all or a substantial part of its assets or properties; or
(ii)	be unable, or admit in writing its inability, to pay its debts as they mature, or commit any other act of bankruptcy; or
(iii)	make a general assignment for the benefit of creditors; or
(iv)	file a voluntary petition or assignment in bankruptcy or a proposal seeking a reorganization, compromise, moratorium or arrangement with its creditors; or
(v)	take advantage of any insolvency or other similar law pertaining to arrangements, moratoriums, compromises or reorganizations, or admit the material allegations of a petition or application filed in respect of it in any bankruptcy, reorganization or insolvency proceeding; or
(vi)	take any corporate action for the purpose of effecting any of the foregoing;

     (i) any default by Borrower or any Obligor under any agreement, document or instrument relating to any indebtedness for borrowed money owing to any person other than Lender or under the Consideration Loan Note Instrument or the Completion Note, or any capitalized lease obligations, contingent indebtedness in connection with any guarantee, letter of credit, indemnity or similar type of instrument in favor of any person other than Lender, in any case in an amount in excess of $1,000,000, which is not remedied within ten (10) days after Borrower receives written notice thereof from Lender;

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     (j) any material default by Borrower or any Obligor under any material contract, lease, license or other obligation to any person other than Lender, any other default by Borrower or any Obligor under any material contract, lease, license or other obligation to any person other than Lender if such default continues for more than ten (10) days after Borrower receives written notice thereof from Lender, or any termination of, or failure to renew or extend, any material lease for real property occupied by Borrower or any Obligor;

     (k) any change in the ownership of Borrower or any Obligor (other than MCII) unless previously approved in writing by Lender;

     (l) the charging of Borrower or any Obligor under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against Borrower or any Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of any of the assets or properties of Borrower or such Obligor;

     (m) a Material Adverse Change in Borrower or any Obligor after the date hereof;

     (n) an event of default under any of the other Financing Agreements;

     (o) a breach of, or failure to comply with, any material term of any intercreditor agreement or subordination agreement (including the Intercreditor Agreement) with respect to Borrower or any Obligor by any party thereto other than Lender, or any breach of, or failure to comply with, any other term of any intercreditor agreement or subordination agreement (including the Intercreditor Agreement) with respect to Borrower or any Obligor by any party thereto other than Lender if such default continues for more than ten (10) days after Borrower receives notice thereof from Lender;

     (p) a Serious Event (as defined in the Consideration Loan Note Instrument) occurs under the Consideration Loan Note Instrument or any default under the Completion Note; provided that there shall be no Event of Default under this subparagraph (p) if the Serious Event (as defined in the Consideration Loan Note Instrument) arises under Condition 5.1.1 of the Consideration Loan Note Instrument; or

     (q) there shall be a default under any Swap Agreement.

9.2 Remedies

     (a) At any time while an Event of Default exists Lender and Agents shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC, PPSA and other applicable law, all of which rights and remedies may be exercised without notice to or consent by Borrower or any Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Lender and Agents hereunder, under any of the other Financing Agreements, the UCC, PPSA or other applicable law, are cumulative, not exclusive and enforceable, in Lender’s and Agents’ discretion, alternatively, successively, or concurrently on any one or more occasion, and shall include the right to apply to a court of equity for an injunction to restrain a breach or threatened by Borrower or any Obligor of this Agreement or any of the other Financing Agreements. Lender and/or Agents may, at any time or times, proceed directly against Borrower or any Obligor to collect the

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Obligations (except under or in connection with any Swap Agreement) without prior recourse to the Collateral.

     (b) Without limiting the foregoing, at any time an Event of Default exists, Lender and Agents may, in their discretion and without limitation, (i) Lender may accelerate the payment of all Obligations (except under or in connection with any Swap Agreement) and demand immediate payment thereof to Lender (provided, that, upon the occurrence of any Event of Default described in Sections 9.1(g) and 9.1(h), all Obligations (except under or in connection with any Swap Agreement) shall automatically become immediately due and payable), (ii) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral and carry on the business of Borrower and each Obligor, (iii) require Borrower and each Obligor, at its expense, to assemble and make available to Lender and Agents any part or all of the Collateral at any place and time designated by Lender and Agents, (iv) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (v) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Lender, Agents or elsewhere) at such prices or terms as Lender and Agents may deem reasonable, for cash, upon credit or for future delivery, with Lender and Agents having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borrower or any Obligor, which right or equity of redemption is hereby expressly waived and released by Borrower and each Obligor, (vii) borrow money and use the Collateral directly or indirectly in carrying on Borrower’s or each Obligor’s business or as security for loans or advances for any such purposes, (viii) grant extensions of time and other indulgences, take and give up security, accept compositions, grant releases and discharges, and otherwise deal with Borrower and Obligors, debtors of Borrower and Obligors, sureties and others as Lender and Agents may see fit without prejudice to the liability of Borrower or Obligors or Lender’s or Agents’ right to hold and realize the Lien created under any Financing Agreement, and/or (ix) terminate this Agreement. If any of the Collateral is sold or leased by Lender or Agents upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Lender or Agents. If notice of disposition of Collateral is required by law, five (5) days prior notice by Lender or Agents to Borrower and Obligors designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrower and each Obligor waives any other notice. In the event Lender or Agents institute an action to recover any Collateral or seek recovery of any Collateral by way of pre-judgment remedy, Borrower and each Obligor waives the posting of any bond which might otherwise be required.

     (c) Lender may apply the cash proceeds of Collateral actually received by Lender or Agents from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Lender may elect, whether or not then due. Borrower and each Obligor shall remain liable to Lender for the payment of any deficiency with

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interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including legal costs and expenses.

     (d) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default, and while such Default or Event of Default or event is continuing, Lender may, at its option, without notice, (i) cease making Revolving Loans or arranging Letter of Credit Accommodations or reduce the lending formulas or amounts of Revolving Loans and Letter of Credit Accommodations available to Borrower and/or (ii) terminate any provision of this Agreement providing for any future Revolving Loans or Letter of Credit Accommodations to be made by Lender to Borrower.

     (e) Borrower shall pay all costs, charges and expenses incurred by Lender, Agents or any nominee or agent of Lender or Agents, whether directly or for services rendered (including reasonable auditor’s costs and legal expenses) in enforcing this Agreement or any other Financing Agreement and in enforcing or collecting Obligations and all such expenses together with any money owing as a result of any borrowing permitted hereby shall be a charge on the proceeds of realization and shall be secured hereby.

SECTION 10 JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

10.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver

     (a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois (without giving effect to principles of conflicts of law) except to the extent that the law of another jurisdiction is specified in a Financing Agreement to be the governing law for that Financing Agreement.

     (b) Borrower, Obligors, Lender and US Collateral Agent irrevocably consent and submit to the non-exclusive jurisdiction of the courts of Illinois and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender and/or Agents shall have the right to bring any action or proceeding against Borrower, Obligors or their property in the courts of any other jurisdiction which Lender and/or Agents deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce their rights against Borrower, Obligors or their property).

     (c) To the extent permitted by law, Borrower and each Obligor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed five (5) days after

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the same shall have been so deposited in the US mails, or, at Lender’s or Agents’ option, by service upon Borrower or any Obligor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Borrower and applicable Obligor shall appear in answer to such process, failing which Borrower and such Obligor shall be deemed in default and judgment may be entered by Lender or Agents against Borrower or such Obligor for the amount of the claim and other relief requested.

     (d) BORROWER, OBLIGORS, LENDER AND US COLLATERAL AGENT EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, OBLIGORS, LENDER AND US COLLATERAL AGENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER, OBLIGORS, LENDER AND/OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     (e) Neither Lender nor Agents shall have any liability to Borrower or any Obligor (whether in tort, contract, equity or otherwise) for losses suffered by Borrower or any Obligor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement or any other Financing Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and Agents, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, each of Lender and Agents shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement or any other Financing Agreement.

     (f) Borrower and each Obligor hereby expressly waives all rights and notice and hearing of any kind prior to the exercise of rights by Lender or Agents while an Event of Default exists, to repossess the Collateral with judicial process or to replevy, attach or levy upon the Collateral or other security for the Obligations. Borrower and each Obligor waives the posting of any bond otherwise required of Lender or Agents in connection with any judicial process or proceeding to obtain possession of, replevy, attach or levy upon the Collateral or other security for the Obligations, to enforce any judgment or other court order entered in favor of Lender or Agents, or to enforce by specific performance, temporary restraining order, preliminary or permanent injunction, this Agreement or any other Financing Agreement.

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10.2 Waiver of Notices

          Borrower and each Obligor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and commercial paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on Borrower or any Obligor which Lender or Agents may elect to give shall entitle Borrower or any Obligor to any other or further notice or demand in the same, similar or other circumstances.

10.3 Amendments and Waivers

          Neither this Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent, and as to amendments, as also signed by an authorized officer of Borrower and each Obligor. Neither Lender nor Agents shall, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender or an Agent, as applicable. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or an Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Lender or an Agent would otherwise have on any future occasion, whether similar in kind or otherwise.

10.4 Waiver of Counterclaims

          Borrower and each Obligor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other than compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

10.5 Indemnification

          Borrower and each Obligor shall indemnify and hold Lender, Agents and their respective directors, agents, employees and counsel, harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrower and each Obligor shall pay the maximum portion which it is permitted to pay under applicable law to Lender and Agents in satisfaction of indemnified matters under this Section. The foregoing indemnity shall survive the payment of the Obligations and the

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termination of this Agreement. To the extent that any person that is entitled to the benefit of the indemnity set forth in this Section is not a party hereto, Lender shall hold the benefit to which such person is entitled hereunder in trust for and on behalf of such person. Notwithstanding the foregoing, Borrower and each Obligor shall have no obligation hereunder to the extent of any liability resulting from the negligence or willful misconduct of Lender or other Person referred to herein or with respect to Hazardous Materials deposited on any property after it is no longer owned, possessed or controlled by Borrower or any Obligor.

SECTION 11 TERM OF AGREEMENT; MISCELLANEOUS

11.1 Term

     (a) This Agreement and the other Financing Agreements are effective as of the respective dates thereof set forth on the respective first pages thereof and shall continue in full force and effect for a term ending on October 31, 2012 (the “Termination Date”), unless sooner terminated pursuant to the terms hereof. Lender or Borrower may terminate this Agreement and the other Financing Agreements effective on the Termination Date by giving to the other party prior written notice; provided, that, this Agreement and all other Financing Agreements must be terminated simultaneously. Upon the effective date of termination of the Financing Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid Obligations (except under or in connection with any Swap Agreement) and shall furnish cash collateral to Lender in such amounts as Lender determines are necessary to secure Lender from loss, cost, damage or expense, including legal fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations, outstanding Swap Agreements and checks or other payments provisionally credited to the Obligations and/or as to which Lender has not yet received final and indefeasible payment. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in US Dollars to such bank account of Lender, as Lender may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrower to the bank account designated by Lender are received in such bank account later than 12:00 noon, Chicago time.

     (b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower and each Obligor of its respective duties, obligations and covenants under this Agreement, the other Financing Agreements and outstanding Swap Agreements until all Obligations have been fully and finally discharged and paid, and Agents’ and/or Lender’s continuing Lien in the Collateral and the rights and remedies of Lender and Agents hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid.

     (c) If for any reason this Agreement is terminated prior to the end of the then current term of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Lender’s lost profits as a result thereof, Borrower agrees to pay to Lender, upon the effective date of such termination, an early termination fee in the amount set forth below if such termination is effective in the period indicated:

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Amount	Period
1.00% of Maximum Credit	From the date hereof to and including the first anniversary of the date hereof
0.50% of Maximum Credit	After the first anniversary of the date hereof to and including the second anniversary of the date hereof
0.25% of Maximum Credit	At any time after the second anniversary of the date hereof

          Such early termination fee shall be presumed to be the amount of damages sustained by Lender as a result of such early termination and Borrower agrees that it is reasonable under the circumstances currently existing. In addition, Lender shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Section 9.1(g) and Section 9.1(h) hereof, even if Lender does not exercise its right to terminate this Agreement, but elects, at its option, to provide financing to Borrower or permit the use of cash collateral under any applicable reorganization or insolvency legislation. The early termination fee provided for in this Section 11.1 shall be deemed included in the Obligations.

11.2 Notices

          All notices, requests and demands hereunder shall be in writing and (a) made to US Collateral Agent and/or Lender at its address set forth below and to Borrower and each Obligor at its chief executive office set forth below, or to such other address as one party may designate by written notice to the others in accordance with this provision, and (b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing.

11.3 Partial Invalidity

          If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

11.4 Successors

          This Agreement and the other Financing Agreements shall be binding upon and inure to the benefit of and be enforceable by Agents, Lender, Borrower, Obligors and their respective successors and assigns, except that Borrower and each Obligor may not assign its rights under this Agreement or the other Financing Agreements without the prior written consent of Lender. Agents and/or Lender may, after written notice to Borrower, assign its rights and delegate its obligations under this Agreement and the other Financing Agreements and further

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may assign, or sell participations in, all or any part of the Revolving Loans, the Letter of Credit Accommodations or any other interest herein to another financial institution or other person, provided that such assignment or participation, as applicable, does not create any withholding tax obligations of Borrower; and upon the completion of any such assignment or participation, as applicable, such assignee or participant shall have, to the extent of such assignment or participation, the same rights and benefits as it would have if it were Lender and/or Agent, as applicable, hereunder, subject to the terms of such assignment or participation.

11.5 Entire Agreement

          This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

11.6 Headings

          The division of this Agreement into Sections and the insertion of headings and a table of contents are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

11.7 Judgment Currency

          To the extent permitted by applicable law, the obligations of Borrower in respect of any amount due under this Agreement shall, notwithstanding any payment in any other currency (the “Other Currency”) (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the currency in which it is due (the “Agreed Currency”) that Lender may, in accordance with normal banking procedures, purchase with the sum paid in the Other Currency (after any premium and costs of exchange) on the Business Day immediately after the day on which Lender receives the payment. If the amount in the Agreed Currency that may be so purchased for any reason falls short of the amount originally due, Borrower shall pay all additional amounts, in the Agreed Currency, as may be necessary to compensate for the shortfall. Any obligation of Borrower not discharged by that payment shall, to the extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided in this Section, continue in full force and effect.

11.8 Amended and Restatement; No Novation

          This Agreement amends and restates the Second Amended and Restated Loan Agreement. Any provision hereof which differs from or is inconsistent with a provision of the Second Amended and Restated Loan Agreement constitutes an amendment to the Second Amended and Restated Loan Agreement with each such amendment being effective as and from the date hereof. The provisions of the Second Amended and Restated Loan Agreement as amended hereby have been consolidated and restated in this Agreement. This Agreement will

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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not discharge or constitute a novation of any debt, obligation, covenant or agreement contained in the Second Amended and Restated Loan Agreement or any of the other Financing Agreements but same shall remain in full force and effect save to the extent same are amended by the provisions in this Agreement.

11.9 Confirmation of Existing Security and Existing Security held for Obligations

     (a) Borrower and each Obligor acknowledges and confirms that, notwithstanding the execution of this Agreement, the Merger, the terms of any Financing Agreements or any other matter, each of the Financing Agreements to which it is a party remains in full force and effect and has not been terminated, discharged or released and constitutes its legal, valid and binding obligation to the extent a party thereto enforceable against it to the extent a party thereto in accordance with its terms except as the same is limited by bankruptcy, insolvency or similar laws affecting creditors’ rights generally and the discretion of the court as to the granting of equitable remedies.

     (b) Borrower and each Obligor agrees that Agents, as applicable, holds the security interests, mortgages and charges created and granted under the Financing Agreements for and on behalf of the Secured Parties to secure the Obligations and Lender shall apply the monetary proceeds of collections or of realization upon any Collateral in accordance with Section 5.4 hereof.

     IN WITNESS WHEREOF, US Collateral Agent, Lender, Borrower and Obligors have caused these presents to be duly executed as of the day and year first above written.

US COLLATERAL AGENT and LENDER		BORROWER
WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)		MAD CATZ, INC.
By:	/s/ Bruno Mello	By:	/s/ Darren Richardson
	Bruno Mello
Title:	Assistant Vice President	Title:
	Wachovia Capital Finance of Canada

Address:	Chief Executive Office:
141 Adelaide Street West	7480 Mission Valley Road
Suite 1500	Suite 101
Toronto, ON M5H 3L5	San Diego, California 92108
Canada	USA
Fax: (416) 364-8165	Fax: (619) 683-6839

THIRD AMENDED AND RESTATED LOAN AGREEMENT

OBLIGOR		OBLIGOR
MAD CATZ INTERACTIVE, INC.		1328158 ONTARIO INC.
By:	/s/ Darren Richardson	By:	/s/ Darren Richardson
Title:		Title:

Address:	Address:
PO Box 747	PO Box 747
BCE Place	BCE Place
181 Bay Street	181 Bay Street
Suite 2500	Suite 2500
Toronto, Ontario M5J 2T7	Toronto, Ontario M5J 2T7
Canada	Canada
Fax: (619) 683-6839	Fax: (619) 683-6839

OBLIGOR		OBLIGOR
WINKLER ATLANTIC HOLDINGS LIMITED		MAD CATZ EUROPE LIMITED
By:	/s/ Darren Richardson	By:	/s/ Darren Richardson
Title:		Title:

Address:	Address:
7480 Mission Valley Road	Suite 1E
Suite 101	Gledhow Mount Mansion
San Diego, California 92108	Roxholme Grove
USA	Leeds, West Yorkshire LS7 4JJ
Fax: (619) 683-6839	United Kingdom
	Fax: (619) 683-6839

THIRD AMENDED AND RESTATED LOAN AGREEMENT

OBLIGOR		OBLIGOR
MAD CATZ INTERACTIVE ASIA LIMITED		FX UNLIMITED, INC.
By:	/s/ Darren Richardson	By:	/s/ Darren Richardson
Title:		Title:

Address:	Address:
Unit Nos. 1717-1721	7480 Mission Valley Road
Level 17, Tower II	Suite 101
Grand Central Plaza	San Diego, California 92108
138 Shatin Rural Committee Road	USA
Shatin, New Territories, Hong Kong	Fax: (619) 683-6839
Fax: (619) 683-6839

OBLIGOR
SAITEK ELEKTRONIK VERTRIEBS GMBH
By:	/s/ Stefan Woger
Title:

Address:

Landsberger Strasse 400
81241 Munich
Germany
Fax: (619) 683-6839

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Exhibit A

Fixed Charge Coverage Ratio

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Exhibit B

Information Certificates of Borrower and Obligors

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Exhibit C

Closing Checklist

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Exhibit D

Corporate Structure Chart

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 7.4

Existing Liens

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 7.7

Non-Compliance with Agreements

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 7.8

Bank Accounts

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 7.14

License Agreements

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 7.16

MCIA Fixed Assets

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 8.6(g)

Form of Compliance Certificate

MAD CATZ, INC.

Date:                     ,                     .

     This Compliance Certificate (this “Certificate”) is given by MAD CATZ, INC. (“Borrower”) pursuant to Section 8.6(g) of the Third Amended and Restated Loan Agreement dated as of June 23, 2009 (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “Loan Agreement”) between Wachovia Capital Finance Corporation (Central) (“Lender”), Borrower and Obligors. Capitalized terms used herein without definition shall have the meanings set forth in the Loan Agreement.

     The officer executing this Certificate is the                                          of Borrower, and as such is duly authorized to execute and deliver this Certificate on behalf of Borrower. By so executing this Certificate, Borrower hereby certifies to Lender that:

(a)	the financial statements delivered with this Certificate comply with all requirements of the Loan Agreement;
(b)	Borrower has reviewed the relevant terms of the Financing Agreements and the condition of the Obligors and their subsidiaries;
(c)	Borrower is in compliance with all financial covenants set forth in Sections 8.13 and 8.20 of the Loan Agreement, as demonstrated by the calculations of such covenants set forth in the Excel spreadsheets attached hereto and as indicated below;

	Covenant	Compliance
(i)	Section 8.13 of Credit Agreement — Fixed Charge Coverage Ratio	Yes/No
(ii)	Section 8.20 of Credit Agreement — Software Expenditures	Yes/No

(d) no Default or Event of Default exists, except as set forth below, which includes a description of the nature and status and period of existence of such Default or Event of Default and what action Borrower has taken, and is undertaking and proposes to take with respect thereto.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

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     IN WITNESS WHEREOF, Borrower has caused this Certificate to be executed by                                                              of Borrower this ___ day of                     , 20___.

MAD CATZ, INC.

By:

Name:

Title:

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 8.9

Existing Indebtedness

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

Schedule 8.10

Existing Loans, Advances and Guarantees

See Attached.

THIRD AMENDED AND RESTATED LOAN AGREEMENT

EX-10.23

Exhibit 10.23

GENERAL SECURITY AGREEMENT

     This General Security Agreement (“Agreement”) dated June 23, 2009 is by Winkler Atlantic Holdings Limited, a British Virgin Islands business company (“Debtor”), in favor of Wachovia Capital Finance Corporation (Central), an Illinois corporation, as US Collateral Agent for and on behalf of the Secured Parties and as Lender.

W I T N E S S E T H

     WHEREAS, US Collateral Agent and Lender have entered into a Third Amended and Restated Loan Agreement (as defined below) with Mad Catz Inc., a Delaware corporation (“Borrower”), and Obligors pursuant to which Lender has provided certain financial accommodations to Borrower;

     WHEREAS, Debtor has executed and delivered or is about to execute and deliver to US Collateral Agent and Lender a guarantee (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “Guarantee”) in favor of US Collateral Agent and Lender pursuant to which Debtor absolutely and unconditionally guarantees to US Collateral Agent and Lender the payment and performance of all now existing and hereafter arising obligations, liabilities and indebtedness of Borrower and Obligors; and

     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

     For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

     1.1 “Accounts” shall mean all present and future rights of Debtor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

     1.2 “Equipment” shall mean all of Debtor’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment and computer hardware and software, whether owned or licensed, and including embedded software, vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

     1.3 “Event of Default” shall have the meaning set forth in Section 5.1 hereof.

     1.4 “Financing Agreements” shall mean, collectively, the Third Amended and Restated Loan Agreement, this Agreement and all notes, guarantees, security agreements and

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other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower, Debtor or any Obligor in connection with the Third Amended and Restated Loan Agreement, the Original Loan Agreement, the First Amended and Restated Loan Agreement, the Amended First Amended and Restated Loan Agreement and the Second Amended and Restated Loan Agreement excluding any Swap Agreements, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

     1.5 “Guaranteed Obligations” shall have the meaning given to it in the Guarantee.

     1.6 “Information Certificate” shall mean the Information Certificate of Debtor constituting Exhibit A hereto containing material information with respect to Debtor, its business and assets provided by or on behalf of Debtor to Lender and US Collateral Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

     1.7 “Inventory” shall mean all of Debtor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Debtor as lessor; (b) are held by Debtor for sale or lease or to be furnished under a contract of service; (c) are furnished by Debtor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

     1.8 “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrower and Debtor.

     1.9 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of Debtor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of Debtor and other contract rights, chattel paper, instruments, notes, and other forms of obligations owing to Debtor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Debtor or to or for the benefit of any third person (including loans or advances to any affiliates or subsidiaries of Debtor) or otherwise associated with any Accounts, Inventory or general intangibles of Debtor (including choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Debtor in connection with the termination of any employee benefit plan and any other amounts payable to Debtor from any employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Debtor is a beneficiary).

     1.10 “Third Amended and Restated Loan Agreement” shall mean the Third Amended and Restated Loan Agreement dated June 23, 2009 by and between Borrower, Obligors, Debtor, US Collateral Agent and Lender, as amended, modified, supplemented, extended, renewed, restated or replaced from time to time.

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SECTION 2. GRANT OF SECURITY INTEREST

     2.1 Grant of Security Interest. To secure payment and performance of all Guaranteed Obligations, Debtor hereby grants to US Collateral Agent for and on behalf of the Secured Parties a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to US Collateral Agent for and on behalf of the Secured Parties as security, all personal property and interests in property and fixtures of Debtor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Guaranteed Obligations at any time granted to or held or acquired by US Collateral Agent, collectively, the “Collateral”) including:

(a)	all Accounts;
(b)	all general intangibles, including all Intellectual Property;
(c)	all goods, including Inventory and Equipment;
(d)	all chattel paper (including all tangible and electronic chattel paper);
(e)	all instruments (including all promissory notes);
(f)	all documents;
(g)	all deposit accounts;
(h)	all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;
(i)	all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;
(j)	all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of Debtor now or hereafter held or received by or in transit to Lender, US Collateral Agent or its affiliates or at any other depository or other institution from or for the account of Debtor, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

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(k)	all commercial tort claims, including those identified in the Information Certificate;
(l)	to the extent not otherwise described above, all Receivables;
(m)	all Records; and
(n)	all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

Notwithstanding the foregoing, the Collateral shall not include any Swap Agreement entered into by Debtor.

     2.2 Perfection of Security Interests.

(a) Debtor irrevocably and unconditionally authorizes US Collateral Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming US Collateral Agent or its designee as the secured party and Debtor as debtor, as US Collateral Agent may require, and including any other information with respect to Debtor or otherwise required by part 5 of Article 9 of the UCC of such jurisdiction as US Collateral Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Debtor hereby ratifies and approves all financing statements naming US Collateral Agent or its designee as secured party and Debtor as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of US Collateral Agent prior to the date hereof and ratifies and confirms the authorization of US Collateral Agent to file such financing statements (and amendments, if any). Debtor hereby authorizes US Collateral Agent to adopt on behalf of Debtor any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming US Collateral Agent or its designee as the secured party and Debtor as debtor includes assets and properties of Debtor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by Debtor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shall Debtor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming US Collateral Agent or its designee as secured party and Debtor as debtor.

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(b) Debtor does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that Debtor shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Debtor shall promptly notify US Collateral Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of Debtor (including by any agent or representative), Debtor shall deliver, or cause to be delivered to US Collateral Agent, all tangible chattel paper and instruments that Debtor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as US Collateral Agent may from time to time specify, in each case except as US Collateral Agent may otherwise agree. At US Collateral Agent’s option, Debtor shall, or US Collateral Agent may at any time on behalf of Debtor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to US Collateral Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wachovia Capital Finance Corporation (Central) and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c) In the event that Debtor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), Debtor shall promptly notify US Collateral Agent thereof in writing. Promptly upon US Collateral Agent’s request, Debtor shall take, or cause to be taken, such actions as US Collateral Agent may reasonably request to give US Collateral Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d) Debtor does not have any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Debtor shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied: (i) US Collateral Agent shall have received not less than five (5) Business Days prior written notice of the intention of Debtor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to US Collateral Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Debtor is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to US Collateral Agent, and (iii) on or before the opening of such deposit account, Debtor shall as US Collateral Agent may specify either (A) deliver to US Collateral Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by Debtor and the bank at which such deposit account is opened and maintained or

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(B) arrange for US Collateral Agent to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to US Collateral Agent. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Debtor’s salaried employees.

(e) Debtor does not own or hold, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

          (i) In the event that Debtor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, Debtor shall promptly endorse, assign and deliver the same to US Collateral Agent, accompanied by such instruments of transfer or assignment duly executed in blank as US Collateral Agent may from time to time specify. If any securities, now or hereafter acquired by Debtor are uncertificated and are issued to Debtor or its nominee directly by the issuer thereof, Debtor shall immediately notify US Collateral Agent thereof and shall as US Collateral Agent may specify, either (A) cause the issuer to agree to comply with instructions from US Collateral Agent as to such securities, without further consent of Debtor or such nominee, or (B) arrange for US Collateral Agent to become the registered owner of the securities.

          (ii) Debtor shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) US Collateral Agent shall have received not less than five (5) Business Days prior written notice of the intention of Debtor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to US Collateral Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom Debtor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be acceptable to US Collateral Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Debtor shall as US Collateral Agent may specify either (1) execute and deliver, and cause to be executed and delivered to US Collateral Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Debtor and such securities intermediary or commodity intermediary or (2) arrange for US Collateral Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to US Collateral Agent.

(f) Debtor is not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Debtor

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	shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof, Debtor shall promptly notify US Collateral Agent thereof in writing. Debtor shall immediately, as US Collateral Agent may specify, either (i) deliver, or cause to be delivered to US Collateral Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to US Collateral Agent, consenting to the assignment of the proceeds of the letter of credit to US Collateral Agent by Debtor and agreeing to make all payments thereon directly to US Collateral Agent or as US Collateral Agent may otherwise direct or (ii) cause US Collateral Agent to become, at Debtor’s expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).
(g)	Debtor has no commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that Debtor shall at any time after the date hereof have any commercial tort claims, Debtor shall promptly notify US Collateral Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by Debtor to US Collateral Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by Debtor to US Collateral Agent shall be deemed to constitute such grant to US Collateral Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of US Collateral Agent provided in Section 2.2(a) hereof or otherwise arising by the execution by Debtor of this Agreement or any of the other Financing Agreements, US Collateral Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming US Collateral Agent or its designee as secured party and Debtor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, Debtor shall promptly upon US Collateral Agent’s request, execute and deliver, or cause to be executed and delivered, to US Collateral Agent such other agreements, documents and instruments as US Collateral Agent may require in connection with such commercial tort claim.
(h)	Debtor does not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of Debtor permitted herein in the ordinary course of business of Debtor in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Debtor shall promptly notify US Collateral Agent thereof in writing. Promptly upon US Collateral

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Agent’s request, Debtor shall deliver to US Collateral Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and Debtor.

(i)

Debtor shall take any other actions reasonably requested by Lender or US Collateral Agent from time to time to cause the attachment, perfection and first priority of, and the ability of Lender and US Collateral Agent to enforce, the security interest of US Collateral Agent in any and all of the Collateral, including (i) executing, delivering and, where appropriate, filing, financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that Debtor’s signature thereon is required therefor, (ii) causing US Collateral Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of US Collateral Agent to enforce, the security interest of US Collateral Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of US Collateral Agent to enforce, the security interest of US Collateral Agent in such Collateral, (iv) obtaining the consents and approvals of any governmental authority or third party including any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

SECTION 3. REPRESENTATIONS AND WARRANTIES

Debtor hereby represents and warrants to Lender and US Collateral Agent the representations and warranties set out in Section 7 of the Third Amended and Restated Loan Agreement (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Revolving Loans and providing Letter of Credit Accommodations by Lender to Borrower.

SECTION 4. AFFIRMATIVE AND NEGATIVE COVENANTS

Debtor is hereby bound by the covenants set out in Section 8 of the Third Amended and Restated Loan Agreement. In addition:

(a)

Debtor shall enter into its register of charges such particulars regarding the charge created by this Agreement as are specified in Section 162 of the BVI Business Companies Act, 2004 (as the same may be amended from time to time) or any similar provision in any statute pursuant to which Debtor is incorporated or existing from time to time and submit a copy of such revised register of charges to its registered agent in the British Virgin Islands to keep at its registered office in the British Virgin Islands; and

(b)

Debtor agrees that it shall not grant a charge over its assets and properties ranking equally or in priority to the charge hereunder granted in favour of Agent.

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SECTION 5. EVENTS OF DEFAULT AND REMEDIES

     5.1 Events of Default. The occurrence or existence of any Event of Default under the Third Amended and Restated Loan Agreement is referred to herein individually as an “Event of Default”, and collectively as “Events of Default”.

     5.2 Remedies.

(a)

At any time an Event of Default exists or has occurred and is continuing, Lender and US Collateral Agent shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by Debtor, Borrower or any Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Lender and US Collateral Agent hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Lender’s or US Collateral Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by Debtor of this Agreement or any of the other Financing Agreements. Lender or US Collateral Agent may, at any time or times, proceed directly against Debtor, Borrower or any Obligor to collect the Guaranteed Obligations (except under or in connection with any Swap Agreement) without prior recourse to any Obligor, Borrower or any of the Collateral.

(b)

Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Lender and US Collateral Agent may, in their discretion and, without limitation:

          (i) accelerate the payment of all Guaranteed Obligations (except under or in connection with any Swap Agreement) and demand immediate payment thereof to Lender (provided, that, upon the occurrence of any Event of Default described in Sections 9.1(g) and 9.1(h) of the Third Amended and Restated Loan Agreement, all Guaranteed Obligations (except under or in connection with any Swap Agreement) shall automatically become immediately due and payable);

          (ii) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral;

          (iii) require Debtor, at Debtor’s expense, to assemble and make available to Lender and US Collateral Agent any part or all of the Collateral at any place and time designated by Lender or Agent;

          (iv) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral;

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          (v) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose; and/or

          (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Lender or US Collateral Agent or elsewhere) at such prices or terms as Lender or US Collateral Agent may deem reasonable, for cash, upon credit or for future delivery, with Lender or US Collateral Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Debtor, which right or equity of redemption is hereby expressly waived and released by Debtor.

If any of the Collateral is sold or leased by Lender or US Collateral Agent upon credit terms or for future delivery, the Guaranteed Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Lender or US Collateral Agent.

If notice of disposition of Collateral is required by law, ten (10) days prior notice by Lender or US Collateral Agent to Debtor designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Debtor waives any other notice.

In the event Lender or US Collateral Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Debtor waives the posting of any bond which might otherwise be required.

(c) Lender or US Collateral Agent may, at any time or times that an Event of Default exists or has occurred and is continuing, enforce Debtor’s rights against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Lender or US Collateral Agent may at such time or times:

          (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to US Collateral Agent and that US Collateral Agent has a security interest therein and Lender or US Collateral Agent may direct any or all account debtors, secondary obligors and other obligors to make payment of Receivables directly to Lender or US Collateral Agent;

          (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Guaranteed Obligations;

          (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Lender and US Collateral Agent shall not be liable for their failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto; and

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          (iv) take whatever other action Lender or US Collateral Agent may deem necessary or desirable for the protection of its interests.

At any time that an Event of Default exists or has occurred and is continuing, at Lender’s or US Collateral Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to US Collateral Agent and are payable directly and only to Lender or US Collateral Agent and Debtor shall deliver to Lender or US Collateral Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Lender or US Collateral Agent may require.

In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Debtor shall, upon Lender’s or US Collateral Agent’s request, hold the returned Inventory in trust for Lender and US Collateral Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Lender’s or US Collateral Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Lender’s or US Collateral Agent’s prior written consent.

(d) To the extent that applicable law imposes duties on Lender or US Collateral Agent to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), Debtor acknowledges and agrees that it is not commercially unreasonable for Lender or US Collateral Agent:

          (i) to fail to incur expenses reasonably deemed significant by Lender or US Collateral Agent to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition;

          (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or, if not required by other law, to fail to obtain consents of any governmental authority or other third party for the collection or disposition of Collateral to be collected or disposed of;

          (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral;

          (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists;

          (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature;

          (vi) to contact other persons, whether or not in the same business as Debtor for expressions of interest in acquiring all or any portion of the Collateral;

          (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature;

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          (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets;

          (ix) to dispose of assets in wholesale rather than retail markets;

          (x) to disclaim disposition warranties;

          (xi) to purchase insurance or credit enhancements to insure Lender and US Collateral Agent against risks of loss, collection or disposition of Collateral or to provide to Lender or US Collateral Agent a guaranteed return from the collection or disposition of Collateral; or

          (xii) to the extent deemed appropriate by Lender or US Collateral Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist them in the collection or disposition of any of the Collateral.

Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Lender or US Collateral Agent would not be commercially unreasonable in Lender’s or US Collateral Agent’s exercise of remedies against the Collateral and that other actions or omissions by Lender or US Collateral Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to Debtor or to impose any duties on Lender or US Collateral Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

(e)

For the purpose of enabling Lender or US Collateral Agent to exercise the rights and remedies hereunder, Debtor hereby grants to Lender and US Collateral Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to Debtor) to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by Debtor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

(f)

Lender may apply the cash proceeds of Collateral actually received by Lender or US Collateral Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Guaranteed Obligations, in whole or in part and in such order as Lender may elect, whether or not then due (except under or in connection with any Swap Agreement). Debtor shall remain liable to Lender and US Collateral Agent for the payment of any deficiency with interest at the highest rate provided for in the Third Amended and Restated Loan Agreement and all costs and expenses of collection or enforcement, including attorneys’ fees and legal expenses.

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SECTION 6. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

     6.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a)	The validity, interpretation and enforcement of this Agreement and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.
(b)	Debtor, Lender and US Collateral Agent irrevocably consent and submit to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois, whichever Lender or US Collateral Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender and US Collateral Agent shall have the right to bring any action or proceeding against Debtor or its property in the courts of any other jurisdiction which they deem necessary or appropriate in order to realize on the Collateral or to otherwise enforce their rights against Debtor or its property).
(c)	Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth below and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender’s or US Collateral Agent’s option, by service upon Debtor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Debtor shall appear in answer to such process, failing which Debtor shall be deemed in default and judgment may be entered by Lender or US Collateral Agent against Debtor for the amount of the claim and other relief requested.
(d)	DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF DEBTOR, LENDER AND US COLLATERAL AGENT IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED

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HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT DEBTOR, LENDER OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF DEBTOR, LENDER AND US COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e)

Lender and US Collateral Agent shall not have any liability to Debtor (whether in tort, contract, equity or otherwise) for losses suffered by Debtor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and US Collateral Agent that the losses were the result of acts or omissions of Lender and US Collateral Agent constituting gross negligence or willful misconduct. In any such litigation, each of Lender and US Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement and the other Financing Agreements.

     6.2 Waiver of Notices. Debtor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and commercial paper, included in or evidencing any of the Guaranteed Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Guaranteed Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on Debtor which Lender or US Collateral Agent may elect to give shall entitle Debtor to any other or further notice or demand in the same, similar or other circumstances.

     6.3 Amendments and Waivers. Neither this Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent, and as to amendments, as also signed by an authorized officer of Debtor. Lender and US Collateral Agent shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender or US Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or US Collateral Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which either would otherwise have on any future occasion, whether similar in kind or otherwise.

     6.4 Waiver of Counterclaims. Debtor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any

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action or proceeding with respect to this Agreement, the Guaranteed Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

     6.5 Indemnification. Debtor shall indemnify and hold Lender, US Collateral Agent, Secured Parties, and their respective directors, agents, employees and counsel (collectively, “Indemnified Parties”), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Debtor shall pay the maximum portion which it is permitted to pay under applicable law to Indemnified Parties in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, Debtor shall not assert, and Debtor hereby waives, any claim against Indemnified Parties, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of the Third Amended and Restated Loan Agreement.

SECTION 7. MISCELLANEOUS

     7.1 Interpretative Provisions.

(a)	All terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.
(b)	Capitalized terms used but not defined herein shall have the meanings given to them in the Third Amended and Restated Loan Agreement.
(c)	All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.
(d)	All references to Debtor, Lender, US Collateral Agent, Borrower, Secured Parties and Indemnified Parties herein, or to any other person herein, shall include their respective successors and assigns.
(e)	The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

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(f)	The word “including” when used in this Agreement shall mean “including, without limitation”.
(g)	All references to the term “good faith” used herein when applicable to Lender or US Collateral Agent shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned. Debtor shall have the burden of proving any lack of good faith on the part of Lender or US Collateral Agent alleged by Debtor at any time.
(h)	An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 6.3 or is cured in a manner satisfactory to Lender and US Collateral Agent, if such Event of Default is capable of being cured as determined by Lender and US Collateral Agent.
(i)	In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”, the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including”.
(j)	Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.
(k)	The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.
(l)	This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.
(m)	This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Lender and US Collateral Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Lender and US Collateral Agent merely because of Lender’s and US Collateral Agent’s involvement in their preparation.

     7.2 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) Business Day after sending; and if by certified mail, return receipt

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requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Debtor:	7480 Mission Valley Road, Suite 101
	San Diego, California
	92108
	Attention: Whitney Peterson
	Telephone No.: (619) 683-9830
	Telecopy No.: (619) 683-9829
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	PO Box 92
	Road Town Tortola
	British Virgin Islands
	VG 1110
	Attention: Colette Corea Saunders
	Telephone No.: 284-494-2204
	Telecopy No.: 284-494-5535
If to Lender and US Collateral Agent:	Wachovia Capital Finance Corporation (Central)
	150 South Wacker Drive, Suite 2200
	Chicago, Illinois 60606-4401
	Attention: Portfolio Manager
	Telephone No.: 312-332-0420
	Telecopy No.: 312-332-0424

     7.3 Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

     7.4 Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon Debtor and its successors and assigns and inure to the benefit of and be enforceable by Lender and US Collateral Agent and their respective successors and assigns, except that Debtor may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Lender and US Collateral Agent.

     7.5 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral

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or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

     IN WITNESS WHEREOF, Debtor has caused these presents to be duly executed as of the day and year first above written.

WINKLER ATLANTIC HOLDINGS LIMITED
By:	/s/ Darren Richardson
	Name:
	Title:

By:	/s/ Stewart Halpern
	Name:
	Title:

Exhibit A

Information Certificate

See attached.

EX-10.24

Exhibit 10.24

GUARANTEE

     THIS GUARANTEE (“Guarantee”), dated June 23, 2009, is by Winkler Atlantic Holdings Limited, a British Virgin Islands business company (“Guarantor”), with its chief executive office at 7480 Mission Valley Road, Suite 101, San Diego, California, 92108 and registered office at PO Box 92, Road Town Tortola, British Virgin Islands VG 1110 in favor of Wachovia Capital Finance Corporation (Central), an Illinois corporation, as US Collateral Agent for and on behalf of the Secured Parties and as Lender, having an office at 150 South Wacker Drive, Suite 2200, Chicago, Illinois 60606-4202.

W I T N E S S E T H :

     WHEREAS, US Collateral Agent, Lender and Mad Catz, Inc., a Delaware corporation (“Borrower”), have entered or are about to enter into financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrower as set forth in the Third Amended and Restated Loan Agreement, dated June 23, 2009, by and among US Collateral Agent, Lender, Borrower and Obligors (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Third Amended and Restated Loan Agreement”) and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Guarantee (all of the foregoing, together with the Third Amended and Restated Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

     WHEREAS, due to the close business and financial relationships between Borrower and Guarantor, in consideration of the benefits which will accrue to Guarantor and as an inducement for and in consideration of Lender making loans and advances and providing other financial accommodations to Borrower pursuant to the Third Amended and Restated Loan Agreement and the other Financing Agreements, Guarantor wishes to guarantee the obligations pursuant to the terms hereof;

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees in favor of US Collateral Agent and Lender as follows:

     1. Guarantee.

     (a) Guarantor absolutely and unconditionally guarantees and agrees to be liable for the full and indefeasible payment and performance when due of the following (all of which are collectively referred to herein as the “Guaranteed Obligations”):

(i) all obligations, liabilities and indebtedness of any kind, nature and description of Borrower and/or any Obligor to Lender, any Agent, their respective affiliates and owing to any financial institution under or in connection with a Swap Agreement, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under the Third

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Amended and Restated Loan Agreement, the other Financing Agreements, any Swap Agreement or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Third Amended and Restated Loan Agreement or after the commencement of any case with respect to Borrower or any Obligor under the Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges and expenses related thereto and all other obligations of Borrower or any Obligor to Lender, any Agent, their respective affiliates and such financial institution arising after the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender, any Agent, their respective affiliates and such financial institution; and

(ii)

all expenses (including, without limitation, attorneys’ fees and legal expenses) incurred by Lender, any Agent, their respective affiliates and such financial institution in connection with the preparation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of Borrower’s or any Obligor’s obligations, liabilities and indebtedness as aforesaid, the rights of Lender, any Agent, their respective affiliates and such financial institution in any collateral or under this Guarantee, all other Financing Agreements or Swap Agreements or in any way involving claims by or against Lender, Agent, their respective affiliates and such financial institution directly or indirectly arising out of or related to the relationships between Borrower, Guarantor or any other Obligor and Lender, any Agent, their respective affiliates and such financial institution, whether such expenses are incurred before, during or after the initial or any renewal term of the Third Amended and Restated Loan Agreement, the other Financing Agreements or any Swap Agreement or after the commencement of any case with respect to Borrower or Obligors under the Bankruptcy Code or any similar statute.

     (b) This Guarantee is a guaranty of payment and not of collection. Guarantor agrees that Lender and US Collateral Agent need not attempt to collect any Guaranteed Obligations from Borrower or any other Obligor or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations (except under or in connection with any Swap Agreement) to Lender when due, whether by maturity, acceleration or otherwise, or at any time thereafter. Lender may apply any amounts received in respect of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in part (including attorneys’ fees and legal expenses incurred by Lender or US Collateral Agent with respect thereto or otherwise chargeable to Borrower or Obligors) and in such order as Lender may elect.

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     (c) Payment by Guarantor shall be made to Lender at the office of Lender from time to time on demand as Guaranteed Obligations become due. Guarantor shall make all payments to Lender on the Guaranteed Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. One or more successive or concurrent actions may be brought hereon against Guarantor either in the same action in which Borrower or any other Obligor is sued or in separate actions. In the event any claim or action, or action on any judgment, based on this Guarantee is brought against Guarantor, Guarantor agrees not to deduct, set-off, or seek any counterclaim for or recoup any amounts which are or may be owed by Lender, US Collateral Agent or any other Secured Party to Guarantor.

     (d) Notwithstanding anything to the contrary contained herein, the amount of the obligations payable by Guarantor under this Guarantee shall be the aggregate amount of the Guaranteed Obligations unless a court of competent jurisdiction adjudicates Guarantor’s obligations to be invalid, avoidable or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), in which case the amount of the Guaranteed Obligations payable by Guarantor hereunder shall be limited to the maximum amount that could be guaranteed by Guarantor without rendering such Guarantor’s obligations under this Guarantee invalid, avoidable or unenforceable under such applicable law.

     2. Waivers and Consents.

     (a) Notice of acceptance of this Guarantee, the making of loans and advances and providing other financial accommodations to Borrower and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which Borrower or Obligors are entitled are hereby waived by Guarantor.

     (b) Guarantor also waives notice of and hereby consents to:

(i)

any amendment, modification, supplement, extension, renewal, or restatement of the Third Amended and Restated Loan Agreement and any of the other Financing Agreements, including, without limitation, extensions of time of payment of or increase or decrease in the amount of any of the Guaranteed Obligations, the interest rate, fees, other charges, or any collateral, and the guarantee made herein shall apply to the Third Amended and Restated Loan Agreement and the other Financing Agreements and the Guaranteed Obligations as so amended, modified, supplemented, renewed, restated or extended, increased or decreased;

(ii)

the taking, exchange, surrender and releasing of collateral or guarantees now or at any time held by or available to Lender, US Collateral Agent or any Secured Party for the obligations of Borrower or any Obligor, including, without limitation, the surrender or release by Lender or US Collateral Agent of Guarantor hereunder;

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(iii)	the exercise of, or refraining from the exercise of, any rights against Borrower, Guarantor or any other Obligor or any collateral;
(iv)	the settlement, compromise or release of, or the waiver of any default with respect to, any of the Guaranteed Obligations; and
(v)	any financing by Lender of Borrower under Section 364 of the Bankruptcy Code or consent to the use of cash collateral by Lender under Section 363 of the Bankruptcy Code.

Guarantor agrees that the amount of the Guaranteed Obligations shall not be diminished and the liability of Guarantor hereunder shall not be otherwise impaired or affected by any of the foregoing.

     (c) No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations shall affect, impair or be a defense to this Guarantee, nor shall any other circumstance which might otherwise constitute a defense available to or legal or equitable discharge of Borrower or any Obligor in respect of any of the Guaranteed Obligations, or Guarantor in respect of this Guarantee, affect, impair or be a defense to this Guarantee. Without limitation of the foregoing, the liability of Guarantor hereunder shall not be discharged or impaired in any respect by reason of any failure by Lender or US Collateral Agent to perfect or continue perfection of any lien or security interest in any collateral or any delay by Lender or US Collateral Agent in perfecting any such lien or security interest. As to interest, fees and expenses, whether arising before or after the commencement of any case with respect to Borrower or any Obligor under the Bankruptcy Code or any similar statute, Guarantor shall be liable therefor, even if Borrower’s or such Obligor’s liability for such amounts does not, or ceases to, exist by operation of law. Guarantor acknowledges that Lender and US Collateral Agent has not made any representations to Guarantor with respect to Borrower, any other Obligor or otherwise in connection with the execution and delivery by Guarantor of this Guarantee and Guarantor is not in any respect relying upon Lender or US Collateral Agent or any statements by Lender or US Collateral Agent in connection with this Guarantee.

     (d) Unless and until the indefeasible payment and satisfaction in full of all of the Guaranteed Obligations in immediately available funds and the termination of the financing arrangements of Lender with Borrower, Guarantor hereby irrevocably and unconditionally waives and relinquishes:

(i)	all statutory, contractual, common law, equitable and all other claims against Borrower or any Obligor, any collateral for the Guaranteed Obligations or other assets of Borrower or any other Obligor, for subrogation, reimbursement, exoneration, contribution, indemnification, setoff or other recourse in respect to sums paid or payable to Lender by Guarantor hereunder; and
(ii)	any and all other benefits which Guarantor might otherwise directly or indirectly receive or be entitled to receive by reason of any amounts paid

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by or collected or due from Guarantor, Borrower or any other Obligor upon the Guaranteed Obligations or realized from their property.

     3. Subordination. Payment of all amounts now or hereafter owed to Guarantor by Borrower or any other Obligor is hereby subordinated in right of payment to the indefeasible payment in full to Lender of the Guaranteed Obligations and all such amounts and any security and guarantees therefor are hereby assigned to US Collateral Agent as security for the Guaranteed Obligations.

     4. Acceleration. Notwithstanding anything to the contrary contained herein or any of the terms of any of the other Financing Agreements, the liability of Guarantor for the entire Guaranteed Obligations shall mature and become immediately due and payable (except under or in connection with a Swap Agreement), even if the liability of Borrower or any other Obligor therefor does not, upon the occurrence of any act, condition or event which constitutes an Event of Default.

     5. Account Stated. The books and records of Lender showing the account between Lender and Borrower shall be admissible in evidence in any action or proceeding against or involving Guarantor as prima facie proof of the items therein set forth, and the monthly statements of Lender rendered to Borrower, to the extent to which no written objection is made within thirty (30) days from the date of sending thereof to Borrower, shall be deemed conclusively correct and constitute an account stated between Lender and Borrower and be binding on Guarantor.

     6. Termination. This Guarantee is continuing, unlimited, absolute and unconditional. All Guaranteed Obligations shall be conclusively presumed to have been created in reliance on this Guarantee. Guarantor shall continue to be liable hereunder until one of Lender’s officers actually receives a written termination notice from Guarantor sent to Lender at its address set forth above by certified mail, return receipt requested and thereafter as set forth below. Such notice received by Lender from Guarantor shall not constitute a revocation or termination of this Guarantee as to any other Obligor. Revocation or termination hereof by Guarantor shall not affect, in any manner, the rights of Lender or US Collateral Agent or any obligations or duties of Guarantor under this Guarantee with respect to (a) Guaranteed Obligations which have been created, contracted, assumed or incurred prior to the receipt by Lender of such written notice of revocation or termination as provided herein, including, without limitation, (i) all amendments, extensions, renewals and modifications of such Guaranteed Obligations (whether or not evidenced by new or additional agreements, documents or instruments executed on or after such notice of revocation or termination), (ii) all interest, fees and similar charges accruing or due on and after revocation or termination, and (iii) all attorneys’ fees and legal expenses, costs and other expenses paid or incurred on or after such notice of revocation or termination in attempting to collect or enforce any of the Guaranteed Obligations against Borrower, Guarantor or any other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations which have been created, contracted, assumed or incurred after the receipt by Lender of such written notice of revocation or termination as provided herein pursuant to any contract entered into by Lender or any Secured Party prior to receipt of such notice. The sole effect of such revocation or termination by Guarantor shall be to exclude from this Guarantee the liability of Guarantor for those Guaranteed Obligations arising after the date of

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receipt by Lender of such written notice which are unrelated to Guaranteed Obligations arising or transactions entered into prior to such date. Without limiting the foregoing, this Guarantee may not be terminated and shall continue so long as the Third Amended and Restated Loan Agreement shall be in effect (whether during its original term or any renewal, substitution or extension thereof).

     7. Reinstatement. If after receipt of any payment of, or proceeds of collateral applied to the payment of, any of the Guaranteed Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Guaranteed Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Guarantee shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Guarantor shall be liable to pay to Lender, and does indemnify and hold Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 7 shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section 7 shall survive the termination or revocation of this Guarantee.

     8. Amendments and Waivers. Neither this Guarantee nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent. Lender and US Collateral Agent shall not by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender and US Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or US Collateral Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Lender or US Collateral Agent would otherwise have on any future occasion, whether similar in kind or otherwise.

     9. Corporate Existence, Power and Authority. Guarantor is a corporation duly organized and in good standing under the laws of its state or other jurisdiction of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on the financial condition, results of operation or businesses of Guarantor or the rights of Lender or US Collateral Agent hereunder or under any of the other Financing Agreements. The execution, delivery and performance of this Guarantee is within the corporate powers of Guarantor, have been duly authorized and are not in contravention of law or the terms of the certificates of incorporation, by laws, or other organizational documentation of Guarantor, or any indenture, agreement or undertaking to which Guarantor is a party or by which Guarantor or its property are bound. This Guarantee constitutes the legal, valid and binding obligation of Guarantor enforceable in accordance with its terms.

     10. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

     (a) The validity, interpretation and enforcement of this Guarantee and any dispute arising out of the relationship between Guarantor, Lender and US Collateral Agent, whether in

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contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois but excluding any principles of conflicts of law or other rule of law that would result in the application of the law of any jurisdiction other than the laws of the State of Illinois.

     (b) Guarantor hereby irrevocably consents and submits to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois whichever Lender or US Collateral Agent elects and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Guarantee or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of Guarantor, Lender and US Collateral Agent in respect of this Guarantee or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between Guarantor, Borrower, Obligors, Lender or US Collateral Agent or the conduct of any such persons in connection with this Guarantee, the other Financing Agreements or otherwise shall be heard only in the courts described above (except that Lender and US Collateral Agent shall have the right to bring any action or proceeding against Guarantor or its property in the courts of any other jurisdiction which Lender or US Collateral Agent deems necessary or appropriate in order to realize on collateral at any time granted by Borrower, Obligors or Guarantor to Lender or US Collateral Agent or to otherwise enforce their respective rights against Guarantor or its property).

     (c) Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth above and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender’s or US Collateral Agent’s option, by service upon Guarantor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Guarantor so served shall appear in answer to such process, failing which Guarantor shall be deemed in default and judgment may be entered by Lender or US Collateral Agent against Guarantor for the amount of the claim and other relief requested.

     (d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY OF GUARANTOR, LENDER AND US COLLATERAL AGENT IN RESPECT OF THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF GUARANTOR, LENDER OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS GUARANTEE WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR, LENDER AND US COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

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     (e) Lender and US Collateral Agent shall not have any liability to Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Guarantee, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and US Collateral Agent that the losses were the result of acts or omissions of Lender and US Collateral Agent constituting gross negligence or willful misconduct. In any such litigation, each of Lender and US Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of the Third Amended and Restated Loan Agreement and the other Financing Agreements.

     11. Notices. All notices, requests and demands hereunder shall be in writing and (a) made to Lender, US Collateral Agent and Guarantor at its address set forth above, or to such other address as a party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram, facsimile or pdf transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by certified mail, return receipt requested, five (5) days after mailing.

     12. Partial Invalidity. If any provision of this Guarantee is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Guarantee as a whole, but this Guarantee shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

     13. Entire Agreement. This Guarantee represents the entire agreement and understanding of this parties concerning the subject matter hereof, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

     14. Successors and Assigns. This Guarantee shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Lender, US Collateral Agent and their respective successors, endorsees, transferees and assigns. The liquidation, dissolution or termination of the Guarantor shall not terminate this Guarantee as to such entity or as to any other Obligors.

     15. Construction.

     (a) All references to the term “Guarantor” wherever used herein shall mean Guarantor and its respective successors and assigns (including, without limitation, any receiver, trustee or custodian for Guarantor or any of its respective assets or Guarantor in its capacity as debtor or debtor-in-possession under the Bankruptcy Code).

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     (b) All references to the term “Lender”, “US Collateral Agent” or “Secured Party” wherever used herein shall mean Lender, US Collateral Agent or Secured Party, as applicable, and their respective successors and assigns.

     (c) All references to the term “Borrower” or “Obligor” wherever used herein shall mean Borrower or Obligor, as applicable, and their respective successors and assigns (including, without limitation, any receiver, trustee or custodian for Borrower or Obligor or any of its assets or Borrower or Obligor in its capacity as debtor or debtor-in-possession under the Bankruptcy Code).

     (d) All references to the term “Person” or “person” wherever used herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality of political subdivision thereof.

     (e) All references to the plural shall also mean the singular and to the singular shall also mean the plural.

     (f) Capitalized terms not otherwise defined herein shall have the meanings given to them in the Third Amended and Restated Loan Agreement.

     (g) US Collateral Agent is acting as agent for and on behalf of the Secured Parties.

     16. Counterparts, etc. This Guarantee may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Guarantee by telefacsimile, pdf or other electronic means shall have the same force and effect as the delivery of an original executed counterpart of this Guarantee. Any party delivering an executed counterpart of this Guarantee by telefacsimile, pdf or other electronic means shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Guarantee.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guarantee as of the day and year first above written.

WINKLER ATLANTIC HOLDINGS LIMITED
By:	/s/ Darren Richardson
	Name:
	Title:

By:	/s/ Stewart Halpern
	Name:
	Title:

EX-10.25

Exhibit 10.25

NEGATIVE PLEDGE AGREEMENT

     This Negative Pledge Agreement (“Agreement”) dated June 23, 2009 is by Saitek Elektronik Vertriebs Gmbh, a German corporation (“Debtor”), in favor of Wachovia Capital Finance Corporation (Central), an Illinois corporation, as US Collateral Agent for and on behalf of the Secured Parties and as Lender.

W I T N E S S E T H

     WHEREAS, US Collateral Agent and Lender have entered into a Third Amended and Restated Loan Agreement dated on or about the date hereof (as amended, modified, supplemented, extended, renewed, restated or replaced from time to time, the “Loan Agreement”) with Mad Catz Inc., a Delaware corporation (“Borrower”), and Obligors pursuant to which Lender has provided certain financial accommodations to Borrower;

     WHEREAS, Debtor has executed and delivered or is about to execute and deliver to US Collateral Agent and Lender a guarantee in favor of US Collateral Agent and Lender pursuant to which Debtor absolutely and unconditionally guarantees to US Collateral Agent and Lender the payment and performance of all now existing and hereafter arising obligations, liabilities and indebtedness of Borrower and Obligors; and

     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. NEGATIVE PLEDGE

     1.1 Debtor shall not create, incur, assume or suffer to exist any Lien of any nature whatsoever on any of its assets or properties, including the Collateral, except:

     (a) Liens of Agents and Lender;

     (b) Liens securing the payment of taxes, either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Debtor and with respect to which adequate reserves have been set aside on its books;

     (c) non-consensual statutory Liens (other than Liens securing the payment of taxes) arising in the ordinary course of Debtor’s business to the extent: (i) such Liens secure indebtedness which is not overdue or (ii) such Liens secure indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to Debtor in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books;

     (d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property which do not interfere in any material respect with the use of such real property or ordinary conduct of the business of Debtor as presently conducted thereon or materially impair the value of the real property which may be subject thereto;

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     (e) the Liens set forth on Schedule 7.4 to the Loan Agreement (except to the extent that Lender requires the discharge thereof prior to the advance of the initial Revolving Loans pursuant to the Loan Agreement); and

     (f) Liens to secure Permitted Inter-Company Debt.

SECTION 2. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

     2.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

     (a) The validity, interpretation and enforcement of this Agreement and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of Illinois.

     (b) Debtor, Lender and US Collateral Agent irrevocably consent and submit to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois, whichever Lender or US Collateral Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Lender and US Collateral Agent shall have the right to bring any action or proceeding against Debtor or its property in the courts of any other jurisdiction which they deem necessary or appropriate to enforce their rights against Debtor or its property).

     (c) Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth below and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender’s or US Collateral Agent’s option, by service upon Debtor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Debtor shall appear in answer to such process, failing which Debtor shall be deemed in default and judgment may be entered by Lender or US Collateral Agent against Debtor for the amount of the claim and other relief requested.

     (d) DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF DEBTOR, LENDER AND US COLLATERAL AGENT IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW

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EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT DEBTOR, LENDER OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF DEBTOR, LENDER AND US COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     (e) Lender and US Collateral Agent shall not have any liability to Debtor (whether in tort, contract, equity or otherwise) for losses suffered by Debtor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and US Collateral Agent that the losses were the result of acts or omissions of Lender and US Collateral Agent constituting gross negligence or willful misconduct. In any such litigation, each of Lender and US Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement and the other Financing Agreements.

     2.2 Waiver of Notices. Debtor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to this Agreement, except such as are expressly provided for herein. No notice to or demand on Debtor which Lender or US Collateral Agent may elect to give shall entitle Debtor to any other or further notice or demand in the same, similar or other circumstances.

     2.3 Amendments and Waivers. Neither this Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent, and as to amendments, as also signed by an authorized officer of Debtor. Lender and US Collateral Agent shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender or US Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or US Collateral Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which either would otherwise have on any future occasion, whether similar in kind or otherwise.

     2.4 Indemnification. Debtor shall indemnify and hold Lender, US Collateral Agent, Secured Parties, and their respective directors, agents, employees and counsel (collectively, “Indemnified Parties”), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the

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fees and expenses of counsel. To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Debtor shall pay the maximum portion which it is permitted to pay under applicable law to Indemnified Parties in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, Debtor shall not assert, and Debtor hereby waives, any claim against Indemnified Parties, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of the Loan Agreement.

SECTION 3. MISCELLANEOUS

     3.1 Interpretative Provisions.

     (a) Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement.

     (b) All references to Debtor, Lender, US Collateral Agent, Borrower, Secured Parties and Indemnified Parties herein, or to any other person herein, shall include their respective successors and assigns.

     (c) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

     (d) All references to the term “good faith” used herein when applicable to Lender or US Collateral Agent shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned. Debtor shall have the burden of proving any lack of good faith on the part of Lender or US Collateral Agent alleged by Debtor at any time.

     (e) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

     (f) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

     (g) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Lender and US Collateral Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing

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Agreements shall not be construed against Lender and US Collateral Agent merely because of Lender’s and US Collateral Agent’s involvement in their preparation.

     3.2 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Debtor:	7480 Mission Valley Road, Suite 101
	San Diego, California 92108
	Attention: Whitney Peterson
	Telephone No.: (619) 683-9830
	Telecopy No.: (619) 683-9829
If to Lender and US Collateral Agent:	Wachovia Capital Finance Corporation (Central)
	150 South Wacker Drive, Suite 2200
	Chicago, Illinois 60606-4401
	Attention: Portfolio Manager
	Telephone No.: 312-332-0420
	Telecopy No.: 312-332-0424

     3.3 Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

     3.4 Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon Debtor and its successors and assigns and inure to the benefit of and be enforceable by Lender and US Collateral Agent and their respective successors and assigns, except that Debtor may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Lender and US Collateral Agent.

     3.5 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

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     IN WITNESS WHEREOF, Debtor, US Collateral Agent and Lender each has caused these presents to be duly executed as of the day and year first above written.

SAITEK ELEKTRONIK VERTRIEBS GMBH
By:	/s/ Stefan Woger
	Name:	Stephan Woger
	Title:	Managing Director

By:	/s/ Martin Eberle
	Name:	Martin Eberle
	Title:	Prokurist

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)
By:
	Name:
	Title:

By:	/s/ Bruno Mello
	Name:	Bruno Mello
	Title:	Assistant Vice President Wachovia Capital Finance of Canada

EX-10.26

Exhibit 10.26

GUARANTEE

     THIS GUARANTEE (“Guarantee”), dated June 23, 2009, is by Saitek Elektronik Vertriebs Gmbh, a German corporation (“Guarantor”), with its chief executive office at Landsberger Strasse 400, 81241, Munich, Germany in favor of Wachovia Capital Finance Corporation (Central), an Illinois corporation, as US Collateral Agent for and on behalf of the Secured Parties and as Lender, having an office at 150 South Wacker Drive, Suite 2200, Chicago, Illinois 60606-4202.

W I T N E S S E T H :

     WHEREAS, US Collateral Agent, Lender and Mad Catz, Inc., a Delaware corporation (“Borrower”), have entered or are about to enter into financing arrangements pursuant to which Lender may make loans and advances and provide other financial accommodations to Borrower as set forth in the Third Amended and Restated Loan Agreement, dated June 23, 2009, by and among US Collateral Agent, Lender, Borrower and Obligors (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Third Amended and Restated Loan Agreement”) and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Guarantee (all of the foregoing, together with the Third Amended and Restated Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

     WHEREAS, due to the close business and financial relationships between Borrower and Guarantor, in consideration of the benefits which will accrue to Guarantor and as an inducement for and in consideration of Lender making loans and advances and providing other financial accommodations to Borrower pursuant to the Third Amended and Restated Loan Agreement and the other Financing Agreements, Guarantor wishes to guarantee the obligations pursuant to the terms hereof;

     NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. Guarantee.

     (a) Guarantor absolutely and unconditionally guarantees and agrees to be liable for the full and indefeasible payment and performance when due of the following (all of which are collectively referred to herein as the “Guaranteed Obligations”):

(i) all obligations, liabilities and indebtedness of any kind, nature and description of Borrower and any Obligor to Lender, any Agent, their respective affiliates and/or owing to any financial institution under or in connection with a Swap Agreement, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether arising under the Third Amended and Restated Loan Agreement, the other Financing Agreements,

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any Swap Agreement or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Third Amended and Restated Loan Agreement or after the commencement of any case with respect to Borrower or any Obligor under the Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges and expenses related thereto and all other obligations of Borrower or any Obligor to Lender, any Agent, their respective affiliates and such financial institution arising after the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Lender, any Agent, their respective affiliates and such financial institution; and

(ii)

all expenses (including, without limitation, attorneys’ fees and legal expenses) incurred by Lender, any Agent, their respective affiliates and such financial institution in connection with the preparation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of Borrower’s or any Obligor’s obligations, liabilities and indebtedness as aforesaid, the rights of Lender, any Agent, their respective affiliates and such financial institution in any collateral or under this Guarantee, all other Financing Agreements or Swap Agreements or in any way involving claims by or against Lender, Agent, their respective affiliates and such financial institution directly or indirectly arising out of or related to the relationships between Borrower, Guarantor or any other Obligor and Lender, any Agent, their respective affiliates and such financial institution, whether such expenses are incurred before, during or after the initial or any renewal term of the Third Amended and Restated Loan Agreement, the other Financing Agreements or any Swap Agreement or after the commencement of any case with respect to Borrower or Obligors under the Bankruptcy Code or any similar statute.

     (b) This Guarantee is a guaranty of payment and not of collection. Guarantor agrees that Lender and US Collateral Agent need not attempt to collect any Guaranteed Obligations from Borrower or any other Obligor or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations (except under or in connection with any Swap Agreement) to Lender when due, whether by maturity, acceleration or otherwise, or at any time thereafter. Lender may apply any amounts received in respect of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in part (including attorneys’ fees and legal expenses incurred by Lender or US Collateral Agent with respect thereto or otherwise chargeable to Borrower or Obligors) and in such order as Lender may elect.

     (c) Payment by Guarantor shall be made to Lender at the office of Lender from time to time on demand as Guaranteed Obligations become due. Guarantor shall make all payments

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to Lender on the Guaranteed Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. One or more successive or concurrent actions may be brought hereon against Guarantor either in the same action in which Borrower or any other Obligor is sued or in separate actions. In the event any claim or action, or action on any judgment, based on this Guarantee is brought against Guarantor, Guarantor agrees not to deduct, set-off, or seek any counterclaim for or recoup any amounts which are or may be owed by Lender, US Collateral Agent or any other Secured Party to Guarantor.

     (d) Notwithstanding anything to the contrary contained herein, the amount of the obligations payable by Guarantor under this Guarantee shall be the aggregate amount of the Guaranteed Obligations unless a court of competent jurisdiction adjudicates Guarantor’s obligations to be invalid, avoidable or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), in which case the amount of the Guaranteed Obligations payable by Guarantor hereunder shall be limited to the maximum amount that could be guaranteed by Guarantor without rendering such Guarantor’s obligations under this Guarantee invalid, avoidable or unenforceable under such applicable law.

     2. Waivers and Consents.

     (a) Notice of acceptance of this Guarantee, the making of loans and advances and providing other financial accommodations to Borrower and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which Borrower or Obligors are entitled are hereby waived by Guarantor.

     (b) Guarantor also waives notice of and hereby consents to:

(i)	any amendment, modification, supplement, extension, renewal, or restatement of the Third Amended and Restated Loan Agreement and any of the other Financing Agreements, including, without limitation, extensions of time of payment of or increase or decrease in the amount of any of the Guaranteed Obligations, the interest rate, fees, other charges, or any collateral, and the guarantee made herein shall apply to the Third Amended and Restated Loan Agreement and the other Financing Agreements and the Guaranteed Obligations as so amended, modified, supplemented, renewed, restated or extended, increased or decreased;
(ii)	the taking, exchange, surrender and releasing of collateral or guarantees now or at any time held by or available to Lender, US Collateral Agent or any Secured Party for the obligations of Borrower or any Obligor, including, without limitation, the surrender or release by Lender or US Collateral Agent of Guarantor hereunder;
(iii)	the exercise of, or refraining from the exercise of, any rights against Borrower, Guarantor or any other Obligor or any collateral;

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(iv)	the settlement, compromise or release of, or the waiver of any default with respect to, any of the Guaranteed Obligations; and
(v)	any financing by Lender of Borrower under Section 364 of the Bankruptcy Code or consent to the use of cash collateral by Lender under Section 363 of the Bankruptcy Code.

Guarantor agrees that the amount of the Guaranteed Obligations shall not be diminished and the liability of Guarantor hereunder shall not be otherwise impaired or affected by any of the foregoing.

     (c) No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations shall affect, impair or be a defense to this Guarantee, nor shall any other circumstance which might otherwise constitute a defense available to or legal or equitable discharge of Borrower or any Obligor in respect of any of the Guaranteed Obligations, or Guarantor in respect of this Guarantee, affect, impair or be a defense to this Guarantee. Without limitation of the foregoing, the liability of Guarantor hereunder shall not be discharged or impaired in any respect by reason of any failure by Lender or US Collateral Agent to perfect or continue perfection of any lien or security interest in any collateral or any delay by Lender or US Collateral Agent in perfecting any such lien or security interest. As to interest, fees and expenses, whether arising before or after the commencement of any case with respect to Borrower or any Obligor under the Bankruptcy Code or any similar statute, Guarantor shall be liable therefor, even if Borrower’s or such Obligor’s liability for such amounts does not, or ceases to, exist by operation of law. Guarantor acknowledges that Lender and US Collateral Agent has not made any representations to Guarantor with respect to Borrower, any other Obligor or otherwise in connection with the execution and delivery by Guarantor of this Guarantee and Guarantor is not in any respect relying upon Lender or US Collateral Agent or any statements by Lender or US Collateral Agent in connection with this Guarantee.

     (d) Unless and until the indefeasible payment and satisfaction in full of all of the Guaranteed Obligations in immediately available funds and the termination of the financing arrangements of Lender with Borrower, Guarantor hereby irrevocably and unconditionally waives and relinquishes:

(i)	all statutory, contractual, common law, equitable and all other claims against Borrower or any Obligor, any collateral for the Guaranteed Obligations or other assets of Borrower or any other Obligor, for subrogation, reimbursement, exoneration, contribution, indemnification, setoff or other recourse in respect to sums paid or payable to Lender by Guarantor hereunder; and
(ii)	any and all other benefits which Guarantor might otherwise directly or indirectly receive or be entitled to receive by reason of any amounts paid by or collected or due from Guarantor, Borrower or any other Obligor upon the Guaranteed Obligations or realized from their property.

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     3. Subordination. Payment of all amounts now or hereafter owed to Guarantor by Borrower or any other Obligor is hereby subordinated in right of payment to the indefeasible payment in full to Lender of the Guaranteed Obligations and all such amounts and any security and guarantees therefor are hereby assigned to US Collateral Agent as security for the Guaranteed Obligations.

     4. Acceleration. Notwithstanding anything to the contrary contained herein or any of the terms of any of the other Financing Agreements, the liability of Guarantor for the entire Guaranteed Obligations shall mature and become immediately due and payable (except under or in connection with a Swap Agreement), even if the liability of Borrower or any other Obligor therefor does not, upon the occurrence of any act, condition or event which constitutes an Event of Default.

     5. Account Stated. The books and records of Lender showing the account between Lender and Borrower shall be admissible in evidence in any action or proceeding against or involving Guarantor as prima facie proof of the items therein set forth, and the monthly statements of Lender rendered to Borrower, to the extent to which no written objection is made within thirty (30) days from the date of sending thereof to Borrower, shall be deemed conclusively correct and constitute an account stated between Lender and Borrower and be binding on Guarantor.

     6. Termination. This Guarantee is continuing, unlimited, absolute and unconditional. All Guaranteed Obligations shall be conclusively presumed to have been created in reliance on this Guarantee. Guarantor shall continue to be liable hereunder until one of Lender’s officers actually receives a written termination notice from Guarantor sent to Lender at its address set forth above by certified mail, return receipt requested and thereafter as set forth below. Such notice received by Lender from Guarantor shall not constitute a revocation or termination of this Guarantee as to any other Obligor. Revocation or termination hereof by Guarantor shall not affect, in any manner, the rights of Lender or US Collateral Agent or any obligations or duties of Guarantor under this Guarantee with respect to (a) Guaranteed Obligations which have been created, contracted, assumed or incurred prior to the receipt by Lender of such written notice of revocation or termination as provided herein, including, without limitation, (i) all amendments, extensions, renewals and modifications of such Guaranteed Obligations (whether or not evidenced by new or additional agreements, documents or instruments executed on or after such notice of revocation or termination), (ii) all interest, fees and similar charges accruing or due on and after revocation or termination, and (iii) all attorneys’ fees and legal expenses, costs and other expenses paid or incurred on or after such notice of revocation or termination in attempting to collect or enforce any of the Guaranteed Obligations against Borrower, Guarantor or any other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations which have been created, contracted, assumed or incurred after the receipt by Lender of such written notice of revocation or termination as provided herein pursuant to any contract entered into by Lender or any Secured Party prior to receipt of such notice. The sole effect of such revocation or termination by Guarantor shall be to exclude from this Guarantee the liability of Guarantor for those Guaranteed Obligations arising after the date of receipt by Lender of such written notice which are unrelated to Guaranteed Obligations arising or transactions entered into prior to such date. Without limiting the foregoing, this Guarantee may not be terminated and shall continue so long as the Third Amended and Restated Loan

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Agreement shall be in effect (whether during its original term or any renewal, substitution or extension thereof).

     7. Reinstatement. If after receipt of any payment of, or proceeds of collateral applied to the payment of, any of the Guaranteed Obligations, Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Guaranteed Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Guarantee shall continue in full force and effect as if such payment or proceeds had not been received by Lender. Guarantor shall be liable to pay to Lender, and does indemnify and hold Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 7 shall remain effective notwithstanding any contrary action which may be taken by Lender in reliance upon such payment or proceeds. This Section 7 shall survive the termination or revocation of this Guarantee.

     8. Amendments and Waivers. Neither this Guarantee nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Lender and US Collateral Agent. Lender and US Collateral Agent shall not by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their respective rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Lender and US Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Lender or US Collateral Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Lender or US Collateral Agent would otherwise have on any future occasion, whether similar in kind or otherwise.

     9. Guarantee Limitations.

     (a) US Collateral Agent and Lender agree to release proceeds from the enforcement of this Guarantee to the extent that enforcement under this Guarantee caused a reduction of the amount of Guarantor’s Net Assets (Reinvermögen) (as defined below), below the amount of its registered share capital which is protected by Sections 30 and 31 of the German Limited Liability Companies Act or where Guarantor’s net assets already are below the amount of its registered share capital, cause such amount to be further reduced. “Net Assets” are calculated as the sum of the balance sheet positions shown under Section 266 (2) (A), (B) and (C) of the German Commercial Code, less the sum of the amounts shown under balance sheet positions pursuant to Section 266 (3) (B), (C) (but disregarding, for the avoidance of doubt, the obligations under this Guarantee) and (D) German Commercial Code each as shown in a balance sheet as of the date on which the enforcement of this Guarantee is sought (Stichtagsbilanz).

     (b) The above release obligations shall not apply if after the date of enforcement Guarantor does not provide conclusive evidence, including in particular interim financial statements up to the end of the last completed calendar month, within fifteen (15) days after the date of the enforcement, or if after receipt of unaudited financial statements notification is given to Guarantor to provide audited financial statements up to the end of that same calendar month and such audited financial statements are not provided within forty five (45) days after the date of such demand.

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     (c) Guarantor shall realise, to the extent legally permitted and commercially justifiable, any and all of its assets that are shown in the balance sheet or are not recorded at all with a book value (Buchwert) that is significantly lower than the market value of the assets if the asset is not necessary for Guarantor’s business (betriebsnotwendig) in a situation where Guarantor does not have sufficient Net Assets to maintain its registered share capital, and US Collateral Agent and Lender has (due to Section 9 (a) above) to release proceeds. Furthermore, it shall take, to the extent legally permitted and commercially justifiable, any other measures (including, without limitation, set-off claims) to avoid a payment under this Guarantee causing the Net Assets of Guarantor to be reduced below the amount of its registered share capital which is protected by Sections 30 and 31 of the German Limited Liability Companies Act.

     (d) If, after having been provided with audited financial statements according to Section 9 (b) above which resulted in an obligation to release proceeds, US Collateral Agent and Lender ascertains that the financial condition of Guarantor as set out in such audited financial statements has substantially improved (in particular, if Guarantor has taken any action in accordance with Section 9 (c) above), US Collateral Agent and Lender may, at Guarantor’s cost and expense, arrange for the preparation of updated audited financial statements of Guarantor in order to determine whether and, if so, to what extent the release obligations under this Section 9 are no longer applicable as a result of the improvement of the financial condition of Guarantor.

     (e) The above restrictions shall not apply if, at the time of enforcement of this Guarantee, Guarantor (i) is a party to a domination or profit and loss transfer agreement (Beherrschungs- oder Gewinnabführungsvertrag) or (ii) has a valuable consideration or recourse claim (vollwertiger Gegenleistungs- oder Rückgewähranspruch) against an affiliated company (verbundenes Unternehmen) within the meaning of Section 15 of the German Stock Corporation Act, which fully covers the loss incurred by the enforcement of this Guarantee.

     10. Corporate Existence, Power and Authority. Guarantor is a corporation duly organized and in good standing under the laws of its state or other jurisdiction of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on the financial condition, results of operation or businesses of Guarantor or the rights of Lender or US Collateral Agent hereunder or under any of the other Financing Agreements. The execution, delivery and performance of this Guarantee is within the corporate powers of Guarantor, have been duly authorized and are not in contravention of law or the terms of the certificates of incorporation, by laws, or other organizational documentation of Guarantor, or any indenture, agreement or undertaking to which Guarantor is a party or by which Guarantor or its property are bound. This Guarantee constitutes the legal, valid and binding obligation of Guarantor enforceable in accordance with its terms.

     11. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

     (a) The validity, interpretation and enforcement of this Guarantee and any dispute arising out of the relationship between Guarantor, Lender and US Collateral Agent, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois

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but excluding any principles of conflicts of law or other rule of law that would result in the application of the law of any jurisdiction other than the laws of the State of Illinois.

     (b) Guarantor hereby irrevocably consents and submits to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois and the United States District Court for the Northern District of Illinois whichever Lender or US Collateral Agent elects and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Guarantee or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of Guarantor, Lender and US Collateral Agent in respect of this Guarantee or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between Guarantor, Borrower, Obligors, Lender or US Collateral Agent or the conduct of any such persons in connection with this Guarantee, the other Financing Agreements or otherwise shall be heard only in the courts described above (except that Lender and US Collateral Agent shall have the right to bring any action or proceeding against Guarantor or its property in the courts of any other jurisdiction which Lender or US Collateral Agent deems necessary or appropriate in order to realize on collateral at any time granted by Borrower, Obligors or Guarantor to Lender or US Collateral Agent or to otherwise enforce their respective rights against Guarantor or its property).

     (c) Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth above and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Lender’s or US Collateral Agent’s option, by service upon Guarantor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Guarantor so served shall appear in answer to such process, failing which Guarantor shall be deemed in default and judgment may be entered by Lender or US Collateral Agent against Guarantor for the amount of the claim and other relief requested.

     (d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ANY OF GUARANTOR, LENDER AND US COLLATERAL AGENT IN RESPECT OF THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY OF GUARANTOR, LENDER OR US COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS GUARANTEE WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR, LENDER AND US COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

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     (e) Lender and US Collateral Agent shall not have any liability to Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Guarantee, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Lender and US Collateral Agent that the losses were the result of acts or omissions of Lender and US Collateral Agent constituting gross negligence or willful misconduct. In any such litigation, each of Lender and US Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of the Third Amended and Restated Loan Agreement and the other Financing Agreements.

     12. Notices. All notices, requests and demands hereunder shall be in writing and (a) made to Lender, US Collateral Agent and Guarantor at its address set forth above, or to such other address as a party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram, facsimile or pdf transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by certified mail, return receipt requested, five (5) days after mailing.

     13. Partial Invalidity. If any provision of this Guarantee is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Guarantee as a whole, but this Guarantee shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

     14. Entire Agreement. This Guarantee represents the entire agreement and understanding of this parties concerning the subject matter hereof, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

     15. Successors and Assigns. This Guarantee shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Lender, US Collateral Agent and their respective successors, endorsees, transferees and assigns. The liquidation, dissolution or termination of the Guarantor shall not terminate this Guarantee as to such entity or as to any other Obligors.

     16. Construction.

     (a) All references to the term “Guarantor” wherever used herein shall mean Guarantor and its respective successors and assigns (including, without limitation, any receiver, trustee or custodian for Guarantor or any of its respective assets or Guarantor in its capacity as debtor or debtor-in-possession under the Bankruptcy Code).

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     (b) All references to the term “Lender”, “US Collateral Agent” or “Secured Party” wherever used herein shall mean Lender, US Collateral Agent or Secured Party, as applicable, and their respective successors and assigns.

     (c) All references to the term “Borrower” or “Obligor” wherever used herein shall mean Borrower or Obligor, as applicable, and their respective successors and assigns (including, without limitation, any receiver, trustee or custodian for Borrower or Obligor or any of its assets or Borrower or Obligor in its capacity as debtor or debtor-in-possession under the Bankruptcy Code).

     (d) All references to the term “Person” or “person” wherever used herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality of political subdivision thereof.

     (e) All references to the plural shall also mean the singular and to the singular shall also mean the plural.

     (f) Capitalized terms not otherwise defined herein shall have the meanings given to them in the Third Amended and Restated Loan Agreement.

     (g) US Collateral Agent is acting as agent for and on behalf of the Secured Parties.

     17. Counterparts, etc. This Guarantee may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Guarantee by telefacsimile, pdf or other electronic means shall have the same force and effect as the delivery of an original executed counterpart of this Guarantee. Any party delivering an executed counterpart of this Guarantee by telefacsimile, pdf or other electronic means shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of this Guarantee.

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IN WITNESS WHEREOF, Guarantor, US Collateral Agent and Lender each has executed and delivered this Guarantee as of the day and year first above written.

SAITEK ELEKTRONIK VERTRIEBS GMBH
By:	/s/ Stefan Woger
	Name:	Stefan Woger
	Title:	Managing Director

By:
	Name:
	Title:

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)
By:
	Name:
	Title:

By:	/s/ Bruno Mello
	Name:	Bruno Mello
	Title:	Assistant Vice President Wachovia Capital Finance of Canada

EX-10.27

Exhibit 10.27

FIRST AMENDMENT TO STOCK PLEDGE AGREEMENT

     THIS FIRST AMENDMENT dated as of the 23rd day of June, 2009.

BETWEEN:

MAD CATZ, INC.

(the “Pledgor”)

OF THE FIRST PART

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WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL) (formerly known as Congress Financial Corporation (Central), as US collateral agent )

(together with its successors and assigns, the “Agent”)

OF THE SECOND PART

WHEREAS

A.	Pledgor entered into a stock pledge agreement dated as of September 25, 2000 (the “Pledge Agreement) pursuant to which, inter alia, Pledgor pledged the stocks listed on Schedule I attached thereto to Agent.
B.	Pledgor wishes to amend the Pledge Agreement as set out herein.

     NOW THEREFORE in consideration of One Dollar and for other good and valuable consideration, the parties hereto agree as set out herein.

1.	This First Amendment is an amendment to the Pledge Agreement. Unless the context of this First Amendment otherwise requires, the Pledge Agreement and this First Amendment shall be read together and shall have effect as if the provisions of the Pledge Agreement and this First Amendment were contained in one agreement.
2.	The term “Agreement” when used in the Pledge Agreement means the Pledge Agreement as amended by this First Amendment, together with all amendments, modifications, supplements, extensions, renewals, restatements, replacements and novations thereof from time to time.
3.	Schedule I to the Pledge Agreement is hereby deleted in its entirety and replaced with Schedule I attached hereto.
4.	This First Amendment may be executed and delivered by each party in counterparts by email (in portable document format), facsimile transmission or original signature and the

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parties hereto may rely on all counterpart signatures as though same were original signatures and all such counterparts taken together shall form one agreement.

5. The validity, interpretation and enforcement of this First Amendment, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of Illinois without giving effect to principles of conflicts of laws, but excluding any rule of law that would cause the application of the law of any jurisdiction other than the laws of the Province of Ontario.

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     IN WITNESS WHEREOF the undersigned has executed this First Amendment as of the day and year first above written.

MAD CATZ, INC.
By: Name:	/s/ Darren Richardson
Title:
By:	/s/ Stewart Halpern
Name:
Title:
WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)
By:
Name:
Title:
By:	/s/ Bruno Mello
Name:	Bruno Mello
Title:	Assistant Vice President Wachovia Capital Finance of Canada

SCHEDULE I

Pledged Stocks

All stock in Mad Catz Limited, FX Unlimited, Inc. and Mad Catz Interactive Asia Limited, whether now owned or hereafter acquired by the Pledgor.

All other capital stock of any other entity acquired by the Pledgor from time to time.

EX-10.28

Exhibit 10.28

DATED   2009

MAD CATZ INTERACTIVE, INC

AMENDMENT TO
CONSIDERATION LOAN NOTE INSTRUMENT
AND
PROMISSORY NOTE

THIS AMENDMENT is made on June 24, 2009 (“the Amendment”) to (a) that certain Consideration Loan Note Instrument, dated as of 20 November 2007 (“the Instrument”) issued by MAD CATZ INTERACTIVE, INC a company incorporated and existing under the laws of Canada with incorporation number 294869-9 having its registered office at Brookfield Place 181 Bay Street Suite 2500 Toronto Ontario M5J 2T7 (“the Company”) to GUYMONT SERVICES SA as trustee of The Winkler Atlantic Trust c/o: HSBC Guyerzeller Trust Company AG Splugenstrasse 6 CH-8027 Zurich Switzerland (“the Holder”) and (b) that certain Promissory Note dated as of August 1, 2008 (“the Completion Note”) issued by the Company to THE WINKLER ATLANTIC TRUST aforesaid (“Winkler”)

WHEREAS

(A)	The Company and the Holder are parties to the Acquisition Agreement (as defined in the Instrument) which provides for the purchase by the Company of all the issued shares in the capital of Winkler Atlantic Holdings Limited
(B)	Pursuant to the Acquisition Agreement, the Company agreed to issue and allot to the Holder as part of the consideration payable under the Acquisition Agreement loan notes in a principal amount equal to $14,500,000 and the loan notes constituted by the Instrument were issued by the Company to the Holder to satisfy such obligation
(C)	Pursuant to the terms of an agreement between the Company and the Holder effective as of August 1, 2008 the Company issued the Completion Note to Winkler
(D)	the Company and the Holder desire to amend the Instrument in the manner described below

NOW THIS AMENDMENT WITNESSES that:

1.	PRELIMINARY
	Capitalized terms used in this Amendment which are not otherwise defined shall have the same meaning as set forth in the Instrument
2.	ENTRY INTO EFFECT AND PERFORMANCE

2.1.1 This Amendment is conditional and shall become effective upon both the following being fulfilled:

(a) the Company entering into with the Senior Lender and other obligors a Third Amended and Restated Loan Agreement and the same becoming effective (subject only to this Amendment becoming effective); and

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(b) receipt by the Holder of evidence that funds of the $20,000 payable by the Company pursuant to clause 8 below have been transmitted by wire transfer to an account requested by Holder

2.1.2 Simultaneously with and effective upon this Amendment becoming effective under clause 2.1.1:

(a)

that original Certificate issued by the Company to the Holder on 20 November 2007 in respect of Loan Notes for the original principal amount of $14,500,000 shall be delivered to the Company by the Holder for cancellation and the Company shall simultaneously with the execution of this Amendment deliver to the Holder a new Certificate for the principal amount of $14,500,000 under the Instrument as amended hereby, dated with the date upon which this Amendment becomes effective pursuant to clause 2.1.1; the cancellation of such original Certificate and issue of such new Certificate do not constitute redemption and reissue of the Loan Notes and are merely for the purpose of evidencing the amendments of the Instrument effected by this Amendment;

(b)

the Holder shall execute and deliver to the Company and the Senior Lender without charge therefor a counterpart of an Amended and Restated Intercreditor Agreement with the Senior Lender (being an Instrument and Agreement evidencing its subordination to the Senior Lender) on the terms already agreed between the parties

3.	AMENDMENTS TO INSTRUMENT
3.1	Title
	Clause 2.1 of the Instrument shall be deemed to be deleted and replaced with the following wording:

“The Loan Notes shall be known as Convertible Unsecured Loan Notes 2019 and shall constitute a single series”

4.	AMENDMENT OF FORM OF LOAN NOTE CERTIFICATE AND CONDITIONS
4.1	Certificate
	The form of certificate set out in Schedule 1 to the Instrument is hereby amended in its entirety so as to be in the form attached hereto as Schedule 1
4.2	Preliminary
	Condition 1.1 is deemed to be deleted in its entirety and replaced with the following wording:

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“The Loan Notes the subject of this certificate have been constituted by an Instrument executed as a deed by Mad Catz Interactive, Inc dated 20 November 2007, as amended by an Amendment dated {   insert date upon which this Amendment becomes effective under clause 2.1.1        } 2009 (“the Instrument”) and a copy of the Instrument may be obtained from the Company free of charge upon written request to it at its registered office”

4.3	Definitions
	Condition 1.2 is hereby amended to take the following actions:

4.3.1 The definition of “Interest Rate” is deemed to be deleted in its entirety and replaced with the following wording:

“means through March 31, 2014 the rate of seven decimal point five per cent (7.5%) per annum and from and after April 1, 2014 the rate of nine per cent (9.0%) per annum”

4.3.2 The definition of “Emergency Credit Interest Rate” is deemed to be deleted in its entirety and replaced with the following wording:

“means the Interest Rate plus three decimal point five per cent (3.5%) per annum”

4.3.3 The definition of “Second Maturity Date” is deemed to be deleted in its entirety and replaced with the following wording:

“means March 31, 2019 or such earlier date on which the Loan Notes have been repaid in full”

4.3.4 The following definitions are deemed to be added in the appropriate alphabetical order:

““Additional Payment”	means a prepayment pursuant to Condition 4.1.5;”
““Additional Payment Date”	means the date that is thirty (30) days after the Company has filed its Annual Report on Form 10-K with the United States Securities and Exchange Commission with respect to any fiscal year triggering an Additional Payment”
““Annual Payment Date”	means the last Business Day of each fiscal year of the Company, the first Annual Payment Date being 31 March 2010 and the last Annual Payment Date being on the Second Maturity Date”

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““EBITDA”	means, with respect to any fiscal year, an amount equal to the Company’s net income for such fiscal year determined in accordance with United States generally accepted accounting principles, plus or minus, to the extent deducted or added in determining such net income for such fiscal year, and without duplication: (a) interest paid or payable or received or receivable; (b) income taxes paid or payable or refunds received or receivable in respect of income taxes; and (c) depreciation and amortization expenses.”
““Net Proceeds”	means the aggregate proceeds received by the Noteholders in respect of any sale of Conversion Shares less all costs and expenses incurred in connection with such sale of Conversion Shares (including without limitation legal fees and expenses, accounting fees and expenses, investment banking fees, brokerage and sales commissions and registration or other regulatory fees)”
““Quarterly Payment Date”	means the last Business Day of each fiscal quarter of the Company, the first Quarterly Payment Date being 30 June 2009 and the last Quarterly Payment Date being the Second Maturity Date”

4.4	Principal and Interest
	Condition 3.1 is deemed to be deleted and replaced with the following wording:

“Subject to and in accordance with the Conditions the Company shall pay to the Noteholders entitled to the same:

3.1.1 the principal nominal amount of the Loan Notes or any part of the Loan Notes as and when the same falls due for payment under the Conditions

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3.1.2 subject to Condition 3.3, interest accrued under the Conditions as and when the same is required under Condition 4.1”

4.5	Scheduled Payments
	The title to Condition 4 (“REPAYMENT”) shall be deleted and replaced by “SCHEDULED PAYMENTS” and Conditions 4.1, 4.2 and 4.3 are deemed to be deleted and replaced with the following wording:

“4.1 Repayment Dates and Circumstances

Subject to these Conditions, the Company shall make the following payments, which shall be applied to outstanding interest and to outstanding principal in accordance with Condition 4.1.8:

4.1.1	Following Serious Event: The Company shall redeem the Loan Notes at par by payment to the Noteholders if and as so required and permitted by Condition 5.3, together with interest accrued under the Conditions upon the amount so repaid up to and including the actual date of payment
4.1.2	First Maturity Date: Subject to any election to the contrary pursuant to condition 7.2.2(c) and subject to the statement contained in a Conversion Notice pursuant to Condition 9.1.1, on the First Maturity Date the Company shall pay $500,000
4.1.3	Quarterly Payment Date: Subject to any election to the contrary pursuant to condition 7.2.2(c) and subject to the statement contained in a Conversion Notice pursuant to Condition 9.1.1, on each Quarterly Payment Date the Company shall pay $44,880.71 (or such less amount as is then outstanding)
4.1.4	Annual Payment Date: Subject to any election to the contrary pursuant to condition 7.2.2(c) and subject to the statement contained in a Conversion Notice pursuant to Condition 9.1.1, on each Annual Payment Date the Company shall pay $2,400,000 (or such less amount as is then outstanding) except that the amount paid on the first such Annual Payment Date (March 31, 2010) shall be $551,154.12
4.1.5	Additional Prepayments: Subject to any election to the contrary pursuant to condition 7.2.2(c) and subject to the statement contained in a Conversion Notice pursuant to Condition 9.1.1, if the Company has EBITDA of greater than $12,500,000 a year in each of two (2) consecutive fiscal years the Company shall pay on the Additional Payment Date with respect to the second such fiscal year $2,000,000

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	provided that any such payment shall not be required unless approved in writing by the Senior Lender (and there shall be no penalties incurred by the Company if such approval is not provided by the Senior Lender) and provided further that the Company shall not be obligated to make more than one such additional payment in any two (2) year period and that the amount of such additional payment shall be reduced by the amount of any voluntary prepayment(s) made pursuant to Condition 4.1.6 during the two (2) year period immediately prior to the payment under this Condition 4.1.5
4.1.6	Voluntary Prepayments: Notwithstanding anything to the contrary herein, the Company shall be permitted to prepay from time to time and on any day any amount without premium or penalty
4.1.7	Second Maturity Date: Subject to any election to the contrary pursuant to condition 7.2.2(c) and subject to the statement contained in a Conversion Notice pursuant to Condition 9.1.1, on the Second Maturity Date the Company shall repay at par the remaining principal and accrued interest (accrued up to and including the date of payment) on the Loan Notes then outstanding
4.1.8	Application of Payments: All payments made under this Condition 4:

(a)	shall be applied to outstanding interest and outstanding principal only and only in that order unless (solely with respect to payments made pursuant to Condition 4.1.6) the Company provides notice that payment is to be applied to outstanding principal first and outstanding interest second;
(b)	in the case of Additional Payments and voluntary prepayments pursuant to Conditions 4.1.5 or 4.1.6, the same shall be applied in or towards discharge of the payments required to be made by the Company under the foregoing provisions of this Condition 4.1 in inverse order to that in which they fall due for payment (ie latest first)”

4.1.9	Payment Schedule: By way of explanation but without any binding effect and so that the provisions of Conditions 4.1.1 to 4.1.8 shall have effect in priority to such schedule, there is attached as Annex A a schedule of the payments to be made under this Condition 4.1
4.2	Surrender of Certificate(s) upon Redemption

Intentionally Omitted

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4.3 Balance Certificate

Intentionally Omitted”

4.6	Serious Events
	Condition 5.1.1 is deemed to be deleted and replaced with the following wording:

“if the Company fails to make any payment when required to be made under Condition 4.1 and such failure is not remedied or cured within five Business Days after notice thereof to the Company is given by any Noteholder”

4.7	Immediate Repayment on Notice
	Condition 5.3 is deemed to be deleted and replaced with the following wording:

“Subject to and only to the extent permitted by the terms of the Senior Lender Agreement or any successor agreement between the Senior Lender and the Noteholders, the Noteholders shall be entitled to require immediate repayment of all or any of the Loan Notes at any time during the continuance of a Serious Event Provided That during the continuance of the Senior Lender Agreement the Noteholders may not require such immediate repayment on the grounds of a Serious Event under condition 5.1.1 unless the Senior Lender grants consent for such requirement or itself takes steps to enforce any security granted to it by the Company or such requirement for immediate repayment is not prohibited by the terms of the Senior Lender Agreement or any successor agreement between the Senior Lender and the Noteholders”

4.8	Senior Lender Agreement
	Condition 5.4 is deemed amended by adding the following wording:

“Each Noteholder further agrees to execute and deliver to the Company and each Senior Lender without charge therefor but upon reimbursement before delivery of the same of up to $20,000 for professional costs reasonably incurred in relation to the same such further instruments and agreements evidencing its subordination to such Senior Lender on terms no more onerous to such Noteholder than contained in the Amended and Restated Intercreditor Agreement entered into by such Noteholder on the date of this Amendment”

4.9	Undertakings by the Company
	Condition 8.1 is deemed to be amended by adding the following wording to the end thereof:

“8.1.10 subject to receipt from the Noteholders of an agreement in form and substance acceptable to the Company to maintain the confidentiality of such information and to comply with applicable securities laws, the Company will provide to the Noteholders until the Loan Notes

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are repaid in full (a) at the same time it is sent to the Senior Lender the annual Board-approved forecast provided by the Company to the Senior Lender (b) a quarterly cash flow forecast and (c) a quarterly update by telephone of the Company’s performance against the forecast”

4.10	Notice of Conversion
	Condition 9.1.1 shall be amended by deleting therefrom the words “it shall state whether the Loan Notes to be converted are those due for repayment on the First Maturity Date or the Second Maturity Date” and there shall be inserted in the place of the words so deleted the words “it shall identify the Loan Notes to be converted by reference to their due date for repayment under Condition 4.1”

4.11	Agreements Regarding Conversion
	A new Condition 9.7 is hereby added to the Loan Note to read as follows:

“9.7 Sale of Conversion Shares

9.7.1	In the event that the market price of the Conversion Shares exceeds the Conversion Rate, the Company will use reasonable commercial efforts to identify potential purchasers of the Conversion Shares and to introduce such purchasers to the Noteholders
9.7.2	The Noteholders agree to convert pursuant to Condition 9 such portion of the principal amount of the Loan Notes into Conversion Shares as any purchaser desires to purchase in a transaction that will provide to the Noteholders Net Proceeds per Conversion Share in excess of the Conversion Rate and to sell such Conversion Shares to such purchaser
9.7.3	The Company shall manage the sale process of any Conversion Shares pursuant to this Condition 9.7 and shall deduct the expenses of such actions from the gross sale proceeds in determining the Net Proceeds to be provided to the Noteholders
9.7.4	Neither the Company nor any Noteholder shall have any obligation to incur any out-of-pocket expenses in connection with such conversion and sale transaction as such transaction must be self funding (i.e. all expenses of such transaction shall be paid from the proceeds of the sale and leave Net Proceeds per Conversion Share in excess of the Conversion Rate)

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9.7.5 Notwithstanding the foregoing:

(a)

the conversion of Loan Notes into Conversion Shares, the issue of the resultant Conversion Shares, the sale and transfer of the Conversion Shares to the purchaser and the receipt by the Noteholders of the Net Proceeds shall be effected simultaneously and if and to the extent that the Noteholders do not receive any Net Proceeds the corresponding conversion of Loan Notes into Conversion Shares shall not have effect;

(b)

the Company shall indemnify the Noteholders against all expenses of sale incurred by or with the agreement of the Company; provided that the Noteholders acknowledge and agree that such expenses shall be fully satisfied from the gross proceeds of the sale of Conversion Shares so long as the Net Proceeds per Conversion Share exceed the Conversion Rate”

5.	AMENDMENTS TO THE COMPLETION NOTE
	The Completion Note is hereby amended such that the maturity date thereunder shall be March 31, 2010 and all principal and interest outstanding on such date, which the parties agree shall be $948,845.88, shall be paid on such date (and upon and by such payment the Completion Note will be cancelled). If the Company defaults in payment of the said sum it shall pay to Winkler Interest upon so much of the same as remains unpaid after such due date from time to time, at the Emergency Credit Interest Rate Subject to the foregoing the terms of the Completion Note remain in full force and effect and in the event of any conflict between the terms of the Completion Note and this Amendment the terms of this Amendment shall control
6.	NO OTHER AMENDMENTS
	Except as expressly amended by this Amendment, the terms of the Instrument remain in full force and effect. In the event of any conflict between the terms of the Instrument and this Amendment the term of this Amendment shall control
7.	RELEVANT COMMITMENTS
	The Company acknowledges its continuing liability under clause 6.4 of the Acquisition Agreement in respect of Relevant Commitments

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8.	EXPENSES OF THIS AMENDMENT
	The Company agrees to pay to the Noteholders a fixed fee of $20,000 at execution of this Amendment to pay the Noteholders’ expenses in connection with the negotiation and execution of this Amendment, including legal and consulting fees
9.	MISCELLANEOUS
	This Amendment may be executed in any number of counterparts with the same effect as if all Parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one agreement. This Amendment and any signed agreement or instrument entered into in connection with this Agreement or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or other electronic means, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person
10.	GOVERNING LAW
	This Amendment shall be governed and construed in all respects by the laws of England and the parties irrevocably submit to the non-exclusive jurisdiction of the courts of England

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SIGNED BY	)	/s/ Werner Schweiter
	)	Werner Schweiter
for and on behalf of	)
GUYMONT SERVICES SA (in Liqu.)	)	/s/ Marzell Beck
in the presence of:	)	Marzell Beck
Witness Signature: /s/ D. Eggenberger
Name: David Eggenberger
Address: Bawargs 8, 7204 Unkvaz
Occupation: Secretary
SIGNED BY	)
	)	/s/ Darren Richardson
for and on behalf of MAD	)
CATZ INTERACTIVE, INC.	)
in the presence of:	)
Witness Signature: /s/ Michael Guerero
Name: Michael Guerero

Address: 7480 Mission Valley Rd.
Suite 101
San Diego, CA 92108

Occupation: Contracts Manager

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SCHEDULE 1

Clause 1 : Form of Loan Note Certificate and Conditions

Certificate No.             representing $     Nominal Amount of Loan Notes
MAD CATZ INTERACTIVE, INC
A company incorporated in Canada
corporate ID number 294869-9
(“the Company”)

ISSUE OF $14,500,000 CONVERTIBLE
UNSECURED LOAN NOTES 2019
(“the Loan Notes”)

Issued under the authority of the statutes and by-laws of the Company and pursuant to a Resolution of the Board of Directors of the Company passed on {                           } 2009

THIS IS TO CERTIFY THAT                                                      of                                                                                is the registered holder of                                          US DOLLARS ($     ) nominal amount of the Loan Notes which Loan Notes are constituted by an Instrument entered into by the Company on November 20, 2007 as amended by an Amendment entered into by the Company with Guymont Services SA and The Winkler Atlantic Trust on {          } 2009 (“the Instrument”) and are issued with the benefit of and subject to the provisions contained in the Instrument and the Conditions endorsed on or attached to this certificate (“the Conditions”)

DATED 2009

DULY EXECUTED	)
by MAD CATZ INTERACTIVE, INC	)
acting by its authorised officer	)

Name:

Status:

Notes:	(1	)	The Company will not register any transfer of any Loan Notes unless the Certificate or a suitable indemnity is produced relating to such Loan Notes. The Certificate or a suitable indemnity must be surrendered before any transfer, whether for the whole or any part of the Loan Notes represented hereby, can be registered or a new certificate issued in exchange.
	(2	)	The Loan Notes are transferable in part in amounts of not less than $1,000 nominal or as a whole, subject to the restrictions on transfer contained in the Conditions.
	(3	)	The Loan Notes are not and will not be the subject of any listing, permission to deal or registration on any investment exchange or with any other authority.
	(4	)	The Loan Notes shall not be offered to the public for purchase.
	(5	)	The address of the Transfer Office is 7840 Mission Valley Road Suite 101 San Diego 92108.
	(6	)	The Loan Notes are subject to set-off of any Provisional Claims and any Substantiated Claims as provided in the Conditions and amounts of the Loan Notes the subject of this Certificate may be cancelled to the extent necessary to satisfy such Substantiated Claims
	(7	)	Accelerated payment of the Loan Notes following the occurrence of a Serious Event under the Conditions is restricted under the terms of the Senior Lender Agreement (as those terms are defined in the Conditions).

Annex A

June 30, 2009	44,881
September 30, 2009	44,881
October 31, 2009	500,000
December 31, 2009	44,881
March 31, 2010*	1,544,881
June 30, 2010	44,881
September 30, 2010	44,881
December 31, 2010	44,881
March 31, 2011	2,444,881
June 30, 2011	44,881
September 30, 2011	44,881
December 31, 2011	44,881
March 31, 2012	2,444,881
June 30, 2012	44,881
September 30, 2012	44,881
December 31, 2012	44,881
March 31, 2013	2,444,881
June 30, 2013	44,881
September 30, 2013	44,881
December 31, 2013	44,881
March 31, 2014	2,444,881
June 30, 2014	44,881
September 30, 2014	44,881
December 31, 2014	44,881
March 31, 2015	2,444,881
June 30, 2015	44,881
September 30, 2015	44,881
December 31, 2015	44,881
March 31, 2016	2,444,881
June 30, 2016	44,881
September 30, 2016	44,881
December 31, 2016	44,881
March 31, 2017	2,444,881
June 30, 2017	44,881
September 30, 2017	44,881
December 31, 2017	44,881
March 31, 2018	2,444,881
June 30, 2018	44,881
September 30, 2018	44,881
December 31, 2018	44,881
March 31, 2019	2,444,877

* Includes payment under the Completion Note in the amount of $948,845.88

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

Mad Catz, Inc., a Delaware corporation
1328158 Ontario Inc., a corporation organized under the laws of Ontario, Canada
Mad Catz Europe, Limited, a company organized under the laws of England and Wales
Mad Catz Limited, a company organized under the laws of England and Wales
Mad Catz Interactive Asia Limited, a company organized under the laws of Hong Kong
Mad Catz Technological Development (Shenzhen) Co., Ltd. , a company organized under the laws of The Peoples Republic of China
FX Unlimited Inc., a Delaware corporation
Mad Catz (Asia) Limited, a company organized under the laws of Hong Kong
Xencet USA, Inc., a Delaware corporation
Singapore Holdings Inc., a Delaware corporation
Winkler Atlantic Holdings Limited, a company organized under the laws of the British Virgin Islands
Saitek Plc, a company organized under the laws of England and Wales
Saitek Industries Ltd., a company organized under the laws of Hong Kong
Saitek Elektronik Vertriebs Gmbh, a company organized under the laws of Germany
Saitek SAS, a company organized under the laws of France

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Mad Catz Interactive, Inc.:

We consent to incorporation by reference in the registration statement No. 333-103798 on Form S-8 of Mad Catz Interactive, Inc. of our report dated June 26, 2009, with respect to the consolidated balance sheets of Mad Catz Interactive, Inc. and subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and comprehensive income (loss), and cash flows for each of the years in the three-year period ended March 31, 2009, and the related financial statement Schedule II, which report appears in the March 31, 2009 Annual Report on Form 10-K of Mad Catz Interactive, Inc.

/s/ KPMG LLP
San Diego, California
June 26, 2009

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Darren Richardson, certify that:

1.	I have reviewed this annual report on Form 10-K of Mad Catz Interactive, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 26, 2009	/S/ Darren Richardson
	Darren Richardson, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stewart Halpern, certify that:

1.	I have reviewed this annual report on Form 10-K of Mad Catz Interactive, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 26, 2009	/S/ Stewart Halpern
	Stewart Halpern, Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mad Catz Interactive, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

     (i) the accompanying Annual Report on Form 10-K of the Company for the period ended March 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

     (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 26, 2009	/s/ Darren Richardson
	Darren Richardson,
	President and Chief Executive Officer

The foregoing certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     Pursuant to 18 U.S.C. §1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Mad Catz Interactive, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

     (i) the accompanying Annual Report on Form 10-K of the Company for the period ended March 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

     (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 26, 2009	/s/ Stewart Halpern
	Stewart Halpern,
	Chief Financial Officer

The foregoing certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. §1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.