COMMERCIAL SECURITY AGREEMENT

Principal     Loan Date  Maturity   Loan No   Call/coll Account Officer Initials
$6,000,000.00 08-15-2003 09-01-2004 92018206                    636AW  /s/AW

   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/OMAGIC CORPORATION(TIN: 88-0290623) Lender: UNITED NATIONAL BANK
          1300  WAKEHAM  AVENUE                         INTERNATIONAL DEPARTMENT
          SANTA  ANA,  CA  92705                        855 SOUTH ATLANTIC BLVD.
                                                        MONTEREY PARK, CA 91754
                                                        (626)281-9575
--------------------------------------------------------------------------------

THIS COMMERCIAL SECURITY AGREEMENT dated August 15,2003, is made and executed
between I/OMAGIC CORPORATION ("Grantor") and UNITED NATIONAL BANK ("Lender").

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

     All Inventory, Chattel Paper, Accounts, Equipment, General Intangibles and
     Consumer Goods, together with the following property: All Fixtures

The word "Collateral" also includes all proceeds of the above described
collateral, including without limitation, any equipment purchased with proceeds,
as well as all accessories, attachments, accessions, replacements and additions,
whether added now or later, together with all insurance proceeds and refunds of
insurance premiums, if any, and all sums that may be due from third parties who
may cause damage to any of the foregoing, whether due to judgment, settlement or
other process.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender IS required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.

Some or all of the Collateral may be located on the following described real
estate:

UCC FINANCING STATEMENT FILED ON JULY 30, 2003 AT SECRETARY OF STATE,
SACRAMENTO, STATE OF CALIFORNIA, WITH FILE #0321260018.
UCC FINANCING STATEMENT FILED ON JULY 30, 2003 AT SECRETARY OF STATE, STATE OF
NEVADA, WITH FILE #2003020439-1

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

Perfection of Security Interest. Grantor agrees to execute financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lender's security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's interest upon any
and all chattel paper if not delivered to Lender for possession by Lender. This
is a continuing Security Agreement and will continue in effect even though all
or any part of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.

Notices to Lender. Grantor will promptly notify Lender in writing at Lender's
address shown above (or such other addresses as Lender may / ~/designate from
time to time) prior to any (1) change in Grantor's name; (2) change in Grantor's
assumed business name(s); (3) change in the
f/1 management of the Corporation Grantor; (4) change in the authorized
signer(s); (5) change in Grantor's principal office address; (6) change in
Grantor's state of organization; (7) conversion of Grantor to a new or different
type of business entity; or (8) change in any other aspect of Grantor that
directly or indirectly relates to any agreements between Grantor and Lender. No
change in Grantor's name or state of organization will take effect until after
Lender has received notice

No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party,
and its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.

Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine,
and fully complies with all applicable laws and regulations concerning form,
content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any Account
becomes subject to a security interest in favor of Lender, the Account shall be
a good and valid account representing an undisputed, bona fide indebtedness
incurred by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of sale,
or for services previously performed by Grantor with or for the account debtor.
So long as this Agreement remains in effect, Grantor shall not, without Lender's
prior written consent, compromise, settle, adjust, or extend payment under or
with regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the Collateral except
those disclosed to Lender in writing.

Location of the Collateral. Except in the ordinary course of Grantor's business,
Grantor agrees fo keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records
concerning the Collateral) at Grantor's address shown above or at such other
locations as are acceptable to Lender. Upon Lender's request, Grantor will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor's operations, including without
limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located.

Removal of the Collateral. Except in the ordinary course of Grantor's business,
including the sales of inventory, Grantor shall not remove the Collateral from
its existing 10catieiJ without Lender's prior written consent. To the extent
that the Collateral consists of vehicles, or other titled property, Grantor
shall not take or permit any action which would require application for
certificates of title for the vehicles outside the State of California, without
Lender's prior written consent. Grantor shall, whenever requested, advise Lender
of the exact location of the Collateral.

<PAGE>

Loan No: 92018206         COMMERCIAL SECURITY AGREEMENT                   Page 2
                                  (Continued)
--------------------------------------------------------------------------------

Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, or as otherwise provided
for in this Agreement, Grantor shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. While Grantor is not in default under
this Agreement, Grantor may sell inventory, but only in the ordinary course of
its business and only to buyers who qualify as a buyer in the ordinary course of
business. A sale in the ordinary course of Grantor's business does not include a
transfer in partial or total satisfaction of a debt or any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender. This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender.

Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender's rights in the Collateral
against the claims and demands of all other persons.

Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to
pay when due all claims for work done on, or services rendered or material
furnished in connection with the Collateral so that no lien or encumbrance may
ever attach to or be filed against the
Collateral.

Inspection of Collateral. Lender and Lender's designated representatives and
agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.

Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, permissible fees or other
charges that could accrue as a result of foreclosure or sale of the Collateral.
In any contest Grantor shall defend itself and Lender and shall satisfy any
final adverse judgment before enforcement against the Collateral. Grantor shall
name Lender as an additional obligee under any surety bond furnished in the
contest proceedings. Grantor further agrees to furnish Lender with evidence that
such taxes, assessments, and governmental and other charges have been paid in
full and in a timely manner. Grantor may withhold any such payment or may elect
to contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender's interest in
the Collateral is not jeopardized.

Compliance with Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating to the undue
erosion of highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Lender's interest in
the Collateral, in Lender's opinion, is not jeopardized.

Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used in violation of any Environmental Laws or for the generation,
manufacture, storage, transportation, treatment, disposal, release or threatened
release of any Hazardous Substance. The representations and warranties contained
herein are based on Grantor's due diligence in investigating the Collateral for
Hazardous Substances. Grantor hereby (1) releases and waives any future claims
against Lender, for indemnity or contribution in the event Grantor becomes
liable for cleanup
or other costs under any Environmental Laws, and (2) agrees to i demnify and
hold harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to indemnify shall
survive the payment of the Indebtedness and the satisfaction of this Agreement.

Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, 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
thirty (30) days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a notice. 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 Grantor or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses "single interest
insurance," which will cover only Lender's interest in the Collateral.

Application of Insurance Proceeds. Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor fails
to do so within fifteen (15) days of the casualty. All proceeds of any insurance
on the Collateral, including accrued proceeds thereon, shall be held by Lender
as part of the Collateral. If Lender consents to repair or replacement of the
damaged or destroyed Collateral, Lender shall, upon satisfactory proof of
expenditure, payor reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration. If Lender does not consent to repair or replacement of
the Collateral, Lender shall retain a sufficient amount of the proceeds to pay
all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds
which have not been disbursed within six (6) months after their receipt and
which Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.

Insurance Reserves. Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid. If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender. The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the payment of premiums
shall remain Grantor's sole responsibility.

Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2)
the risks insured; (3) the amount of the policy; (4) the property insUred(5) the
then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (6) the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

<PAGE>

Loan No: 92018206         COMMERCIAL SECURITY AGREEMENT                   Page 3
                                  (Continued)
--------------------------------------------------------------------------------

Financing Statements. Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect Lender's
security interest. At Lender's request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lender's
security interest in the Property. Grantor will pay all filing fees, title
transfer fees, and other fees and costs involved unless prohibited by law or
unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute financing statements and documents of title in
Grantor's name and to execute all documents necessary to transfer title if there
is a default. Lender may file a copy of this Agreement as a financing statement.
If Grantor changes Grantor's name or address, or the name or address of any
person granting a security interest under this Agreement changes, Grantor will
promptly notify the Lender of such change.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor'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 the Collateral and paying all
costs for insuring, maintaining and preserving the 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 Grantor. 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. The Agreement also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

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

Payment Default. Grantor fails to make any payment when due under the
Indebtedness.

Other Defaults. Grantor 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
Grantor.

Default In Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement, purchase or
r II sales agreement, or any other agreement, in favor of any other creditor or
person that may materially affect any of Grantor's property or Grantor's or any
Grantor's ability to repay the Indebtedness or perform their respective
obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to
Lender by Grantor or on Grantor'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.

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.

Insolvency. The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor'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 Grantor.

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 Grantor or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Grantor's accounts, including deposit accounts, with Lender. However, this Event
of Default shall not apply if there is a good faith dispute by Grantor as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Grantor 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
guarantor, endorser, surety, or accommodation party of any of the Indebtedness
or guarantor, endorser, surety, or accommodation party dies or becomes
incompetent or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.

Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.

Insecurity. Lender in good faith believes itself insecure.

Cure Provisions. If any default, other than a default in payment is curable and
if Grantor has not been given a notice of a breach of the same provision of this
Agreement within the preceding three (3) months, it may be cured (and no event
of default will have occurred) if Grantor, after receiving written notice from
Lender demanding cure of such default: (1) cures the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise anyone or more of the following rights and
remedies:

Accelerate Indebtedness. Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.

Assemble Collateral. Lender m~1 require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If


<PAGE>

Loan No: 92018206     COMMERCIAL SECURITY AGREEMENT                       Page 4
                                  (Continued)
--------------------------------------------------------------------------------

the Collateral contains other goods not covered by this Agreement at the time of
repossession, Grantor agrees Lender may take such other goods, provided that
Lender makes reasonable efforts to return them to Grantor after repossession.

Sell the Collateral. Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Lender's own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor, and
other persons as required by law, reasonable notice of the time and place of any
public sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to any
person who, after Event of Default occurs, enters into and authenticates an
agreement waiving that person's right to notification of sale. The requirements
of reasonable notice shall be met if such notice is given at least ten (10) days
before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the Collateral,
shall become a part of the Indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of expenditure until
repaid.

Appoint Receiver. Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lender's right to the appointment of
a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.

Collect Revenues, Apply Accounts. Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lender's discretion transfer any Collateral into
Lender's own name or that of Lender's nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as
Lender may determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address to which mail
and payments are to be sent; and endorse notes, checks, drafts, money orders,
documents of title, instruments and items pertaining to payment, shipment, or
storage of any Collateral. To facilitate collection, Lender may notify account
debtors and obligors on any Collateral to make payments directly to Lender.

Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.

Other Rights and Remedies. Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.

Election of Remedies. Except as may be prohibited by applicable law, all of
Lender's rights and remedies, whether evidenced by this
Agreement, the Related Documents, or by any other writing, 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
I obligation of Grantor under this Agreement, after Grantor's failure to
perform, shall not affect Lender's right to declare a default and exercise its
remedies.

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. If the parties as to the
j 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.

Expenses. If Lender institutes any suit or action to enforce any of the terms of
this Agreement, Lender shall be entitled to recover such sum as the court may
adjudge reasonable. Whether or not any court action is involved, and to the
extent not prohibited by law, all reasonable expenses Lender incurs that in
Lender's opinion are necessary at any time for the protection of its interest or
the enforcement of its rights shall become a part of the Indebtedness payable on
demand and shall bear interest at the Note rate from the date of the expenditure
until repaid. Expenses covered by this paragraph include, without limitation,
however subject to any limits under applicable law, Lender's expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services,
to the extent permitted by applicable law. Grantor also will pay any court
costs, in addition to all other sums provided by law.

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.

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.

Preference Payments. Any monies Lender pays because of an asserted preference
claim in Grantor's bankruptcy will become a part of the Indebtedness and, at
Lender's option, shall be payable by Grantor as provided in this Agreement.

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 Grantor, shall constitute a waiver of any of Lender's rights or of
any of 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, Grantor agrees to
keep Lender informed at all times of Grantor's current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.

Power of Attorney. Grantor hereby, appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or
to demand termination of filings of other secured


<PAGE>

Loan No: 92018206         COMMERCIAL SECURITY AGREEMENT                   Page 5
                                  (Continued)
--------------------------------------------------------------------------------

parties. Lender may at any time, and without further authorization from Grantor,
file a carbon, photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the
perfection of Lender's security interest in the Collateral.

Waiver of Co-Obligor's Rights. If more than one person is obligated for the
Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all claims
against such other person which Grantor has or would otherwise have by virtue of
payment of the Indebtedness or any part thereof, specifically including but not
limited to all rights of indemnity, contribution or exoneration.

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.

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

Survival of Representations and Warranties. All representations, warranties, and
agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor's Indebtedness shall be paid in
full.

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:

Account. The word "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Grantor (or to a third party grantor acceptable to Lender).

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

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

Collateral. The word "Collateral" means all of Grantor's right, title and
interest in and to all the Collateral as described in the Collateral Description
section of this Agreement.

Default.  The word "Default" means the Default set forth in this Agreement in
the
section titled "Default".

Environmental Laws. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to I 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.

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

Guaranty. The word "Guaranty" means I/OMAGIC CORPORATION only.

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 Grantor is responsible
under this Agreement or under any of the Related Documents.
Lender. The word "Lender" means UNI~D NATIONAL BANK, its successors and assigns.
Note. The word "Note" means the Note executed by I/OMAGIC CORPORATION in the
principal amount of $6,000,000.00 dated August 15, 2003, together with all
renewals of, extensions of, modifications of, refinancings of, consolidations
of, and substitutions for the note or credit agreement.
Property. The word "Property" means all of Grantor's right, title and interest
in and to all the Property as described in the "Collateral Description" section
of this Agreement.

Related Documents. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, 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 Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS
TERMS. THIS AGREEMENT IS DATED AUGUST 15,2003.

<PAGE>

Loan No: 92018206         COMMERCIAL SECURITY AGREEMENT                   Page 6
                                  (Continued)
--------------------------------------------------------------------------------

GRANTOR:

I/OMAGIC CORPORATION

By: /s/ Tony Shahbaz                               By: /s/ Steve Gillings,
TONY SHAHBAZ, President of I/OMAGIC CORPORATION    STEVE GILLINGS, Chief
     Financial Officer of
         I/OMAGIC CORPORATION

LENDER:

UNITED NATIONAL BANK

/s/ Alison Wu
Authorized Signer