BUSINESS LOAN 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.
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Borrower:   I/O  MAGIC  CORPORATION    Lender:   CHINATRUST  BANK  [USA]
            1300  WAKEHAM  AVENUE                CORPORATE  LENDING
            SANTA  ANA,  CA  92705               18645  GALE  AVENUE  #  150
                                                 CITY  OF  INDUSTRY,  CA  91748

THIS  BUSINESS  LOAN  AGREEMENT  DATED  DECEMBER  31, 2002, IS MADE AND EXECUTED
BETWEEN  I/OMAGIC  CORPORATION ("BORROWER") AND CHINATRUST BANK [USA] ("LENDER")
ON  THE  FOLLOWING  TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL
LOANS  FROM  LENDER  OR  HAS APPLIED !O LENDER FOR A COMMERCIAL LOAN OR LOANS OR
OTHER  FINANCIAL  ACCOMMODATIONS,  INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY
EXHIBIT  OR  SCHEDULE  ATTACHED TO THIS AGREEMENT ("LOAN"). BORROWER UNDERSTANDS
AND  AGREES  THAT:  (A)  IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS
RELYING UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS AS SET FORTH
IN  THIS  AGREEMENT;  (B)  THE  GRANTING,  RENEWING, OR EXTENDING AT ANY LOAN BY
LENDER  AT  ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION;
AND  (C)  ALL SUCH LOANS SHALL BE AND REMAIN SUBJECT TO THE TERMS AND CONDITIONS
OF  THIS  AGREEMENT.

TERM.  This  Agreement  shall  be  effective  as of December 31, 2002, and shall
continue  in full force and effect until such time as all of Borrower's Loans in
favor  of  Lender  have been paid in full, including principal, interest, costs,
expenses, attorneys' fees, and other fees and charges, or until such time as the
parties  may  agree  in  writing  to  terminate  this  Agreement.

CONDITIONS  PRECEDENT  TO  EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment  to Lender's satisfaction of all of the conditions set forth in this
Agreement  and  in  the  Related  Documents.

     LOAN  DOCUMENTS.  Borrower  shall provide to Lender the following documents
for  the Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests  in  the  Collateral; (3) financing statements and all other documents
perfecting  Lender's  Security  Interests; (4) evidence of Insurance as required
below;  (5)  together  with all such Related Documents as Lender may require for
the Loan; all in form and substance satisfactory to Lender and Lender's counsel.

     BORROWER'S  AUTHORIZATION.  Borrower  shall  have  provided  in  form  and
substance  satisfactory  to  Lender  properly  certified  resolutions,  duly
authorizing  the  execution  and  delivery  of  this Agreement, the Note and the
Related  Documents.  In  addition,  Borrower  shall  have  provided  such  other
resolutions, authorizations, documents and instruments as Lender or its counsel,
may  require.

     PAYMENT  OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges,  and other expenses which are then due and payable as specified in this
Agreement  or  any  Related  Document.

     REPRESENTATIONS  AND  WARRANTIES.  The  representations  and warranties set
forth  in  this  Agreement,  in  the  Related  Documents, and in any document or
certificate  delivered  to  Lender  under  this  Agreement are true and correct.

     NO  EVENT  OF  DEFAULT.  There shall not exist at the time of any Advance a
condition  which  would  constitute  an Event of Default under this Agreement or
under  any  Related  Document.

REPRESENTATIONS  AND  WARRANTIES. Borrower represents and warrants to Lender, as
of  the  date  of  this  Agreement,  as of the dale of each disbursement of loan
proceeds,  as of the date of any renewal, extension or modification of any Loan,
and  at  all  times  any  Indebtedness  exists:

ORGANIZATION.  Borrower  is  a corporation for profit which Is, and at all times
shall  be,  duly  organized, validly existing, and in good standing under and by
virtue  of  the  laws of the State of California. Borrower is duly authorized to
transact  business  in  all  other  states  in which Borrower is doing business,
having  obtained  all necessary filings, governmental licenses and approvals for
each  state  in which Borrower is doing business. Specifically, Borrower is, and
at  all limes shall be, duly qualified as a foreign corporation in all states in
which  the  failure  to  so  qualify would have a material adverse effect on its
business  or  financial  condition. Borrower has the full power and authority to
own its properties and to transact the business in which it is presently engaged
or  presently  proposes  to engage. Borrower maintains an office at 1300 WAKEHAM
AVENUE,  SANTA  ANA,  CA  92705.  Unless  Borrower  has  designated otherwise in
writing,  the  principal  office is the office at which Borrower keeps its books
and  records  including  its  records  concerning  the Collateral. Borrower will
notify  Lender  prior  to  any  change  in  the  location of Borrower's state of
organization  or  any  change  In  Borrower's name. Borrower shall do all things
necessary to preserve and to keep in full force and effect its existence, rights
and  privileges,  and  shall  comply  with  all  regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority
or  court  applicable  to  Borrower  and  Borrower's  business  activities.

ASSUMED  BUSINESS NAMES. Borrower has filed or recorded all documents or filings
required  by  law  relating  to  all  assumed  business  names used by Borrower.
Excluding  the name of Borrower, the following is a complete list of all assumed
business  names  under  which  Borrower  does  business:  NONE.

AUTHORIZATION. Borrower's execution, delivery, and performance of this Agreement
and  all the Related Documents have been duly authorized by all necessary action
by  Borrower and do not conflict with, result in a violation of, or constitute a
default  under  (1)  any  provision  of  Borrower's articles of Incorporation or
organization,  or  bylaws,  or  any  agreement  or other instrument binding upon
Borrower  or  (2)  any  law,  governmental  regulation,  court  decree, or order
applicable  to  Borrower  or  to  Borrower's  properties.

FINANCIAL  INFORMATION.  Each  of  Borrower's  financial  statements supplied to
Lender  truly  and completely disclosed Borrower's financial condition as of the
date  of  the  statement,  and  there  has  been  no  material adverse change in
Borrower's  financial  condition  subsequent  to  the  date  of  the most recent
financial  statement  supplied  to  Lender.  Borrower has no material contingent
obligations  except  as  disclosed  in  such  financial  statements.

LEGAL  EFFECT.  This  Agreement  constitutes,  and  any  instrument or agreement
Borrower is required to give under this Agreement when delivered will constitute
legal,  valid,  and binding obligations of Borrower enforceable against Borrower
in  accordance  with  their  respective  terms.

PROPERTIES.  Except as contemplated by this Agreement or as previously disclosed
in  Borrower's  financial  statements or in writing to Lender and as accepted by
Lender,  and  except  for  property  tax  liens  for taxes not presently due and
payable,  Borrower  owns and has good title to all of Borrower's properties free
and clear of all Security Interests, and has not executed any security documents
or  financing  statements  relating  to  such  properties.  All  of  Borrower's
properties  are  titled  in  Borrower's legal name, and Borrower has not used or
filed  a financing statement under any other name for at least the last five (5)
years.

HAZARDOUS  SUBSTANCES.  Except  as  disclosed  to  and acknowledged by Lender in
writing,  Borrower  represents  and  warrants  that:  (1)  During  the period of
Borrower's  ownership  of  Borrower's  Collateral,  there  has  bean  no  use,
generation,  manufacture,  storage,  treatment,  disposal, release or threatened
release of any Hazardous Substance by any person on, under, about or from any of
the  Collateral,  (2)  Borrower  has  no knowledge of, or reason to believe that
there  has  been  (a) any breach or violation of any Environmental Laws: (b) any
use,  generation,  manufacture,  storage,  treatment,  disposal,  release  or

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threatened  release  of  any  Hazardous  Substance  on, under, about or from the
Collateral by any prior owners or occupants of any of the Collateral; or (c) any
actual  or threatened litigation or claims of any kind by any person relating to
such  matters.  (3)  Neither Borrower nor any tenant, contractor, agent or other
authorized  user  of  any  of  the  Collateral shall use, generate, manufacture,
store,  treat, dispose of or release any Hazardous Substance on, under, about or
from  any  of  the  Collateral;  and  any  such  activity  shall be conducted in
compliance  with all applicable federal, state, and local laws, regulations, and
ordinances,  including  without  limitation  all  Environmental  Laws.  Borrower
authorizes  Lender  and  its  agents  to  enter upon the Collateral to make such
inspections  and tests as Lender may deem appropriate to determine compliance of
the Collateral with this section of the Agreement. Any Inspections or tests made
by  Lender  shall  be  at  Borrower's expense and for Lender's purposes only and
shall  not be construed to create any responsibility or liability on the part of
Lender  to  Borrower  or to any other person. The representations and warranties
contained  herein  are  based  on  Borrower's due diligence in investigating the
Collateral  for  hazardous  waste  and Hazardous Substances. Borrower hereby (1)
releases  and  waives  any  future  claims  against  Lender  for  indemnity  or
contribution  in  the  event  Borrower becomes liable for cleanup or other costs
under  any  such  laws,  and  (2)  agrees  to indemnify and hold harmless Lender
against  any  and  all  claims,  losses,  liabilities,  damages,  penalties, and
expenses  which  Lender  may  directly or indirectly sustain or suffer resulting
from  a  breach of this section of the Agreement or as a consequence of any use,
generation,  manufacture,  storage, disposal, release or threatened release of a
hazardous  waste  or substance on the Collateral. The provisions of this section
of  the  Agreement,  including  the  obligation  to indemnify, shall survive the
payment  of  the Indebtedness and the termination, expiration or satisfaction of
this Agreement and shall not be affected by Lender's acquisition of any interest
in  any  of  the  Collateral,  whether  by  foreclosure  or  otherwise.

LITIGATION  AND  CLAIMS.  No  litigation,  claim,  investigation, administrative
proceeding or similar action (Including those for unpaid taxes) against Borrower
is  pending  or threatened, and no other event has occurred which may materially
adversely  affect  Borrower's  financial  condition  or  properties,  other than
litigation,  claims,  or  other  events, if any, that have been disclosed to and
acknowledged  by  Lender  in  writing.

TAXES.  To  the  best of Borrower's knowledge, all of Borrower's tax returns and
reports  that  are or were required to be filed, have been filed, and all taxes,
assessments  and other governmental charges have been paid in full, except those
presently  being  or  to  be contested by Borrower in good faith in the ordinary
course  of  business  and  for  which  adequate  reserves  have  been  provided.

LIEN  PRIORITY.  Unless  otherwise  previously  disclosed  to Lender in writing,
Borrower  has  not entered into or granted any Security Agreements, or permitted
the  filing  or  attachment of any Security Interests on or affecting any of the
Collateral  directly  or  indirectly  securing  repayment of Borrower's Loan and
Note,  that  would  be  prior  or  that  may  in any way be superior to Lender's
Security  Interests  and  rights  in  and  to  such  Collateral.

BINDING  EFFECT. This Agreement, the Note, all Security Agreements (if any), and
all  Related  Documents  are  binding  upon the signers thereof, as well as upon
their  successors,  representatives  and assigns, and are legally enforceable in
accordance  with  their  respective  terms.

AFFIRMATIVE  COVENANTS.  Borrower covenants and agrees with Lender that, so long
as  this  Agreement  remains  In  effect,  Borrower  will:

NOTICES  OF  CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1) all
material adverse changes in Borrower's financial condition, and (2) all existing
and  all  threatened  litigation,  claims,  investigations,  administrative
proceedings  or  similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of  any  Guarantor.

FINANCIAL  RECORDS.  Maintain  its  books  and  records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit Borrower's
books  and  records  at  all  reasonable  times.

FINANCIAL  STATEMENTS.  Furnish  Lender with such financial statements and other
related  Information  at  such  frequencies  and  In  such  detail as Lender may
reasonably  request.

ADDITIONAL  INFORMATION.  Furnish such additional information and statements, as
Lender  may  request  from  time  to  time.

INSURANCE.  Maintain  fire and other risk insurance, public liability insurance,
and  such  other  insurance  as  Lender  may  require with respect to Borrower's
properties  and  operations,  in  form,  amounts,  coverages  and with insurance
companies  acceptable  to Lender. Borrower, upon request of Lender, will deliver
to  Lender  from  time to time the policies or certificates of insurance in form
satisfactory  to  Lender,  including  stipulations  that  coverages  will not be
cancelled  or  diminished without at least ten (10) days prior written notice to
Lender.  Each  insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired In any way by any act, omission
or  default  of  Borrower  or  any other person. In connection with all policies
covering  assets in which Lender holds or is offered a security Interest for the
Loans,  Borrower  will  provide  Lender with such lender's loss payable or other
endorsements  as  Lender  may  require.

INSURANCE  REPORTS.  Furnish  to Lender, upon request of Lender, reports on each
existing  insurance  policy  showing  such  information as Lender may reasonably
request,  including  without  limitation  the  following:  (1)  the  name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties
insured;  (5)  the  then current property values on the basis of which Insurance
has  been  obtained,  and  the  manner  of determining those values; and (6) the
expiration  date of the policy. In addition, upon request of Lender (however not
more  often  than  annually),  Borrower  will  have  an  Independent  appraiser
satisfactory  to  Lender  determine,  as  applicable,  the  actual cash value or
replacement  cost of any Collateral. The cost of such appraisal shall be paid by
Borrower.

OTHER  AGREEMENTS. Comply with all terms and conditions of all other agreements,
whether  now  or  hereafter  existing,  between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such  agreements.

LOAN  PROCEEDS. Use all Loan proceeds solely for Borrower's business operations,
unless  specifically  consented  to  the  contrary  by  Lender  in  writing.

TAXES, CHARGES AND LIENS. Pay and discharge when due all of Its indebtedness and
obligations,  including  without limitation all assessments, taxes. governmental
charges,  levies  and  liens, of every kind and nature, imposed upon Borrower or
its  properties,  income, or profits, prior to the date on which penalties would
attach,  and  all  lawful  claims that, if unpaid, might become a lien or charge
upon  any  of  Borrower's  properties,  income,  or  profits.

PERFORMANCE. Perform and comply, in a timely manner, with all terms, conditions,
and provisions set forth in this Agreement, in the Related Documents, and in all
other  instruments  and  agreements  between Borrower and Lender. Borrower shall
notify  Lender  immediately  in  writing  of  any default in connection with any
agreement.

OPERATIONS.  Maintain  executive and management personnel with substantially the
same  qualifications  and  experience  as  the  present executive and management
personnel;  provide  written  notice  to  Lender  of any change in executive and
management  personnel;  conduct its business affairs in a reasonable and prudent
manner.

ENVIRONMENTAL STUDIES. Promptly conduct and complete, at Borrower's expense, all
such  investigations,  studies,  samplings  and  testings as may be requested by
Lender  or any governmental authority relative to any substance, or any waste or
by-product  of  any  substance  defined  as toxic or a hazardous substance under
applicable  federal,  state, or local law, rule, regulation, order or directive,
at  or affecting any property or any facility owned, leased or used by Borrower.

COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with all laws, ordinances, and

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regulations,  now  or  hereafter  In  effect,  of  all  governmental authorities
applicable  to  the conduct of Borrower's properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans  With  Disabilities  Act.  Borrower may contest in good faith any such
law,  ordinance,  or  regulation  and withhold compliance during any proceeding,
including  appropriate  appeals,  so  long  as  Borrower  has notified Lender in
writing  prior  to  doing  so and so long as, in Lender's sole opinion, Lender's
interests  in the Collateral are not jeopardized. Lender may require Borrower to
post  adequate  security or a surety bond, reasonably satisfactory to Lender, to
protect  Lender's  interest.

INSPECTION.  Permit  employees  or  agents  of  Lender at any reasonable time to
inspect  any  and  all  Collateral  for  the  Loan or Loans and Borrower's other
properties  and  to examine or audit Borrower's books, accounts, and records and
to  make  copies  and  memoranda  of Borrower's books, accounts, and records. If
Borrower  now  or at any time hereafter maintains any records (Including without
limitation  computer  generated  records  and computer software programs for the
generation  of  such records) in the possession of a third party, Borrower, upon
request  of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any records
it  may  request,  all  at  Borrower's  expense.

COMPLIANCE  CERTIFICATES.  Unless waived in writing by Lender, provide Lender at
least  annually,  with  a  certificate  executed  by  Borrower's chief financial
officer,  or  other  officer or person acceptable to Lender, certifying that the
representations  and warranties set forth in this Agreement are true and correct
as of the date of the certificate and further certifying that, as of the date of
the  certificate,  no  Event  of  Default  exists  under  this  Agreement.

ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects with
any  and all Environmental Laws; not cause or permit to exist, as a result of an
Intentional  or  unintentional  action  or omission on Borrower's part or on the
part  of  any  third  party,  on property owned and/or occupied by Borrower, any
environmental  activity  where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit  issued  by  the  appropriate  federal,  state  or  local  governmental
authorities;  shall  furnish  to  Lender promptly and in any event within thirty
(30)  days  after receipt thereof a copy of any notice, summons, lien, citation,
directive,  letter  or  other  communication  from  any  governmental  agency or
Instrumentality  concerning  any intentional or unintentional action or omission
on  Borrower's part In connection with any environmental activity whether or not
there  Is  damage  to  the  environment  and/or  other  natural  resources.

ADDITIONAL  ASSURANCES.  Make,  execute  and  deliver  to Lender such promissory
notes,  mortgages,  deeds  of trust, security agreements, assignments, financing
statements,  instruments,  documents  and  other  agreements  as  Lender  or its
attorneys may reasonably request to evidence and secure the Loans and to perfect
all  Security  Interests.

LENDER'S  EXPENDITURES.  If  any  action  or  proceeding is commenced that would
materially  affect  Lender's  interest in the Collateral or if Borrower fails to
comply  with any provision of this Agreement or any Related Documents, including
but  not  limited to Borrower's failure to discharge or pay when due any amounts
Borrower  is  required  to  discharge or pay under this Agreement or any Related
Documents,  Lender on Borrower's behalf may (but shall not be obligated to) take
any  action  that  Lender  deems  appropriate,  including  but  not  limited  to
discharging  or  paying  all  taxes, liens, security Interests, encumbrances and
other  claims,  at  any  time  levied or placed on any Collateral and paying all
costs  for  insuring,  maintaining  and  preserving  any  Collateral.  All  such
expenditures  incurred  or  paid  by  Lender  for  such  purposes will then bear
interest  at  the  rate charged under the Note from the date incurred or paid by
Lender  to  the  date  of repayment by Borrower. All such expenses will become a
part of the indebtedness and, at Lender's option, will (A) be payable on demand;
(B)  be added to the balance of the Note and be apportioned among and be payable
with  any  installment  payments to become due during either (1) the term of any
applicable  insurance  policy;  or (2) the remaining term of the Note; or (C) be
treated  as  a  balloon  payment  which  will  be  due and payable at the Note's
maturity.

NEGATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:

INDEBTEDNESS  AND LIENS. (1) Except for trade debt incurred in the normal course
of  business  and indebtedness to Lender contemplated by this Agreement, create,
incur  or  assume indebtedness for borrowed money, including capital leases, (2)
sell,  transfer,  mortgage, assign, pledge, lease, grant a security interest in,
or  encumber any of Borrower's assets (except as allowed as Permitted Liens), or
(3)  sell  with  recourse  any  of  Borrower's  accounts,  except  to  Lender.

CONTINUITY  OF  OPERATIONS.  (1) Engage In any business activities substantially
different  than  those  In  which  Borrower  is  presently  engaged,  (2)  cease
operations,  liquidate,  merge,  transfer, acquire or consolidate with any other
entity,  change  its  name,  dissolve  or transfer or sell Collateral out of the
ordinary course of business, or (3) pay any dividends on Borrower's stock (other
than dividends payable in its stock), provided, however that notwithstanding the
foregoing,  but  only  so  long  as  no  Event  of  Default  has occurred and is
continuing  or  would  result  from  the  payment of dividends, if Borrower Is a
"Subchapter  S Corporation" (as defined in the Internal Revenue Code of 1986, as
amended),  Borrower may pay cash dividends on Its stock to its shareholders from
time to time in amounts necessary to enable the shareholders to pay income taxes
and  make  estimated  income  tax  payments  to  satisfy their liabilities under
federal  and state law which arise solely from their status as Shareholders of a
Subchapter  S  Corporation  because  of  their ownership of shares of Borrower's
stock,  or  purchase  or retire any of Borrower's outstanding shares or alter or
amend  Borrower's  capital  structure.

LOANS,  ACQUISITIONS  AND  GUARANTIES.  (1)  Loan, invest in or advance money or
assets,  (2) purchase, create or acquire any interest in any other enterprise or
entity,  or  (3)  incur  any obligation as surety or guarantor other than in the
ordinary  course  of  business.

CESSATION  OF  ADVANCES.  If  Lender has made any commitment to make any Loan to
Borrower,  whether  under  this  Agreement  or under any other agreement, Lender
shall  have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement or
any  of  the  Related  Documents  or  any  other  agreement that Borrower or any
Guarantor  has  with  Lender;  (B)  Borrower  or  any  Guarantor  dies,  becomes
incompetent  or  becomes  insolvent,  files  a petition in bankruptcy or similar
proceedings,  or  is  adjudged  a  bankrupt; (C) there occurs a material adverse
change  in  Borrower's  financial  condition,  in the financial condition of any
Guarantor,  or  in  the  value  of  any Collateral securing any Loan; or (D) any
Guarantor  seeks,  claims  or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in
good  faith  deems  itself  insecure, even though no Event of Default shall have
occurred.

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.

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 Loan.

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 or any Grantor 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 or any Grantor's property or Borrower's or
any Grantor's ability to repay the Loans or perform their respective obligations
under  this  Agreement  or  any  of  the  Related  Document.

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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
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
of 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.

DEFECTIVE  COLLATERALIZATION.  This  Agreement  or  any of the Related Documents
ceases  to  be  in  full  force  and effect (including failure of any collateral
document  to create a valid and perfected security Interest or lien) at any time
and  for  any  reason.

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  Loan.  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  of  any  of  the  indebtedness  or any Guarantor dies or becomes
incompetent,  or  revokes  or  disputes the validity of, or liability under, any
Guaranty  of  the  indebtedness. 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  !he  common  stock  of  Borrower.

ADVERSE  CHANGE.  A  material  adverse  change  occurs  in  Borrowers  financial
condition, or Lender believes the prospect of payment or performance of the Loan
is  impaired.

INSECURITY.  Lender  In  good  faith  believes  itself  Insecure.

RIGHT  TO CURE. If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured (and no
Event of Default will have occurred) if Borrower or Grantor, as the case may be,
after  receiving  written notice from Lender demanding cure of such default: (1)
cure the default within fifteen (15) days; or (2) if the Cure requires more than
fifteen  (15)  days,  immediately  Initiate steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter continue and
complete  all reasonable and necessary steps sufficient to produce compliance as
soon  as  reasonably  practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise  provided  In this Agreement or the Related Documents, all commitments
and  obligations  of Lender under this Agreement or the Related Documents or any
other  agreement  immediately  will  terminate (including any obligation to make
further  Loan  Advances  or  disbursements),  and,  at  Lender's  option,  all
indebtedness  immediately will become due and payable, all without notice of any
kind  to  Borrower,  except  that in the case of an Event of Default of the type
described  in  the  "insolvency"  subsection  above,  such acceleration shall be
automatic  and  not  optional. In addition, Lender shall have all the rights and
remedies  provided  in  the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable Law, all of Lender's rights
and  remedies  shall  be  cumulative  and  may  be  exercised  singularly  or
concurrently.  Election by Lender to pursue any remedy shall not exclude pursuit
of  any  other remedy, and an election to make expenditures or to take action to
perform  an  obligation  of Borrower or of any Grantor shall not affect Lender's
right  to  declare  a  default  and  to  exercise  its  rights  and  remedies.

COMPENSATING  BALANCE.  BORROWER AGREES TO MAINTAIN A MINIMUM QUARTERLY COMBINED
AVERAGE  COLLECTED  COMPENSATING BALANCE OF $750,000.00, EXCLUDING TCD BALANCES.
IF  THE  MINIMUM  QUARTERLY  AVERAGE BALANCE IS NOT MAINTAINED, AN INTEREST RATE
EQUAL  TO  WSJ  PRIME  RATE  PLUS  0.75%  SHALL  BE APPLIED TO THE SHORTFALL AND
BORROWER'S  ACCOUNT  WILL  BE  CHARGED  ACCORDINGLY.

REPORTING  REQUIREMENTS.  BORROWER  AGREES TO PROVIDE LENDER WITH THE FOLLOWING:
1)  CPA  AUDITED  ANNUAL BUSINESS FINANCIAL STATEMENT TO BE SUBMITTED WITHIN 120
DAYS  OF  FISCAL  YEAR-END.
2)  ANNUAL  BUSINESS  TAX  RETURN  TO  BE  SUBMITTED  WITHIN  30 DAYS OF FILING.
3)  MONTHLY ACCOUNTS RECEIVABLES AGING REPORT, ACCOUNTS PAYABLE AGING REPORT AND
INVENTORY  LISTING  TO  BE  SUBMITTED  WITHIN  15  DAYS  FROM  EACH  MONTH  END.
4)  10Q  REPORT  TO  BE  SUBMITTED  WITHIN  60  DAYS  OF  EACH  QUARTER-END.
5)  10K  REPORT  TO  BE  SUBMITTED  WITHIN  90  DAYS  FROM  YEAR-END.

FINANCIAL  COVENANT.
1)  CURRENT  RATIO  SHALL  BE  MAINTAINED  AT  NO  LESS  THAN  1.25X.
(defined  as  total  current  assets  divided  by  current  liabilities).
2)  EFFECTIVE  TANGIBLE  NET  WORTH  SHALL  BE  MAINTAINED  AT  $16,000,000.00.
(Defined  as  stated  net  worth includes redeemable convertible preferred stock
less  intangibles,  net  loans  to  affiliate(s),  net  loans  to  shareholders/
principals/officers,  plus  subordinated  debt).
3)  EFFECTIVE  DEBT/EQUITY  RATIO  SHALL  BE  MAINTAINED AT NO HIGHER THAN 2.0X.
(Defined as total liabilities less subordinated debt divided by stated net worth
less  intangibles,  net  loans  to  affiliate(s),  net  loans  to  shareholders/
principals/officers,  plus  subordinated  debt.)

OTHER  TERMS  AND  CONDITIONS.
1)  BORROWER  SHALL  MAINTAIN  TOTAL  BANKING  RELATIONSHIP WITH CHINATRUST BANK
(U.S.A.);  ANY  ACCOUNTS  ESTABLISHED  OR  TO  BE ESTABLISHED AT OTHER FINANCIAL
INSTITUTIONS  SHALL REQUIRE THE CONSENT OF CTBUSA WITH THE EXCEPTION OF EXISTING
ACCOUNTS  AT  WELLS  FARGO  BANK.

2)  BORROWER  ACKNOWLEDGES  THAT  NO  OTHER  BANK  BORROWING  IS ALLOWED WITHOUT
LENDER'S  PRIOR  WRITTEN  CONSENT.

3)  BORROWER  AGREES  AND  AUTHORIZES  LENDER TO CONDUCT ON-SITE FIELD AUDITS AS
DEEMED  NECESSARY  ON  THE BORROWER'S ACCOUNTS RECEIVABLE, INVENTORY AND RELATED
BOOKS  AND  RECORDS  THROUGH  THE  LENDER'S APPOINTED AUDITORS AT THE BORROWER'S
EXPENSE.  NO  CAP  ON  AUDIT  FEES.

4)  LOCKBOX  ARRANGEMENT  TO  BE ESTABLISHED FOR COLLECTION OF 80% OF BORROWER'S
ACCOUNT  DEBTOR  PAYMENTS  OR  80% OF ACCOUNTS RECEIVABLES BALANCE, WHICHEVER IS
HIGHER.  (100%  OF  PROCEEDS  COLLECTED  VIA  LOCK  BOX  TO  BE CREDITED TO BANK
CONTROLLED  ACCOUNT  #22606467  AND  TO  BE  USED  AS  LOAN  REPAYMENT).

5)  BORROWER  MAY  NOT  MAKE  ADVANCES  OR  LOANS  IN  ANY FORM OR TO ANY PARTY,
INCLUDING  BUT NOT LIMITED TO AFFILIATES OR NONAFFILIATES, WITHOUT PRIOR WRITTEN
CONSENT  FROM  CHINATRUST  BANK  (U.S.A.).

<PAGE>

6)  BORROWER  AGREES  TO  MAINTAIN  A  DEPOSIT  ACCOUNT WITH LENDER AS ITS MAJOR
OPERATING  ACCOUNT  WHICH  WILL  BE  SUBJECT  TO  ACCOUNT  ANALYSIS  CHARGES.

7)  SATISFACTORY  FIELD AUDIT TO BE CONDUCTED WITHIN TWO MONTHS OF 12/20/2002 AT
BORROWER'S  EXPENSE.

LINE  OF  CREDIT. LENDER AGREES AT ITS SOLE DISCRETION (AS MORE SPECIFICALLY SET
FORTH  BELOW),  TO MAKE AVAILABLE TO BORROWER A REVOLVING LINE OF CREDIT UP TO A
MAXIMUM  AMOUNT  OF  NINE  MILLION AND 00/100 U.S. DOLLARS ($9,000,000.00). EACH
ADVANCE  OVER  A  TOTAL  OUTSTANDING  LINE  BALANCE  OF  $4,000,000.00 WILL HAVE
MATURITIES  AS  DETAILED  BELOW.  THIS  LINE  OF  CREDIT MAY BE USED AS FOLLOWS:

A)  WITHIN  THE LINE A SUB-LINE OF $8,000,000.00 IS AVAILABLE WITH THE FOLLOWING
SUB-LIMITS:

A.1)  WITHIN  THE  SUB-LINE  A  SUB-LIMIT  OF  $8,000,000.00  IS  AVAILABLE FOR:
      1.     ISSUANCE  OF  USANCE  LETTERS  OF  CREDIT;
                  BUT  ONLY  UP  TO  60  DAYS;
      2.     ISSUANCE  OF  SIGHT  LETTERS  OF  CREDIT;
      3.     REFINANCING  LETTERS  OF  CREDIT;
      4.     LOCAL  PURCHASE  FINANCING  AGAINST  INVOICE(S);
      5.     WORKING  CAPITAL  LOANS:
                  ITEMS  2-5  MAY  HAVE  MATURITIES  OF  UP  TO  150  DAYS.

THE  AVAILABILITY  OF  SUB-LIMIT  (A.1) IS SUBJECT TO THE BORROWING BASE FORMULA
STATED  BELOW.

B)  WITHIN  THE  LINE,  A  SUBLINE  OF  $1,000,000.00  IS  AVAILABLE  FOR:
      6.  UNCOLLECTED  FUNDS  AVAILABILITY,  AS  SET  FORTH  BELOW.

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.  THE  AGGREGATE  UNCOLLECTED  FUNDS
AVAILABILITY  FOR  ACCOUNT #22606270 SHALL NOT AT ANY TIME EXCEED $1,000,000.00.
(REFER  TO  "RIDER  TO  BUSINESS LOAN AGREEMENT" ATTACHED HERETO AND MADE A PART
HEREOF.)

BORROWER  ACKNOWLEDGES  THAT  LENDER  WILL  NOT  PERMIT  AN  OVERDRAFT STATUS IN
BORROWER'S  CHECKING  ACCOUNT.  FURTHER  BORROWER  AGREES  TO  MAKE AN IMMEDIATE
DEPOSIT  TO  COVER  ANY  RETURNED  CHECK  OR  IN  CLEARING  CHECK  OVERDRAFTS.

THE  AGGREGATE  OUTSTANDING  SHALL  NOT AT ANY TIME EXCEED $9,000,000.00. IN THE
EVENT  THE  AGGREGATE  OUTSTANDING  EVER  EXCEEDS  $9,000,000.00, BORROWER SHALL
IMMEDIATELY  PAY  DOWN  THE  LINE  BY  THE  AMOUNT  WHICH EXCEEDS $9,000,000.00.
FURTHER, IN THE EVENT SUB-LINE A OR SUB-LINE B EVER EXCEEDS THE AMOUNT PERMITTED
TO  BE  OUTSTANDING  THEREUNDER,  BORROWER  SHALL  IMMEDIATELY  REPAY THE EXCESS
AMOUNT.
"THIS AGREEMENT REFLECTS THE BANK'S GENERAL WILLINGNESS TO EXTEND CREDIT TO YOU,
BUT  DOES  NOT  INVOLVE  ANY  OBLIGATION  ON  THE PART OF THE BANK TO MAKE FUNDS
AVAILABLE  THEREFORE,  NO  COMMITMENT  OR  FACILITY  FEE  WILL  BE  CHARGED."

BORROWING  BASE  FORMULA.  THE  BORROWING BASE FORMULA IS CALCULATED AS FOLLOWS:
65%  OF  ELIGIBLE  ACCOUNT  RECEIVABLES*';
*ELIGIBLE  ACCOUNTS  RECEIVABLE  ARE  DEFINED, BUT NOT LIMITED TO THE FOLLOWING:
1)  THE  ACCOUNTS  RECEIVABLE  CANNOT  BE  FROM CONDITIONAL SALES OR CONSIGNMENT
SALES;
2)  NO  FOREIGN  RECEIVABLES  (UNLESS  COVERED  BY CREDIT INSURANCE OR LETTER OF
CREDIT,  SATISFACTORY  TO  BANK).  ON A CASE BY CASE BASIS THE BANK MAY CONSIDER
FINANCING  ON  A  WITH  OR WITHOUT RECOURSE BASIS TO OUR BORROWERS, EXPORT SIGHT
DRAFTS  DRAWN  UNDER  SIGHT  LETTERS OF CREDIT AND/OR USANCE DRAFTS DRAWN ON THE
ISSUING  BANK  PROVIDING THE UNDERLYING LETTER OF CREDIT HAS BEEN ADVISED BY AND
LODGED  WITH  CTBUSA;
3)  NOT  SUBJECT  TO  OFFSET  BY  A  CONTRA  COUNT;
4)  NOT  AGED OVER 90 DAYS FROM INVOICE DATE, OR ALTERNATIVELY OVER 60 DAYS FROM
DUE  DATE;
5)  NOT  BELONGING  TO  AN  ACCOUNT  THAT WHEN CROSS AGED, MORE THAN 50% OF THAT
SPECIFIC  ACCOUNT  RECEIVABLE  IS  MORE  THAN  90  DAYS  PAST  INVOICE  DATE, OR
ALTERNATIVELY  60  DAYS PAST DUE DATE. A DETERMINATION TO WAIVE THIS MAY BE DONE
ON  A  CASE-BY-CASE  BASIS  PROVIDED  AN  ANALYSIS  BY  THE  BANK  INDICATES THE
COLLECTIBILITY  OF  THE  OTHER  RECEIVABLES  IS  CERTAIN;
6)  NOT  AFFILIATED  WITH  BORROWER;
7)  NO  COD  ACCOUNTS;
8)  UNITED STATES GOVERNMENT RECEIVABLES UNLESS FORMAL ASSIGNMENT FROM N 138 AND
N  139  ARE  OBTAINED;
9)  NO  STATE  OR  MUNICIPAL  ACCOUNTS RECEIVABLE UNLESS SUPPORTED BY ACCEPTABLE
ASSIGNMENTS AND WHEREVER POSSIBLE THE BANK SHOULD BE INDICATED AS A JOINT PAYEE;
10)  NOT  PREVIOUSLY  DECLINED  BY  A  FACTOR  FOR  CREDIT  REASONS.

TERM  OUT. UPON MATURITY OF THE LINE (12-31-2003) BORROWER MAY CHOOSE ONE OF THE
FOLLOWING  OPTIONS:

A)  PAYOUT  THE  EXISTING  LIEN  OF  CREDIT  WITH  LENDER,  OR;

B) CONVERT THE EXISTING LINE OF CREDIT WITH LENDER. TO A (6) MONTH TERM LOAN, ON
TERMS  AND  CONDITIONS  SATISFACTORY  TO  LENDER,  PROVIDED HOWEVER, THE PAYMENT
SCHEDULE  WILL  BE  AS  FOLLOWS:

BORROWER  WILL  REPAY TERM LOAN IN PRINCIPAL PAYMENTS EQUAL TO 1/6TH OF THE THEN
TOTAL  OUTSTANDING  PRINCIPAL  BALANCE  OF  THE LINE. BORROWER'S FIRST PRINCIPAL
PAYMENT  IS DUE 01-31-2004, AND ALL SUBSEQUENT PRINCIPAL PAYMENTS ARE DUE ON THE
SAME  DAY  OF  EACH  MONTH  AFTER  THAT.  IN ADDITION, BORROWER WILL PAY REGULAR
MONTHLY  PAYMENTS  OF  ALL  ACCRUED UNPAID INTEREST DUE AS OF EACH PAYMENT DATE,
BEGINNING  01-31-2004,  WITH  ALL  SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON THE
SAME DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL PAYMENT DUE 06-30-3004, WILL
BE  FOR  ALL  PRINCIPAL  AND ALL ACCRUED INTEREST NOT YET PAID, UNLESS OTHERWISE
AGREED  OR REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST TO ACCRUED
UNPAID  INTEREST,  THEN  TO  PRINCIPAL,  AND  ANY REMAINING AMOUNT TO ANY UNPAID
COLLECTION COSTS AND LATE CHARGES. THE ANNUAL INTEREST RATE SHALL BE COMPUTED ON
A 365/360 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.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
this  Agreement:

<PAGE>

AMENDMENTS. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this  Agreement.  No  alteration  of  or  amendment  to  this Agreement shall be
effective  unless  given in writing and signed by the party or parties sought to
be  charged  or  bound  by  the  alteration  or  amendment.

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 OF AN ACTION FOR THESE PURPOSES. THE FEDERAL
ARBITRATION ACT SHALL APPLY TO THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
OF  THIS  ARBITRATION  PROVISION.

ATTORNEYS'  FEES;  EXPENSES.  Borrower agrees to pay upon demand all of Lender's
costs  and  expenses,  including  Lender's  attorneys'  fees  and Lender's legal
expenses,  incurred in connection with the enforcement of this Agreement. Lender
may  hire or pay someone else to help enforce this Agreement, and Borrower shall
pay  the  costs  and  expenses  of  such enforcement. Costs and expenses include
Lender's  attorneys'  fees and legal expenses whether or not there is a lawsuit,
including  attorneys'  fees  and  legal  expenses  for  bankruptcy  proceedings
(including  efforts  to  modify  or  vacate  any  automatic stay or injunction),
appeals,  and  any  anticipated post-judgment collection services. Borrower also
shall  pay  all  court  costs and such additional fees as may be directed by the
court.

CAPTION  HEADINGS.  Caption  headings  in  this  Agreement  are  for convenience
purposes  only  and  are not to be used to interpret or define the provisions of
this  Agreement.

CONSENT  TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale or
transfer,  whether  now  or later, of one or more participation interests in the
Loan  to  one or more purchasers, whether related or unrelated to Lender. Lender
may  provide,  without any limitation whatsoever, to any one or more purchasers,
or  potential  purchasers,  any  information  or knowledge Lender may have about
Borrower  or  about  any  other matter relating to the Loan, and Borrower hereby
waives  any  rights  to  privacy Borrower may have with respect to such matters.
Borrower  additionally  waives  any  and  all  notices  of sale of participation
interests,  as  well  as  all  notices  of  any repurchase of such participation
interests.  Borrower  also  agrees that the purchasers of any such participation
interests  will  be  considered  as the absolute owners of such interests in the
Loan  and  will have all the rights granted under the participation agreement or
agreements  governing the sale of such participation interests. Borrower further
waives  all  rights  of  offset  or  counterclaim  that it may have now or later
against  Lender  or  against  any purchaser of such a participation interest and
unconditionally  agrees  that  either  Lender  or  such  purchaser  may  enforce
Borrower's  obligation  under the Loan irrespective of the failure or insolvency
of  any  holder  of  any  interest in the Loan. Borrower further agrees that the
purchaser  of  any  such  participation  interests  may  enforce  its  interests
irrespective  of  any personal claims or defenses that Borrower may have against
Lender.

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.

NO  WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under
this  Agreement  unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a  waiver of such right or any other right. A waiver by Lender of a provision of
this  Agreement  shall  not  prejudice  or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of  this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender  and  Borrower,  or  between  Lender  and any Grantor, shall constitute a
waiver  of  any  of  Lender's  rights  or  of any of Borrower's or any Grantor's
obligations  as  to  any  future transactions. Whenever the consent of Lender is
required  under  this  Agreement,  the granting of such consent by Lender in any
instance  shall  not constitute continuing consent to subsequent instances where
such  consent  is  required  and  in  all  cases  such consent may be granted or
withheld  in  the  sole  discretion  of  Lender.

NOTICES.  Any notice required to be given under this Agreement shall be given in
writing,  and shall be effective when actually delivered, when actually received
by  telefacsimile  (unless  otherwise  required  by  law), when deposited with a
nationally  recognized  overnight  courier, or, if mailed, when deposited in the
United  States  mail,  as  first  class,  certified  or  registered mail postage
prepaid,  directed  to the addresses shown near the beginning of this Agreement.
Any  party  may  change  its  address for notices under this Agreement by giving
formal  written  notice to the other parties, specifying that the purpose of the
notice is to change the party's address. For notice purposes, Borrower agrees to
keep  Lender  informed  at  all  times  of  Borrower's  current  address. Unless
otherwise  provided  or required by law, if there is more than one Borrower, any
notice  given  by  Lender  to  any  Borrower is deemed to be notice given to all
Borrowers.

SEVERABILITY.  If  a court of competent jurisdiction finds any provision of this
Agreement  to be illegal, invalid, or unenforceable as to any circumstance, that
finding  shall  not  make  the  offending  provision  illegal,  invalid,  or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the  offending  provision  cannot be so modified, it shall be considered deleted
from  this  Agreement.  Unless  otherwise  required  by  law,  the  illegality,
invalidity,  or  unenforceability  of  any provision of this Agreement shall not
affect  the  legality, validity or enforceability of any other provision of this
Agreement.

SUBSIDIARIES  AND  AFFILIATES  OF  BORROWER.  To  the  extent the context of any
provisions  of this Agreement makes it appropriate, including without limitation
any  representation,  warranty  or covenant, the word "Borrower" as used in this
Agreement  shall  include  all  of  Borrower's  subsidiaries  and  affiliates.
Notwithstanding  the  foregoing  however,  under  no  circumstances  shall  this
Agreement  be  construed  to  require Lender to make any Loan or other financial
accommodation  to  any  of  Borrower's  subsidiaries  or  affiliates.

SUCCESSORS  AND  ASSIGNS. AI! covenants and agreements contained by or on behalf
of  Borrower shall bind Borrower's successors and assigns and shall inure to the
benefit  of  Lender and its successors and assigns. Borrower shall not, however,
have  the right to assign Borrower's rights under this Agreement or any interest
therein,  without  the  prior  written  consent  of  Lender.

SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees that

<PAGE>

in  extending  Loan  Advances,  Lender  is  relying  on  all  representations,
warranties,  and  covenants  made  by  Borrower  in  this  Agreement  or  in any
certificate  or  other  instrument  delivered  by  Borrower to Lender under this
Agreement  or  the Related Documents. Borrower further agrees that regardless of
any  investigation  made  by  Lender,  all  such representations, warranties and
covenants  will survive the extension of Loan Advances and delivery to Lender of
the  Related  Documents, shall be continuing in nature, shall be deemed made and
redated  by  Borrower at the time each Loan Advance is made, and shall remain in
full  force  and effect until such time as Borrower's indebtedness shall be paid
in  full,  or  until  this  Agreement shall be terminated in the manner provided
above,  whichever  is  the  last  to  occur.

TIME  IS  OF  THE  ESSENCE.  Time  is  of the essence in the performance of this
Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings  when  used  in  this  Agreement.  Unless  specifically  stated  to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the  plural,  and  the  plural  shall  include  the singular, as the context may
require.  Words and terms not otherwise defined in this Agreement shall have the
meanings  attributed  to  such  terms in the Uniform Commercial Code. Accounting
words  and terms not otherwise defined in this Agreement shall have the meanings
assigned  to them in accordance with generally accepted accounting principles as
in  effect  on  the  date  of  this  Agreement:

ADVANCE.  The  word  "Advance" means a disbursement of Loan funds made, or to be
made,  to  Borrower  or  on  Borrower's  behalf  on a line of credit or multiple
advance  basis  under  the  terms  and  conditions  of  this  Agreement.

AGREEMENT.  The  word  "Agreement"  means  this Business Loan Agreement, as this
Business  Loan  Agreement may be amended or modified from time to time, together
with  all  exhibits  and schedules attached to this Business Loan Agreement from
time  to  time.

BORROWER.  The  word  "Borrower"  means  I/OMAGIC  CORPORATION  only.

COLLATERAL.  The  word  "Collateral"  means  all  property and assets granted as
collateral  security  for  a  Loan,  whether  real or personal property, whether
granted  directly  or  indirectly,  whether  granted  now  or in the future, and
whether  granted  in  the  form  of  a  security  interest, mortgage, collateral
mortgage,  deed  of  trust,  assignment,  pledge, crop pledge, chattel mortgage,
collateral  chattel  mortgage,  chattel  trust,  factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention contract,
lease  or  consignment  intended  as a security device, or any other security or
lien  interest  whatsoever,  whether  created  by  law,  contract, or otherwise.

ENVIRONMENTAL  LAWS.  The  words  "Environmental  Laws"  mean any and all state,
federal  and  local  statutes,  regulations  and  ordinances  relating  to  the
protection  of human health or the environment, including without limitation the
Comprehensive  Environmental  Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments
and  Reauthorization  Act  of  1986,  Pub. L. No. 99-499 ("SARA"), the Hazardous
Materials  Transportation  Act,  49  U.S.C.  Section 1801, et seq., The Resource
Conservation  and  Recovery  Act, 42, U.S.C. Section 6901, et seq., Chapters 6.5
through  7.7  of  Division  20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or federal laws, rules, or regulations
adopted  pursuant  thereto.

EVENT OF DEFAULT. The words "Event of Default" mean any of the events of default
set  forth  in  this  Agreement  in  the  default  section  of  this  Agreement.
GAAP.  The  word  "GAAP"  means  generally  accepted  accounting  principles.

GRANTOR.  The  word  "Grantor"  means  I/OMAGIC  CORPORATION  only.

GUARANTOR.  The  word  "Guarantor"  means  I/OMAGIC  CORPORATION  only.

GUARANTY.  The  word  "Guaranty"  means  the  guaranty from Guarantor to Lender,
including  without  limitation  a  guaranty  of  all  or  part  of  the  Note.

HAZARDOUS  SUBSTANCES.  The  words  "Hazardous  Substances" mean materials that,
because  of  their  quantity,  concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or  the  environment  when  improperly  used,  treated,  stored,  disposed  of,
generated,  manufactured, transported or otherwise handled. The words "Hazardous
Substances" are used in their very broadest sense and include without limitation
any  and  all hazardous or toxic substances, materials or waste as defined by or
listed  under  the  Environmental  Laws.  The  term  "Hazardous Substances" also
includes,  without  limitation,  petroleum  and  petroleum  by-products  or  any
fraction  thereof  and  asbestos.

INDEBTEDNESS.  The  word  "Indebtedness" means the indebtedness evidenced by the
Note  or  Related  Documents, including all principal and interest together with
all  other indebtedness and costs and expenses for which Borrower is responsible
under  this  Agreement  or  under  any  of  the  Related  Documents.

LENDER.  'The  word  "Lender"  means  CHINATRUST  BANK (USA), its successors and
assigns.

LOAN.  The word "Loan" means any and all loans and financial accommodations from
Lender  to  Borrower  whether  now or hereafter existing, and however evidenced,
including  without limitation those loans and financial accommodations described
herein  or  described on any exhibit or schedule attached to this Agreement from
time  to  time.

NOTE.  The word "Note" means THAT CERTAIN PROMISSORY NOTE DATED APRIL 9, 2001 IN
THE ORIGINAL PRINCIPAL AMOUNT OF $8,000,000 AS AMENDED AND EXTENDED FROM TIME TO
TIME, INCLUDING PURSUANT TO THE CHANGE IN TERMS AGREEMENT OF EVEN DATE HEREWITH.

PERMITTED  LIENS.  The  words  "Permitted  Liens"  mean  (1)  liens and security
interests securing indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments,  or  similar  charges either not yet due or being contested in good
faith;  (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like  liens  arising in the ordinary course of business and securing obligations
which  are  not  yet  delinquent;  (4)  purchase  money  liens or purchase money
security  interests  upon or in any property acquired or held by Borrower in the
ordinary  course  of  business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled  "Indebtedness  and Liens"; (5) liens and security interests which, as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing;  and  (6)  those  liens  and  security interests which in the aggregate
constitute  an  immaterial and insignificant monetary amount with respect to the
net  value  of  Borrower's  assets.

RELATED  DOCUMENTS.  The  words  "Related  Documents" mean all promissory notes,
credit  agreements,  loan  agreements,  environmental  agreements,  guaranties,
security  agreements,  mortgages,  deeds  of  trust,  security deeds, collateral
mortgages,  and  all other instruments, agreements and documents, whether now or
hereafter  existing,  executed  in  connection  with  the  Loan.

SECURITY  AGREEMENT.  The  words  "Security  Agreement" mean and include without
limitation  any agreements, promises, covenants, arrangements, understandings or
other  agreements,  whether  created by law, contract, or otherwise, evidencing,
governing,  representing,  or  creating  a  Security  Interest.

SECURITY  INTEREST.  The words "Security Interest" mean, without limitation, any
and all types of collateral security, present and future, whether in the form of

<PAGE>

a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge,  crop  pledge,  chattel  mortgage,  collateral chattel mortgage, chattel
trust,  factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or  otherwise.

BORROWER  ACKNOWLEDGES  HAVING  READ  ALL  THE  PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT  AND  BORROWER  AGREES  TO  ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED  DECEMBER  31,  2002.
BORROWER:
I/OMAGIC  CORPORATION

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

LENDER:
CHlNATRUST  BANK  [USA]


BY:
     Authorized  Signer