<PAGE>

                                                                   EXHIBIT 10.1


                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT ("Agreement") is made, entered into, and
effective as of October 15, 2002 (the "Effective Date"), by and between I/O
Magic Corporation., a Nevada corporation ("Company"), and Tony Shahbaz, an
individual ("Employee") (collectively, the "Parties").

                                    RECITALS
                                    --------

         A. Company is engaged in the business of marketing and distributing
computer peripheral products and maintains its principal place of business in
the State of California.

         B. Company desires to have an employment agreement with Employee as its
President, and CEO subject to the terms and conditions of this Agreement.

         NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the Parties hereto hereby agree as follows:

                                    AGREEMENT
                                    ---------

1. TERM OF EMPLOYMENT.

         a. SPECIFIED PERIOD. Company hereby employs Employee and Employee
accepts employment with Company for a period of Five years commencing upon the
date of this Agreement.

         b. RENEWAL. This Agreement and it's terms and conditions shall
automatically renew. The agreement may be changed upon the mutual agreement of
Employee and Company's Board of Director's.

         c. EMPLOYMENT TERM DEFINED. "Employment term" refers to the entire
period of employment of Employee by Company, whether for the period provided
above, or whether terminated earlier as hereinafter provided or extended by
mutual agreement between Company and Employee.

2. DUTIES AND OBLIGATIONS OF EMPLOYEE. Employee shall serve as President and
CEO. Employee shall report to the Board of Directors of the Company. Employee
shall faithfully and diligently perform all professional duties and acts as may
be requested and required of Employee by Company or its Directors. Employee
shall devote such time and attention to the business of Company as shall be
required to perform the required services and duties.

3. EXCLUSIVITY, NON-DISCLOSURE.

         a. DEVOTION TO COMPANY BUSINESS. Employee agrees to perform Employee's
services efficiently and to the best of Employee's ability. Employee agrees
throughout the term of this Agreement to devote his time, energy and skill to
the business of the Company.


                                       1
<PAGE>

         b. TRADE SECRETS. Employee agrees that he shall not at any time, either
during or subsequent to his employment term, unless expressly consented to in
writing by Company, either directly or indirectly use or disclose to any person
or entity any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Company,
including, but not limited to, information concerning the customers of Company,
Company's marketing methods, compensation paid to employees, independent
contractors or suppliers and other terms of their employment or contractual
relationships, financial and business records, know-how, or any other
information concerning the business of Company, its manner of operations, or
other data of any kind, nature or description. Employee agrees that the above
information and items are important, material and confidential trade secrets and
these affect the successful conduct of Company's business and its goodwill.

4. COMPENSATION.

         a. ANNUAL SALARY. Company shall compensate Employee for his services
hereunder at the annual salary set forth in Exhibit A hereto payable in
accordance with the Company's practices, less normal payroll deductions, and
prorated for the actual employment term.

         b. SALARY INCREASES; ADDITIONAL COMPENSATION. Employee shall receive
such annual increases in salary and such additional compensation as may be
determined by the Board of Directors elected compensation committee of the
Company in its sole discretion. Such salary increases and/or additional
compensation shall be paid to Employee on the anniversary date of this Agreement
during the Employment Term, and at such other times as may be determined by the
Board of Directors.

5.       EMPLOYEE INCENTIVES.

         Employee shall be entitled to participate in all profit sharing, stock
option and other similar plans in accordance with the directives of the Board of
Directors.

6.       EMPLOYEE BENEFITS.

         a. MEDICAL COVERAGE. Company agrees to provide Employee and employee's
family full medical insurance coverage for medical and dental.

         b. PLAN PARTICIPATION. Employee shall be entitled to participate in or
to receive benefits under all of Company's employee benefit plans made available
by Company or in the future to similarly situated employees, subject to the
terms, conditions and overall administration of such plans, including but not
limited to 401(k) plans, IRA plans, E.R.I.S.A Plans, any other retirement or
benefit plans that the Company has made available to similarly situated
employees.

7. BUSINESS EXPENSES. Employee will be required to incur travel, meals,
entertainment and other business expenses on behalf of the Company in the
performance of Employee's duties hereunder. Company will reimburse Employee for
all such reasonable business expenses incurred by Employee in connection with
Company's business upon presentation of receipts or other acceptable
documentation of the expenditures. In compensating Employee for expenses, the
ordinary and usual business guidelines and documentation requirements shall be
adhered to by Company and Employee.

                                       2
<PAGE>

8. TERMINATION OF EMPLOYMENT.

         a. TERMINATION FOR CAUSE. Company may terminate this Agreement for
cause by giving written notice of termination to Employee. The Company agrees to
compensate employee four (4) times the employee's annual salary and extend any
and all warrants and options granted to the employee to an additional 7 years
from date of termination. The notice of termination required by this section
shall specify the ground for the termination and shall be supported by a
statement of all relevant facts.

         b. TERMINATION UPON DEATH OR DISABILITY.

                  i. DEATH. This Agreement shall be terminated immediately upon
the death of Employee. However, company agrees to provide employees family a
life Insurance Policy for a minimum of $2m.

                  ii. DISABILITY. Company reserves the right to terminate this
Agreement if, due to illness or injury, either physical or mental, Employee is
unable to perform Employee's customary duties as an employee of Company, unless
reasonable accommodation can be made to allow Employee to continue working, for
more than 90 days in the aggregate out of a period of twelve consecutive months.
The disability shall be determined by a certification from a physician. Such a
termination shall be effected by giving ten days' written notice of termination
to Employee. Termination pursuant to this provision shall not prejudice
Employee's rights to receive disability insurance payments or the continued
compensation pursuant to Section 4(c) of this Agreement.

         c. EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION. Without the
prior written consent of Employee, this Agreement shall not be terminated by any
voluntary or involuntary dissolution of Company resulting from a merger or
consolidation in which Company is not the consolidated or surviving corporation,
or a transfer of all or substantially all of the assets of Company. In the event
of any such merger or consolidation or transfer of assets, Employee's rights,
benefits, and obligations hereunder shall be assigned to the surviving or
resulting corporation or the transferee of Company's assets.

         d. PAYMENT ON TERMINATION. Notwithstanding any provision of this
Agreement, if Company terminates this Agreement without cause, other than upon
death or disability as set forth above, it shall pay Employee the remaining
salary amount for the remaining outstanding term of this Agreement or any
renewal thereof at the then current rate of compensation, plus any other
benefits to which he would otherwise receive.

9. GENERAL PROVISIONS.

         a. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto their respective devisees, legatees, heirs,
legal representatives, successors, and permitted assigns. The preceding sentence
shall not affect any restriction on assignment set forth elsewhere in this
Agreement.

                                       3
<PAGE>

         b. NOTICES. Any notice, request, instruction, or other document
required by the terms of this Agreement, or deemed by any of the Parties hereto
to be desirable, to be given to any other Party hereto shall be in writing and
shall be given by facsimile, personal delivery, overnight delivery, or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the Company at the address of its corporate office and to the Employee at the
Employee's home address as it appears in the Employee's personnel records. A
notice sent as aforesaid may change addresses from time to time. If notice is
given by facsimile, personal delivery, or overnight delivery in accordance with
the provisions of this Section, said notice shall be conclusively deemed given
at the time of such delivery. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed given seven
business days after deposit thereof in the United States mail.

         c. SUMS DUE DECEASED EMPLOYEE. If Employee dies prior to the expiration
of the employment term, any sums that may be due him from Company under this
Agreement as of the date of death shall be paid to Employee's executors,
administrators, heirs, personal representatives, successors, and assigns.

         d. ARBITRATION. If a dispute or claim shall arise with respect to any
of the terms or provisions of this Agreement, or with respect to the performance
by either of the Parties under this Agreement, other than a dispute with respect
to Section 3 of this Agreement, then either party may, with notice as herein
provided, require that the dispute be submitted under the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). Each party shall bear
one-half (1/2) of the cost of appointing the arbitrator and of paying such
arbitrator's fees. The written decision of the arbitrator(s) ultimately
appointed by or for both Parties shall be binding and conclusive on the Parties.
Judgment may be entered on such written decision of the single arbitrator in any
court having jurisdiction and the Parties consent to the jurisdiction of the
Municipal and Superior Court of Orange County, California for this purpose. Any
arbitration undertaken pursuant to the terms of this section shall occur in
Orange County, California.

         e. ASSIGNMENT. Subject to all other provisions of this Agreement, any
attempt to assign or transfer this Agreement or any of the rights conferred
hereby, by judicial process or otherwise, to any person, firm, Company, or
corporation without the prior written consent of the other party, shall be
invalid, and may, at the option of such other party, result in an incurable
event of default resulting in termination of this Agreement and all rights
hereby conferred.

         f. CHOICE OF LAW. This Agreement and the rights of the Parties
hereunder shall be governed by and construed in accordance with the laws of the
State of California including all matters of construction, validity,
performance, and enforcement and without giving effect to the principles of
conflict of laws.

         g. INDEMNIFICATION. Company shall indemnify, defend and hold Employee
harmless, to the fullest extent permitted by law, for all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorney's fees that
Employee shall incur or suffer that arise from, result from or relate to the
discharge of Employee's duties under this Agreement. Company shall maintain
adequate insurance for this purpose or shall advance Employee any expenses
incurred in defending any such proceeding or claim to the maximum extent
permitted by law.

                                       4
<PAGE>

         h. JURISDICTION. The Parties submit to the jurisdiction of the Courts
of the State of California or a Federal Court empaneled in the State of
California for the resolution of all legal disputes arising under the terms of
this Agreement, including, but not limited to, enforcement of any arbitration
award.

         i. ENTIRE AGREEMENT. Except as provided herein, this Agreement,
including exhibits, contains the entire agreement of the Parties, and supersedes
all existing negotiations, representations, or agreements and all other oral,
written, or other communications between them concerning the subject matter of
this Agreement. There are no representations, agreements, arrangements, or
understandings, oral or written, between and among the Parties hereto relating
to the subject matter of this Agreement that are not fully expressed herein.

         j. SEVERABILITY. If any provision of this Agreement is unenforceable,
invalid, or violates applicable law, such provision, or unenforceable portion of
such provision, shall be deemed stricken and shall not affect the enforceability
of any other provisions of this Agreement.

         k. CAPTIONS. The captions in this Agreement are inserted only as a
matter of convenience and for reference and shall not be deemed to define,
limit, enlarge, or describe the scope of this Agreement or the relationship of
the Parties, and shall not affect this Agreement or the construction of any
provisions herein.

         l. MODIFICATION. No change, modification, addition, or amendment to
this Agreement shall be valid unless in writing and signed by all Parties
hereto.

         m. ATTORNEYS' FEES. Except as otherwise provided herein, if a dispute
should arise between the Parties including, but not limited to arbitration, each
party shall pay it's own attorney's fees and shall not be entitled to
re-imbursement.

         n. TAXES. Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to prove
the proper amount to withhold of such taxes and to prove payment to the tax
authority of such required withholding.

         o. NOT FOR THE BENEFIT OF CREDITORS OR THIRD PARTIES. The provisions of
this Agreement are intended only for the regulation of relations among the
Parties. This Agreement is not intended for the benefit of creditors of the
Parties or other third Parties and no rights are granted to creditors of the
Parties or other third Parties under this Agreement. Under no circumstances
shall any third party, who is a minor, be deemed to have accepted, adopted, or
acted in reliance upon this Agreement.

                                       5
<PAGE>

         g. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. The Parties agree that facsimile signatures of this Agreement shall
be deemed a valid and binding execution of this Agreement.

         h. CONFLICT WAIVER. Both Employee and the Company (the "Parties")
hereby agree and acknowledge that Lawrence W. Horwitz ("Horwitz"), has
represented both the Company and the Employee in the past. The Parties hereto
further acknowledge that they have been informed of the inherent conflict of
interest associated with the drafting of this Agreement by Horwitz and waive any
action they may have against Horwitz regarding such conflict. The Parties have
been given the opportunity to consult with independent counsel of their choice
regarding their rights under this Agreement.

         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the Effective Date.

"Company"                                            "Employee"

I/O MAGIC CORPORATION,                               TONY SHAHBAZ
A NEVADA CORPORATION

/S/ STEEL SU                                         /S/ TONY SHAHBAZ
------------                                         ----------------
BY: Mr. Steel Su
ITS: Director &
        Compensation Committee Member


/S/ STEVE GILLINGS
------------------
BY: Mr. Steve Gillings
ITS: Officer/VP of Finance &
        Compensation Committee Member


/S/ TONY SHAHBAZ
----------------
BY: Mr. Tony Shahbaz
ITS: Officer, Director &
        Compensation Committee Member

                                       6
<PAGE>

                                   EXHIBIT "A"
                              TERMS OF COMPENSATION



1.       ANNUAL SALARY - Annual Salary shall be $198,500.00. The companies
         compensation committee shall consider such salary for performance
         review and increase from time to time by the companies Board of
         Director's.

2.       BONUS - The employee shall receive a quarterly bonus equal to 7% of the
         companies quarterly Net Income as reported and reviewed by the
         companies third party auditors. Such payment shall be due upon
         completion of each quarterly statement.

3.       AUTO ALLOWANCE - The Company agrees to compensate employee $1,200.00
         per month for an auto allowance. Employee agrees to forfeit such
         automobile allowance should the company directly lease a company
         automobile of equivalent value for the employee.

4.       STOCK OPTIONS - From time to time and annually the employee shall be
         granted stock options and/or the companies Compensation Committee may
         determine other incentives as it may see fit.

5.       VACATION PAY - The employee shall be entitled to vacation and sick pay
         as approved by the company for all key management.

6.       TERM OF COMPENSATION - This agreement and all compensation and benefits
         as set fourth shall be retroactive to January 1, 2002 and will follow
         the terms and conditions through the term of this agreement. The
         beginning term of this agreement is defined by the date of execution.


                                       7