<PAGE>

Exhibit 10.1

<TABLE>

                                                        BUSINESS LOAN AGREEMENT
<CAPTION>
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      Principal           Loan Date         Maturity           Loan No          Call / Coll      Account        Officer     Initials
   <S>                   <C>               <C>               <C>                 <C>   <C>                        <C>
   $14,000,000.00        04-09-2002        12-31-2002        3030600000          4A0 / 71                         321
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                                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
              SANTA ANA, CA 92705                                                   18645 GALE AVENUE # 150
                                                                                    CITY OF INDUSTRY, CA 91748

====================================================================================================================================
</TABLE>

THIS BUSINESS LOAN AGREEMENT DATED APRIL 9, 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 April 9, 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 December 31, 2002.

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.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 2
--------------------------------------------------------------------------------

     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 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.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 3
--------------------------------------------------------------------------------

     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 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.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 4
--------------------------------------------------------------------------------

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.

     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.

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 2.5X.
(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.).





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 5
--------------------------------------------------------------------------------

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.

LINE OF CREDIT . LENDER AGREES TO MAKE AVAILABLE TO BORROWER A REVOLVING LINE OF
CREDIT UP TO A MAXIMUM AMOUNT OF FOURTEEN MILLION AND 00/100 U.S. DOLLARS
($14,000,000.00). 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 $13,000,000.00 IS AVAILABLE WITH THE FOLLOWING
SUB-LIMITS:

A.1) WITHIN THE SUB-LINE A SUB-LIMIT OF $13,000,000.00 IS AVAILABLE FOR:

     1.  ISSUANCE OF USANCE LETTERS OF CREDIT;

ALL 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:

ALL UP TO 150 DAYS.

A.2) WITHIN THE SUB-LINE A SUB-LIMIT OF $3,000,000.00 IS AVAILABLE FOR:
     6. ISSUANCE OF SIGHT OR USANCE LETTERS OF CREDIT AGAINST 30% OF INVENTORY*,

WITH MATURITIES UP TO 60 DAYS.

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

NOTE: SUBLIMIT A.2) MAY BE USED FUR ISSUANCE OF SIGHT OR USANCE LETTERS OF
CREDIT ONLY WHEN A.1) DO NOT PROVIDE SUFFICIENT AVAILABILITY. THE SUCCEEDING
ACCEPTANCES OR TRUST RECEIPTS ARE SUBJECT TO THE BORROWING BASE STATED BELOW.

* INELIGIBLE INVENTORY IS DEFINED AS IN-TRANSIT INVENTORY.

B) WITHIN THE LINE, A SUBLINE OF $1,000,000.00 IS AVAILABLE FOR:

     6. 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. 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 CHINATRUST BANK (U.S.A.) WILL NOT CREATE AN OVERDRAFT
STATUS IN BORROWER'S CHECKING ACCOUNT. FURTHER BORROWER ACKNOWLEDGES THAT CTBUSA
WILL REQUIRE AN IMMEDIATE DEPOSIT TO COVER ANY RETURNED CHECK OR IN CLEARING
CHECK OVERDRAFTS.

THE AGGREGATE OUTSTANDING SHALL NOT AT ANY TIME EXCEED $14,000,000.00.
"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<<

* INELIGIBLE ACCOUNTS RECEIVABLE ARE DEFINED AS: ACCOUNTS AGED MORE THAN 90 DAYS
FROM INVOICE DATE, AFFILIATED ACCOUNTS, FOREIGN ACCOUNTS, CONSIGNMENTS, ACCOUNTS
WITH OVER 50% OF ITS COMBINED INVOICES OUTSTANDING OVER 90 DAYS FROM DATE OF
INVOICE.

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.

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) 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 PRIMARILY ON THE BORROWER'S ACCOUNTS RECEIVABLE, ACCOUNTS
PAYABLE AND INVENTORY 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).
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.).
6) BORROWER AGREES TO MAINTAIN A DEPOSIT ACCOUNT WITH LENDER AS ITS MAJOR
OPERATING ACCOUNT WHICH WILL BE SUBJECT TO ACCOUNT ANALYSIS CHARGES.
7) PRIOR TO RENEWAL, SATISFACTORY FIELD AUDIT TO BE CONDUCTED AT BORROWER'S
EXPENSE.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 6
--------------------------------------------------------------------------------

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

     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 WILT 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.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 7
--------------------------------------------------------------------------------

     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 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.

     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 any guarantor, surety, or
     accommodation party of any or all of the Loan.

     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 ORIGINAL NOTE DATED 04-09-2001 IN THE AMOUNT OF
     $8,000,000.00 MATURING ON 04-09-2002.





<PAGE>

                             BUSINESS LOAN AGREEMENT
LOAN NO. 3030600000                (CONTINUED)                            PAGE 8
--------------------------------------------------------------------------------

     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 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 APRIL 9, 2002.

BORROWER:

I/OMAGIC CORPORATION

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

LENDER:

CHlNATRUST BANK [USA]

BY:
   --------------------------------------------------
     Authorized Signer