CHANGE IN TERMS AGREEMENT

Principal     Loan Date  Maturity   Loan No   Call/coll Account Officer Initials
$9,000,000.00 12-31-2002 12-31-2003 3030600000  4A0/71            321    /s/CC

   References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
--------------------------------------------------------------------------------

Borrower:   I/O  MAGIC  CORPORATION    Lender:   CHINATRUST  BANK  [USA]
            1300  WAKEHAM  AVENUE                CORPORATE  LENDING

Principal Amount: $9,000,000.00 Initial Rate: 5.500%  Date of Agreement:
                                                             December  31,  2002

DESCRIPTION  OF  EXISTING INDEBTEDNESS. AN ORIGINAL INDEBTEDNESS AS EVIDENCED BY
PROMISSORY  NOTE DATED 04-09-2001 IN THE AMOUNT OF $8,000,000.00, AS AMENDED AND
SUPERSEDED  BY:  CHANGE  IN  TERMS  AGREEMENT  NOW  MATURING  12-31-2002.

DESCRIPTION  OF  COLLATERAL.  COLLATERAL  DESCRIBED IN UCC-1 FINANCING STATEMENT
FILED  ON  04-26-2001,  UNDER  THE  NAME  OF  I/OMAGIC  CORPORATION,  INSTRUMENT
#0112160339.

DESCRIPTION  OF  CHANGE  IN  TERMS.  THE MATURITY DATE OF THE LINE IS CHANGED TO
12-31-2003.  THE  LOAN  AMOUNT  IS DECREASED TO $9,000,000.00. THE BUSINESS LOAN
AGREEMENT  DATED 04-09-2002 IS AMENDED AND SUPERSEDED BY BUSINESS LOAN AGREEMENT
DATED  12-31-2002.  ALL  OTHER TERMS AND CONDITIONS, STATED IN ALL OTHER RELATED
LOAN DOCUMENTS INCLUDING BUT NOT LIMITED TO THE SECURITY AGREEMENT, NOT MODIFIED
HEREWITH  WILL REMAIN IN FULL FORCE AND EFFECT WITHOUT WAIVER OR MODIFICATION OF
ANY  KIND.

PROMISE  TO PAY. I/OMAGIC CORPORATION ("Borrower") promises to pay to CHINATRUST
BANK  [USA]  ("Lender"),  or  order,  in  lawful  money  of the United States of
America,  the  principal amount of Nine Million & 00/100 Dollars ($9,000,000.00)
or  so  much  as  may  be  outstanding,  together  with  interest  on the unpaid
outstanding principal balance of each advance. Interest shall be calculated from
the  dale  of  each  advance  until  repayment  of  each  advance.

PAYMENT.  Borrower  will  pay  this  loan  on  demand.  Payment  in  full is due
immediately  upon  Lender's demand. If no demand is made, Borrower will pay this
loan  in  accordance  with  the  following  payment  schedule:

ADVANCES  FOR REFINANCING OF LETTERS OF CREDIT, LOCAL PURCHASE FINANCING AGAINST
INVOICES  AND  WORKING  CAPITAL LOANS WILL ALL HAVE A MATURITY NOT EXCEEDING 150
DAYS.

INTEREST  ACCRUED  ON  ANY  ADVANCE UNDER THIS LINE OF CREDIT WILL BE DUE ON THE
FIRST  DAY OF EACH AND EVERY MONTH FOLLOWING SUCH ADVANCE. PRINCIPAL WILL BE DUE
AND  PAYABLE  ON  THE  RESPECTIVE  SCHEDULED  MATURITY  OF  EACH  ADVANCE.

Interest  on this Agreement is computed on a 365/360 simple interest basis; that
is,  by  applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of  days  the  principal  balance  is  outstanding.  Borrower will pay Lender at
Lender's  address  shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from  time  to  time  based on changes in an independent index which is the WALL
STREET JOURNAL PRIME (the "Index"). The Index is not necessarily the lowest rate
charged by Lender on its loans. If the Index becomes unavailable during the term
of  this loan, Lender may designate a substitute index after notice to Borrower.
Lender  will  tell  Borrower the current Index rate upon Borrower's request. The
interest  rate  change  will  not  occur  more  often  than  each  DAY. Borrower
understands  that  Lender may make loans based on other rates as well. THE INDEX
CURRENTLY  IS  4.250%  PER  ANNUM. THE INTEREST RATE TO BE APPLIED TO THE UNPAID
PRINCIPAL  BALANCE OF THE NOTE WILL BE AT A RATE OF 0.750 PERCENTAGE POINTS OVER
THE  INDEX,  ADJUSTED IF NECESSARY FOR ANY MINIMUM AND  MAXIMUM RATE LIMITATIONS
DESCRIBED  BELOW,  RESULTING  IN  AN  INITIAL  RATE  OF  5.500%  PER  ANNUM.
NOTWITHSTANDING  THE FOREGOING, THE VARIABLE INTEREST RATE OR RATES PROVIDED FOR
IN  THE NOTE WILL BE SUBJECT TO THE FOLLOWING MINIMUM AND MAXIMUM RATES. NOTICE:
Under  no  circumstances  will the interest rate on the Note be less than 5.500%
per  annum  or  more  than  the  maximum  rate  allowed  by  applicable  law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are  earned  fully  as of the date of the loan and will not be subject to refund
upon  early  payment  (whether  voluntary  or as a result of default), except as
otherwise  required  by  law. Except for the foregoing, Borrower may pay without
penalty  all  or  a  portion  of  the  amount owed earlier than it is due. Early
payments  will  not,  unless agreed to by Lender in writing, relieve Borrower of
Borrower's  obligation  to continue to make payments of accrued unpaid interest.
Rather,  early  payments  will reduce the principal balance due. Borrower agrees
not to send Lender payments marked "paid in full,""without recourse," or similar
language.  If Borrower sends such a payment, Lender may accept it without losing
any  of Lender's rights under this Agreement, and Borrower will remain obligated
to  pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that indicates
that  the  payment  constitutes  "payment in full" of the amount owed or that is
tendered  with  other  conditions  or  limitations  or as full satisfaction of a
disputed amount must be mailed or delivered to: CHINATRUST BANK [USA], CORPORATE
LENDING,  18645  GALE  AVENUE  #  150,  CITY  OF  INDUSTRY,  CA  91748.

LATE  CHARGE.  If  a  payment  is 10 days or more late, Borrower will be charged
5.000%  OF  THE  UNPAID  PORTION  OF  THE  REGULARLY SCHEDULED PAYMENT OR $5.00,
WHICHEVER  IS  GREATER.

INTEREST  AFTER  DEFAULT.  Upon default, at Lender's option, and if permitted by
applicable Law, Lender may add any unpaid accrued interest to principal and such
sum  will  bear  interest  therefrom  until  paid  at  the rate provided in this
Agreement  (including  any  increased  rate). Upon Borrower's failure to pay all
amounts  declared  due  pursuant to this section, Lender, at its option, may, if
permitted  under  applicable  law,  increase  the variable interest rate on this
Agreement  to  5.750  percentage  points  over  the  Index.

DEFAULT.  Each  of the following shall constitute an Event of Default under this
Agreement:

PAYMENT  DEFAULT.  Borrower  fails  to  make  any  payment  when  due  under the
indebtedness.

OTHER  DEFAULTS.  Borrower  fails  to  comply with or to perform any other term,
obligation,  covenant  or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or  condition  contained  in  any  other  agreement between Lender and Borrower.

DEFAULT IN FAVOR OF THIRD PARTIES Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement,
in  favor  of  any  other  creditor  or person that may materially affect any of
Borrower's  property  or  Borrower's  ability  to perform Borrower's obligations
under  this  Agreement  or  any  of  the  Related  Documents.

FALSE STATEMENTS. Any warranty, representation or statement made or furnished to
Lender  by  Borrower or on Borrower's behalf under this Agreement or the Related

<PAGE>

Documents  is  false or misleading in any material respect, either now or at the
time  made  or  furnished or becomes false or misleading at any time thereafter.
INSOLVENCY.  The  dissolution  or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
or Borrower's property, any assignment for the benefit of creditors, any type of
creditor  workout, or the commencement of any proceeding under any bankruptcy or
insolvency  laws  by  or  against  Borrower.

CREDITOR  OR  FORFEITURE  PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings,  whether  by  judicial  proceeding,  self-help, repossession or any
other  method, by any creditor of Borrower or by any governmental agency against
any  collateral securing the indebtedness. This includes a garnishment of any of
Borrower's  accounts,  including  deposit  accounts,  with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as
to  the  validity  or  reasonableness  of  the  claim  which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice of
the  creditor  or  forfeiture  proceeding  and  deposits with Lender monies or a
surety  bond  for the creditor or forfeiture proceeding, in an amount determined
by  Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

EVENTS  AFFECTING  GUARANTOR. Any of the preceding events occurs with respect to
any  guarantor,  endorser,  surety,  or  accommodation  party  of  any  of  the
indebtedness  or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any  Guaranty  of  the  indebtedness  evidenced  by this Note. In the event of a
death,  Lender,  at  its  option,  may, but shall not be required to, permit the
guarantor's  estate  to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.

CHANGE  IN  OWNERSHIP.  Any  change in ownership of twenty-five percent (25%) or
more  of  the  common  stock  of  Borrower.

ADVERSE  CHANGE.  A  material  adverse  change  occurs  in  Borrower's financial
condition,  or  Lender  believes  the  prospect of payment or performance of the
indebtedness  is  impaired.

INSECURITY.  Lender  in  good  faith  believes  itself  insecure.

CURE  PROVISIONS. If any default, other than a default in payment is curable and
if  Borrower  has  not  been given a notice of a breach of the same provision of
this  Agreement within the preceding twelve (12) months, it may be cured (and no
event of default will have occurred) if Borrower, after receiving written notice
from Lender demanding cure of such default: (1) cures the default within fifteen
(15)  days; or (2) if the cure requires more than fifteen (15) days, immediately
initiates  steps which Lender deems in Lender's sole discretion to be sufficient
to  cure  the  default and thereafter continues and completes all reasonable and
necessary  steps  sufficient  to  produce  compliance  as  soon  as  reasonably
practical.

LENDER'S  RIGHTS.  Upon  default, Lender may declare the entire unpaid principal
balance  on  this Agreement and all accrued unpaid interest immediately due, and
then  Borrower  will  pay  that  amount.

ATTORNEYS'  FEES;  EXPENSES. Lender may hire or pay someone else to help collect
this  Agreement  if Borrower does not pay. Borrower will pay Lender that amount.
This  includes,  subject to any limits under applicable law, Lender's attorneys'
fees  and  Lender's legal expenses, whether or not there Is a lawsuit, including
attorneys'  fees,  expenses  for  bankruptcy  proceedings  (including efforts to
modify  or  vacate any automatic stay or injunction), and appeals. Borrower also
will  pay  any  court  costs,  in  addition  to  all other sums provided by law.

GOVERNING  LAW.  THIS  AGREEMENT  WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE  WITH  FEDERAL  LAW  AND  THE  LAWS  OF THE STATE OF CALIFORNIA. THIS
AGREEMENT  HAS  BEEN  ACCEPTED  BY  LENDER  IN  THE  STATE  OF  CALIFORNIA.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit  to  the  jurisdiction  of  the  courts  of  LOS ANGELES County, State of
California.

RIGHT  OF  SETOFF.  To the extent permitted by applicable law, Lender reserves a
right  of  setoff  in  all  Borrower's  accounts  with Lender (whether checking,
savings,  or  some  other  account).  This  includes all accounts Borrower holds
jointly  with  someone  else  and  all accounts Borrower may open In the future.
However,  this does not include any IRA or Keogh accounts, or any trust accounts
for  which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent  permitted  by  applicable law, to charge or setoff all sums owing on the
indebtedness  against  any  and  all  such  accounts.

COLLATERAL.  Borrower  acknowledges  this  Agreement  is  secured  by:
PLEASE  REFER  TO  THE  "DESCRIPTION  OF  COLLATERAL"  PARAGRAPH  STATED  ABOVE.

LINE  OF  CREDIT.  This Agreement evidences a revolving line of credit. Advances
under  this Agreement may be requested orally by Borrower or as provided in this
paragraph.  All  oral  requests  shall be confirmed in writing on the day of the
request.  All  communications,  instructions,  or  directions  by  telephone  or
otherwise  to  Lender  are  to  be  directed to Lender's office shown above. The
following  persons  currently  are  authorized to request advances and authorize
payments  under  the  line  of  credit  until  Lender receives from Borrower, at
Lender's  address  shown above, written notice of revocation of their authority:
ANY  ONE  OF  THE  FOLLOWING:  TONY  SHAHBAZ,  PRESIDENT/SECRETARY  OF  I/OMAGIC
CORPORATION;  and  STEVE GILLINGS (ACTUAL SIGNATURE) X /s/ STEVE GILLINGS, CHIEF
FINANCIAL  OFFICER OF I/OMAGIC CORPORATION. Borrower agrees to be liable for all
sums  either:  (A) advanced in accordance with the instructions of an authorized
person  or  (B)  credited to any of Borrower's accounts with Lender.  The unpaid
principal  balance  owing  on  this  Agreement  at  any time may be evidenced by
endorsements  on this Agreement or by Lender's internal records, including daily
computer  print-outs. Lender will have no obligation to advance funds under this
Agreement  if:  (A)  Borrower  or any guarantor is in default under the terms of
this  Agreement or any agreement that Borrower or any guarantor has with Lender,
including  any  agreement made in connection with the signing of this Agreement;
(B)  Borrower  or  any  guarantor ceases doing business or is insolvent; (C) any
guarantor  seeks,  claims  or otherwise attempts to limit, modify or revoke such
guarantor's  guarantee  of  this  Agreement  or  any other loan with Lender; (D)
Borrower  has  applied  funds  provided  pursuant to this Agreement for purposes
other  than  those  authorized  by  Lender; or (E) Lender in good faith believes
itself  insecure.
\ARBITRATION.  BORROWER  AND  LENDER  AGREE  THAT  ALL  DISPUTES,  CLAIMS  AND
CONTROVERSIES  BETWEEN  THEM  WHETHER  INDIVIDUAL,  JOINT,  OR  CLASS IN NATURE,
ARISING  FROM THIS AGREEMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT
AND  TORT  DISPUTES,  SHALL  BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION  ASSOCIATION  IN EFFECT AT THE TIME THE CLAIM IS FILED, UPON REQUEST
OF  EITHER PARTY. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SHALL CONSTITUTE A
WAIVER  OF  THIS  ARBITRATION  AGREEMENT  OR  BE  PROHIBITED BY THIS ARBITRATION
AGREEMENT.  THIS  INCLUDES, WITHOUT LIMITATION, OBTAINING INJUNCTIVE RELIEF OR A
TEMPORARY RESTRAINING ORDER; INVOKING A POWER OF SALE UNDER ANY DEED OF TRUST OR
MORTGAGE;  OBTAINING  A  WRIT  OF  ATTACHMENT  OR  IMPOSITION  OF A RECEIVER; OR
EXERCISING  ANY  RIGHTS  RELATING  TO  PERSONAL  PROPERTY,  INCLUDING  TAKING OR
DISPOSING  OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT TO ARTICLE
9  OF  THE  UNIFORM  COMMERCIAL  CODE.  ANY  DISPUTES,  CLAIMS, OR CONTROVERSIES
CONCERNING  THE  LAWFULNESS  OR  REASONABLENESS  OF  ANY ACT, OR EXERCISE OF ANY
RIGHT,  CONCERNING  ANY  COLLATERAL,  INCLUDING ANY CLAIM TO RESCIND, REFORM, OR
OTHERWISE  MODIFY  ANY  AGREEMENT  RELATING  TO  THE  COLLATERAL,  SHALL ALSO BE
ARBITRATED,  PROVIDED  HOWEVER  THAT  NO  ARBITRATOR SHALL HAVE THE RIGHT OR THE
POWER TO ENJOIN OR RESTRAIN ANY ACT OF ANY PARTY. BORROWER AND LENDER AGREE THAT
IN  THE  EVENT OF AN ACTION FOR JUDICIAL FORECLOSURE PURSUANT TO CALIFORNIA CODE
OF CIVIL PROCEDURE SECTION 726, OR ANY SIMILAR PROVISION IN ANY OTHER STATE, THE
COMMENCEMENT  OF  SUCH  AN  ACTION  WILL NOT CONSTITUTE A WAIVER OF THE RIGHT TO
ARBITRATE  AND  THE  COURT  SHALL  REFER  TO ARBITRATION AS MUCH OF SUCH ACTION,
INCLUDING  COUNTERCLAIMS,  AS  LAWFULLY MAY BE REFERRED TO ARBITRATION. JUDGMENT
UPON  ANY  AWARD  RENDERED  BY ANY ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION.  NOTHING  IN  THIS AGREEMENT SHALL PRECLUDE ANY PARTY FROM SEEKING
EQUITABLE  RELIEF  FROM  A  COURT  OF  COMPETENT  JURISDICTION.  THE  STATUTE OF
LIMITATIONS,  ESTOPPEL,  WAIVER,  LACHES,  AND  SIMILAR  DOCTRINES  WHICH  WOULD
OTHERWISE  BE  APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE APPLICABLE IN
ANY  ARBITRATION  PROCEEDING,  AND THE COMMENCEMENT OF AN ARBITRATION PROCEEDING
SHALL  BE  DEEMED  THE COMMENCEMENT OR AN ACTION FOR THESE PURPOSES. THE FEDERAL

<PAGE>

ARBITRATION ACT SHALL APPLY TO THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
OF  THIS  ARBITRATION  PROVISION.

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the  original  obligation  or obligations, including all agreements evidenced or
securing  the  obligation(s),  remain  unchanged  and  in full force and effect.
Consent  by  Lender  to  this  Agreement does not waive Lender's right to strict
performance  of  the  obligation(s)  as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of  the obligation(s). It is the intention of Lender to retain as liable parties
all  makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement.  If  any person who signed the original obligation does not sign this
Agreement  below, then all persons signing below acknowledge that this Agreement
is  given  conditionally,  based  on  the  representation  to  Lender  that  the
non-signing  party  consents  to the changes and provisions of this Agreement or
otherwise  will  not  be  released  by  it.  This waiver applies not only to any
initial  extension,  modification  or  release,  but also to all such subsequent
actions.

UNCOLLECTED  FUNDS  AVAILABILITY. LENDER AGREES TO MAKE AVAILABLE TO BORROWER AN
UNCOLLECTED  FUNDS  PROTECTION  FACILITY IN THE AMOUNT OF ONE MILLION AND 00/100
U.S.  DOLLARS  ($1,000,000.00).  BORROWER  MAY  USE  UP  TO  $1,000,000.00  OF
UNCOLLECTED FUNDS DEPOSITED INTO BORROWER'S BUSINESS CHECKING ACCOUNT #22606270.
(SEE  "RIDER  TO  BUSINESS  LOAN  AGREEMENT"  DATED  04-29-2002.).

SUCCESSORS  AND  ASSIGNS. Subject to any limitations stated in this Agreement on
transfer  of Borrower's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral  becomes  vested  in  a  person  other than Borrower, Lender, without
notice  to  Borrower, may deal with Borrower's successors with reference to this
Agreement  and  the  indebtedness  by  way  of  forbearance or extension without
releasing Borrower from the obligations of this Agreement or liability under the
indebtedness.

NOTIFY  US  OF  INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please  notify  us if we report any inaccurate information about your account(s)
to  a  consumer  reporting  agency.  Your written notice describing the specific
inaccuracy(ies)  should  be sent to us at the following address: CHINATRUST BANK
[USA],  CORPORATE  LENDING,  18645 GALE AVENUE #150, CITY OF INDUSTRY, CA 91748.

MISCELLANEOUS  PROVISIONS. This Agreement is payable on demand. The inclusion of
specific  default  provisions  or  rights  of Lender shall not preclude Lender's
right  to  declare  payment of this Agreement on its demand. Lender may delay or
forgo  enforcing  any  of  its  rights  or remedies under this Agreement without
losing  them.  Borrower  and  any other person who signs, guarantees or endorses
this  Agreement,  to  the extent allowed by law, waive any applicable statute of
limitations,  presentment,  demand for payment, and notice of dishonor. Upon any
change  in the terms of this Agreement, and unless otherwise expressly stated in
writing,  no  party  who  signs  this  Agreement,  whether  as maker, guarantor,
accommodation  maker  or  endorser,  shall  be released from liability. All such
parties  agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to  realize  upon  or  perfect Lender's security interest in the collateral; and
take  any  other  action  deemed  necessary  by Lender without the consent of or
notice  to  anyone. All such parties also agree that Lender may modify this loan
without  the  consent  of or notice to anyone other than the party with whom the
modification  is  made.  The  obligations  under  this  Agreement  are joint and
several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF  THIS  AGREEMENT,  INCLUDING  THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES  TO  THE  TERMS  OF  THE  AGREEMENT.
BORROWER:

I/O  MAGIC  CORPORATION

By:   /s/  TONY  SHAHBAZ
    --------------------
TONY  SHAHBAZ,  President/Secretary  of  I/O  MAGIC
CORPORATION