Document:

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                                                                   EXHIBIT 10.38

                         EXECUTIVE EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the "Agreement") made as of January 24, 2001 between ARIAD
Pharmaceuticals, Inc. (the "Company") a Delaware corporation, and Frederick V.
Casselman (the "Employee").

1.     Employment, Duties and Acceptance.

       1.1    The Company hereby employs the Employee, for the Term (as
              hereinafter defined), to render full-time services to the Company,
              and to perform such duties as he shall reasonably be directed by
              the Chief Executive Officer of the Company to perform. The
              Employee's title shall be designated by the Chief Executive
              Officer and initially shall be Chief Business Officer and Senior
              Vice President.

       1.2    The Employee hereby accepts such employment and agrees to render
              the services described above.

       1.3    The principal place of employment of the Employee hereunder shall
              be in the greater Boston, Massachusetts area, or other locations
              reasonably acceptable to the Employee. The Employee acknowledges
              that for limited periods of time he may be required to provide
              services to the Company at locations, reasonably acceptable to the
              Employee, outside of the Boston, Massachusetts area.

       1.4    Notwithstanding anything to the contrary herein, although the
              Employee shall provide services as a full-time employee, it is
              understood that the Employee may (a) have an academic appointment
              and (b) participate in professional activities (collectively,
              "Permitted Activities"); provided, however, that such Permitted
              Activities do not interfere with the Employee's duties to the
              Company.

2.     Term of Employment.

       The term of the Employee's employment under this Agreement (the "Term")
       shall commence February 12, 2001 (the "Effective Date") or such other
       date mutually agreed upon by the parties, and shall end on February 28,
       2004 unless sooner terminated pursuant to Section 4 or 5 of this
       Agreement; provided that this Agreement shall automatically be renewed
       for successive one-year terms (the Term and, if the period of employment
       is so renewed, such additional period(s) of employment are collectively
       referred to herein as the "Term") unless terminated by written notice
       given by either party to the other at least ninety days prior to the end
       of the applicable Term.

3.     Compensation.

       3.1    As full compensation for all services to be rendered pursuant to
              this Agreement, the Company agrees to pay the Employee, during the
              Term, a salary at the fixed rate of $210,000 per annum during the
              first year of the Term and increased each year thereafter, by
              amounts, if any, to be determined by the Board of Directors of the
              Company (the "Board"), in its sole discretion, payable in equal
              biweekly installments, less such deductions or amounts to be
              withheld as shall be required by applicable law and regulations.

       3.2    Each year, the Company shall pay the Employee a discretionary
              bonus of up to 30% of base salary, which bonus shall be determined
              annually by the Board. The bonus, if any, may be
<PAGE>   2
              paid in the form of stock options, stock awards, deferred
              compensation or cash, as determined by the Board.

       3.3    The Company shall pay or reimburse the Employee for all reasonable
              expenses actually incurred or paid by him during the Term in the
              performance of his services under this Agreement, upon
              presentation of expense statements or vouchers or such other
              supporting information as it may require.

       3.4    The Employee shall be eligible under any incentive plan, stock
              award plan, bonus, deferred or extra compensation plan, pension,
              group health, disability and life insurance or other so-called
              "fringe" benefits which the Company provides for its executives at
              the comparable level. All stock options and stock awards granted
              to the Employee shall be subject to a vesting schedule which shall
              be determined by the Compensation and Stock Option Committee of
              the Board. The stock options and stock awards, if any, to be
              granted to the Employee shall also be subject to the terms of a
              stock option plan and certificate and stock award plan and
              certificate, respectively. Any unvested options shall be forfeited
              to the Company in the event (a) this Agreement is terminated by
              the Company for Cause pursuant to Section 4 herein, or (b) either
              party elects not to renew this Agreement pursuant to Section 2
              herein.

       3.5    The Company shall grant the Employee an option to purchase 200,000
              shares of the Company's Common Stock at the fair market value on
              the date of the Board's approval, in accordance with the Company's
              1991 Stock Option Plan for Employees, as amended. The Employee
              agrees that all such options shall be subject to a four-year
              vesting schedule, vesting in equal increments of 25% on each
              anniversary of their issuance. Any unvested options shall be
              forfeited to the Company in the event (a) this Agreement is
              terminated by the Company for Cause pursuant to Section 4 herein,
              or (b) either party elects not to renew this Agreement pursuant to
              Section 2 herein.

4.     Termination by the Company.

       The Company may terminate this Agreement, if any one or more of the
       following shall occur:

       (a)    The Employee shall die during the Term; provided, however, the
              Employee's legal representatives shall be entitled to receive the
              compensation provided for hereunder to the last day of the month
              in which his death occurs.

       (b)    The Employee shall become physically or mentally disabled, whether
              totally or partially, so that he is unable substantially to
              perform his services hereunder for (i) a period of 180 consecutive
              days, or (ii) for shorter periods aggregating 180 days during any
              twelve month period.

       (c)    The Employee acts, or fails to act, in a manner that provides
              Cause for termination. For purposes of this Agreement, the term
              "Cause" means (i) the conviction of the Employee of any felony
              involving moral turpitude, (ii) any acts of fraud or embezzlement
              by the Employee involving the Company or any of its Affiliates,
              (iii) the failure by the Employee to perform any of his material
              duties hereunder, (iv) violation of any federal, state or local
              law, or administrative regulation, (v) a conflict of interest,
              (vi) conduct that could result in publicity reflecting unfavorably
              on the Company in a material way, (vii) failure to comply with the
              written policies of the Company, or (viii) a breach of the terms
              of this Agreement by the Employee. As the term "Cause" applies to
              clauses (iii) through (viii), such act, conduct, or failure, as
              the case may be, must adversely affect the Company's business. The
              Company shall provide the Employee written notice of termination
              pursuant to this Section 4, and
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              Employee shall have 30 days to cure or remedy such failure or
              breach, in which case this Agreement shall not be terminated.

5.     Termination by the Employee.

       5.1    The Employee may terminate this Agreement, if any one or more of
              the following shall occur:

              (a)    a material breach of the terms of this Agreement by the
                     Company and such breach continues for 30 days after the
                     Employee gives the Company written notice of such breach;

              (b)    the Company shall make a general assignment for benefit of
                     creditors; or any proceeding shall be instituted by the
                     Company seeking to adjudicate it as bankrupt or insolvent,
                     or seeking liquidation, winding up, reorganization,
                     arrangement, adjustment, protection, relief, or composition
                     of it or its debts under law relating to bankruptcy,
                     insolvency or reorganization or relief of debtors, or
                     seeking entry of an order for relief or the appointment of
                     a receiver, trustee, or other similar official for it or
                     for any substantial part of its property or the Company
                     shall take any corporate action to authorize any of the
                     actions set forth above in this subsection 5(b);

              (c)    an involuntary petition shall be filed or an action or
                     proceeding otherwise commenced against the Company seeking
                     reorganization, arrangement or readjustment of the
                     Company's debts or for any other relief under the Federal
                     Bankruptcy Code, as amended, or under any other bankruptcy
                     or insolvency act or law, state or federal, now or
                     hereafter existing and remain undismissed or unstayed for a
                     period of 30 days; or

              (d)    a receiver, assignee, liquidator, trustee or similar
                     officer for the Company or for all or any part of its
                     property shall be appointed involuntarily.

              (e)    a Change in Control as defined in Section 14.

6.     Severance.

       6.1    If (i) the Company terminates this Agreement without Cause or (ii)
              the Employee terminates this Agreement pursuant to Section 5.1(a),
              then: (1) except in the case of death or disability, the Company
              shall continue to pay Employee his current salary for the
              remaining period of the applicable Term; (2) all stock, stock
              options, similar equity rights, and deferred compensation option
              awards granted pursuant to this Agreement that would have vested
              during the Term shall vest immediately prior to such termination;
              and (3) the Company shall continue to provide all benefits subject
              to COBRA at its expense for up to one year.

       6.2    In the event of a consummation of a Change in Control of the
              Company, and if the Employee gives notice of termination within 90
              days after such occurrence, then (i) all stock, stock options,
              similar equity rights, and deferred compensation option awards
              granted to the Employee shall immediately vest and remain fully
              exercisable through their original term with all rights; and (ii)
              the Company shall continue to pay the Employee his then-current
              salary for the shorter of (a) six months, or (b) the remaining
              period of the applicable Term.

7.     Other Benefits.

       In addition to all other benefits contained herein, the Employee shall be
       entitled to:
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       (a)    Vacation time of four weeks per year taken in accordance with the
              vacation policy of the Company.

       (b)    After six years of employment, one three-month period of fully
              paid leave of absence in accordance with Company policies in place
              at that time; it being understood that such policies may restrict
              the Employee from taking such leave of absence until a time that
              is acceptable to the Company and may include other such
              limitations.

       (c)    Group health, disability and life insurance.

       (d)    The Company shall provide the Employee with an automobile
              allowance of $750 per month and standard tax preparation and
              planning services.

8.     Confidentiality.

       8.1    The Employee acknowledges that, during the course of performing
              his services hereunder, the Company shall be disclosing
              information to the Employee related to the Company's Field of
              Interest, Inventions, projects and business plans, as well as
              other information (collectively, "Confidential Information"). The
              Employee acknowledges that the Company's business is extremely
              competitive, dependent in part upon the maintenance of secrecy,
              and that any disclosure of the Confidential Information would
              result in serious harm to the Company.

       8.2    The Employee agrees that the Confidential Information only shall
              be used by the Employee in connection with his activities
              hereunder as an employee of the Company, and shall not be used in
              any way that is detrimental to the Company.

       8.3    The Employee agrees not to disclose, directly or indirectly, the
              Confidential Information to any third person or entity, other than
              representatives or agents of the Company. The Employee shall treat
              all such information as confidential and proprietary property of
              the Company.

       8.4    The term "Confidential Information" does not include information
              that (a) is or becomes generally available to the public other
              than by disclosure in violation of this Agreement, (b) was within
              the Employee's possession prior to being furnished to such
              Employee, (c) becomes available to the Employee on a
              nonconfidential basis or (d) was independently developed by the
              Employee without reference to the information provided by the
              Company.

       8.5    The Employee may disclose any Confidential Information that is
              required to be disclosed by law, government regulation or court
              order. If disclosure is required, the Employee shall give the
              Company advance notice so that the Company may seek a protective
              order or take other action reasonable in light of the
              circumstances.

       8.6    Upon termination of this Agreement, the Employee shall promptly
              return to the Company all materials containing Confidential
              Information, as well as data, records, reports and other property,
              furnished by the Company to the Employee or produced by the
              Employee in connection with services rendered hereunder.
              Notwithstanding such return or any of the provisions of this
              Agreement, the Employee shall continue to be bound by the terms of
              the confidentiality provisions contained in this Section 8 for a
              period of three years after the termination of this Agreement.

       8.7    In connection with his employment by the Company, the Employee
              hereby acknowledges that he may enter into more than one agreement
              with regard to (a) the confidentiality of certain books, records,
              documents and business, (b) rights to certain inventions,
              proprietary
<PAGE>   5
              information, and writings, (c) publication of certain materials,
              and (d) other related matters (the "Confidential Matters") of the
              Company (the "Confidentiality Agreements"). In order to clarify
              any potential conflicts between certain respective provisions of
              such Confidentiality Agreements, the Employee and the Company
              hereby agree that, as among such Confidentiality Agreements, the
              provision (or part thereof) in any such Confidentiality Agreement
              which affords the greatest protection to the Company with respect
              to the Confidential Matters shall control.

9.     Inventions Discovered by the Employee While Performing Services
       Hereunder.

       During the Term, the Employee shall promptly disclose to the Company any
       invention, improvement, discovery, process, formula, or method or other
       intellectual property, whether or not patentable, whether or not
       copyrightable (collectively, "Inventions") made, conceived or first
       reduced to practice by the Employee, either alone or jointly with others,
       while performing service hereunder. The Employee hereby assigns to the
       Company all of his right, title and interest in and to any such
       Inventions. During and after the Term, the Employee shall execute any
       documents necessary to perfect the assignment of such Inventions to the
       Company and to enable the Company to apply for, obtain, and enforce
       patents and copyrights in any and all countries on such Inventions. The
       Employee hereby irrevocably designates the Chief Patent Counsel to the
       Company as his agent and attorney-in-fact to execute and file any such
       document and to do all lawful acts necessary to apply for and obtain
       patents and copyrights and to enforce the Company's rights under this
       paragraph. This Section 9 shall survive the termination of this
       Agreement.

10.    Non-Competition and Non-Solicitation.

       During the Term and for a period of one year following the date of
       termination or nonrenewal for any reason (other than for termination
       pursuant to Section 5.1(a): (a) the Employee shall not in the United
       States or in any country in which the Company shall then be doing
       business, directly or indirectly, enter the employ of, or render any
       services to, any person, firm or corporation engaged in any business
       competitive with the business of the Company or of any of its
       subsidiaries or affiliates of which the Employee may become an employee
       or officer during the Term; he shall not engage in such business on his
       own account; and he shall not become interested in any such business,
       directly or indirectly, as an individual, partner, shareholder, director,
       officer, principal, agent, employee, trustee, consultant, or any other
       relationship or capacity; provided, however, that nothing contained in
       this Section 10 shall be deemed to prohibit the Employee from acquiring,
       solely as an investment, shares of capital stock of any public
       corporation; (b) neither the Employee nor any Affiliate of the Employee
       shall solicit or utilize, or assist any person in any way to solicit or
       utilize, the services, directly or indirectly, of any of the Company's
       directors, consultants, members of the Board of Scientific and Medical
       Advisors, officers or employees (collectively, "Associates of the
       Company"). This nonsolicitation and nonutilization provision shall not
       apply to Associates of the Company who have previously terminated their
       relationship with the Company.

       10.1   If the Employee commits a breach, or threatens to commit a breach,
              of any of the provisions of this Section 10, the Company shall
              have the following rights and remedies:

              10.1.1 The right and remedy to have the provisions of this
                     Agreement specifically enforced by any court having equity
                     jurisdiction, it being acknowledged and agreed that any
                     such breach or threatened breach shall cause irreparable
                     injury to the Company and that money damages shall not
                     provide an adequate remedy to the Company; and

              10.1.2 The right and remedy to require the Employee to account for
                     and pay over to the Company all compensation, profits,
                     monies, accruals, increments or other benefits
                     (collectively "Benefits") derived or received by the
                     Employee as the result of any transactions
<PAGE>   6
                     constituting a breach of any of the provisions of the
                     preceding paragraph, and the Employee hereby agrees to
                     account for and pay over such Benefits to the Company.

                     Each of the rights and remedies enumerated above shall be
                     independent of the other, and shall be severally
                     enforceable, and all of such rights and remedies shall be
                     in addition to, and not in lieu of, any other rights and
                     remedies available to the Company under law or in equity.

       10.2   If any of the covenants contained in Section 8, 9 or 10, or any
              part thereof, is hereafter construed to be invalid or
              unenforceable, the same shall not affect the remainder of the
              covenant or covenants, which shall be given full effect without
              regard to the invalid portions.

       10.3   If any of the covenants contained in Section 8, 9 or 10, or any
              part thereof, is held to be unenforceable because of the duration
              of such provision or the area covered thereby, the parties agree
              that the court making such determination shall have the power to
              reduce the duration and/or area of such provision and, in its
              reduced form, such provision shall then be enforceable.

       10.4   The parties hereto intend to and hereby confer jurisdiction to
              enforce the covenants contained in Sections 8, 9 and 10 upon the
              courts of any state within the geographical scope of such
              covenants. In the event that the courts of any one or more of such
              states shall hold any such covenant wholly unenforceable by reason
              of the breadth of such scope or otherwise, it is the intention of
              the parties hereto that such determination not bar or in any way
              affect the Company's right to the relief provided above in the
              courts of any other states within the geographical scope of such
              covenants, as to breaches of such covenants in such other
              respective jurisdictions, the above covenants as they relate to
              each state being, for this purpose, severable into diverse and
              independent covenants.

11.    Indemnification.

       The Company shall indemnify the Employee, to the maximum extent permitted
       by applicable law, against all costs, charges and expenses incurred or
       sustained by him in connection with any action, suit or proceeding to
       which he may be made a party by reason of his being an officer, director
       or employee of the Company or of any subsidiary or affiliate of the
       Company. The Company shall provide, subject to its availability upon
       reasonable terms (which determination shall be made by the Board) at its
       expense, directors and officers insurance for the Employee in reasonable
       amounts. Determination with respect to (a) the availability of insurance
       upon reasonable terms and (b) the amount of such insurance coverage shall
       be made by the Board in its sole discretion.

12.    Notices.

       All notices, requests, consents and other communications required or
       permitted to be given hereunder shall be in writing and shall be deemed
       to have been duly given if sent by prepaid telegram (confirmed delivery
       by the telegram service), private overnight mail service (delivery
       confirmed by such service), registered or certified mail (return receipt
       requested), or delivered personally, as follows (or to such other address
       as either party shall designate by notice in writing to the other in
       accordance herewith):
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       If to the Company:
       ARIAD Pharmaceuticals, Inc.
       26 Landsdowne Street
       Cambridge, Massachusetts 02139
       Attention: Chief Executive Officer
       Telephone: (617) 494-0400
       Fax:       (617) 494-1828

       If to the Employee:
       Frederick V. Casselman
       214 Beacon Street
       Boston, Massachusetts  02116

13.    General.

       13.1   This Agreement shall be governed by and construed and enforced in
              accordance with the laws of the Commonwealth of Massachusetts
              applicable to agreements made and to be performed entirely in
              Massachusetts.

       13.2   The Section headings contained herein are for reference purposes
              only and shall not in any way affect the meaning or interpretation
              of this Agreement.

       13.3   This Agreement sets forth the entire agreement and understanding
              of the parties relating to the subject matter hereof, and
              supersedes all prior agreements, arrangements and understandings,
              written or oral, relating to the subject matter hereof. No
              representation, promise or inducement has been made by either
              party that is not embodied in this Agreement, and neither party
              shall be bound by or liable for any alleged representation,
              promise or inducement not so set forth.

       13.4   This Agreement and the Employee's rights and obligations hereunder
              may not be assigned by the Employee or the Company; provided,
              however, the Company may assign this Agreement to an Affiliate or
              a successor-in interest.

       13.5   This Agreement may be amended, modified, superseded, canceled,
              renewed or extended, and the terms or covenants hereof may be
              waived, only by a written instrument executed by the parties
              hereto, or in the case of a waiver, by the party waiving
              compliance. The failure of a party at any time or times to require
              performance of any provision hereof shall in no manner affect the
              right at a later time to enforce the same. No waiver by a party of
              the breach of any term or covenant contained in this Agreement,
              whether by conduct or otherwise, in any one or more instances,
              shall be deemed to be, or construed as, a further or continuing
              waiver of any such breach, or a waiver of the breach of any other
              term or covenant contained in this Agreement.

14.    Definitions. As used herein the following terms have the following
       meaning:

       (a)    "Affiliate" means and includes any corporation or other business
              entity controlling, controlled by or under common control with the
              corporation in question.

       (b)    The "Company's Field of Interest" is the discovery, development
              and commercialization of pharmaceutical products based on (a)
              intervention in signal transduction pathways and (b) gene and cell
              therapy. The Company's Field of Interest may be changed at any
              time at the sole discretion of the Company.
<PAGE>   8
       (c)    "Person" means any natural person, corporation, partnership, firm,
              joint venture, association, joint stock company, trust,
              unincorporated organization, governmental body or other entity.

       (d)    "Subsidiary" means any corporation or other business entity
              directly or indirectly controlled by the corporation in question.

       (e)    "Change in Control" means the occurrence of any of the following
              events (without the consent of the Employee):

              (i)    Any corporation, person or other entity makes a tender or
                     exchange offer for shares of the Company's Common Stock
                     pursuant to which such corporation, person or other entity
                     acquires more than 50% of the issued and outstanding shares
                     of the Company's Common Stock;

              (ii)   The stockholders of the Company approve a definitive
                     agreement to merge or consolidate the Company with or into
                     another corporation or to sell or otherwise dispose of all
                     or substantially all of the Company's assets; or

              (iii)  Any person within the meaning of Section 3 (a) (9) or
                     Section 13 (d) of the Securities Exchange Act of 1934
                     acquires more than 50% of the combined voting power of
                     Company's issued and outstanding voting securities entitled
                     to vote in the election of the Board.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                                      ARIAD PHARMACEUTICALS, INC.

                                      By /s/ Harvey J. Berger, M.D.
                                        ----------------------------------
                                        Harvey J. Berger, M.D.
                                        Chairman and Chief Executive Officer

                                      EMPLOYEE

                                      /s/ Frederick V. Casselman
                                      ------------------------------------
                                      Frederick V. Casselman<PAGE>

                                PROMISSORY NOTE
<TABLE>
<CAPTION>
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 PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL          ACCOUNT        OFFICER        INITIALS
<S>            <C>            <C>             <C>           <C>          <C>               <C>             <C>             <C>
$250,000.00    06-13-2000     09-20-2004       56064                      0020              206368          125
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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.
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</TABLE>

BORROWER: FOTOBALL USA, INC.            LENDER: U.S. BANK NATIONAL ASSOCIATION
          3738 RUFFIN ROAD                      CORPORATE LENDING - KEARNY MESA
          SAN DIEGO, CA 92123                   9005 COMPLEX DRIVE
                                                SAN DIEGO, CA 92123

================================================================================

                                                     DATE OF NOTE: JUNE 13, 2000

PRINCIPAL AMOUNT: $250,000.00           INTEREST RATE: 9.500%

PROMISE TO PAY. FOTOBALL USA, INC. ("BORROWER") PROMISES TO PAY TO U.S. BANK
NATIONAL ASSOCIATION ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES
OF AMERICA, THE PRINCIPAL AMOUNT OF TWO HUNDRED FIFTY THOUSAND & 00/100 DOLLARS
($250,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST AT THE
RATE OF 9.500% PER ANNUM ON THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH
ADVANCE. INTEREST SHALL BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL
REPAYMENT OF EACH ADVANCE.

PAYMENT. BORROWER WILL PAY THIS LOAN IN ACCORDANCE WITH THE FOLLOWING PAYMENT
SCHEDULE:

     3 CONSECUTIVE MONTHLY INTEREST PAYMENTS ON THE TWENTIETH OF EACH MONTH,
     BEGINNING JULY 20, 2000. FOLLOWED BY 48 CONSECUTIVE MONTHLY PAYMENTS
     BEGINNING OCTOBER 20, 2000 IN A MONTHLY PAYMENT AMOUNT NECESSARY TO FULLY
     AMORTIZE THE LOAN BALANCE OWING ON SEPTEMBER 20, 2000. A FINAL PAYMENT IS
     DUE SEPTEMBER 20, 2004 FOR ALL REMAINING UNPAID PRINCIPAL AND ACCRUED
     INTEREST.

Interest on this Note is computed on a 365/365 simple interest basis; that is,
by applying the ratio of the annual interest rate over the number of days in a
year, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.

PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to A
MINIMUM INTEREST CHARGE OF $100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments of accrued unpaid interest. Rather, they will reduce the
principal balance due.

LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT OR $5.00, WHICHEVER IS GREATER.

DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition.

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

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, do one or both of the following: (a) increase the interest rate on this
Note 5.000 percentage points, and (b) add any unpaid accrued interest to
principal and such sum will bear interest therefrom until paid at the rate
provided in this Note (including any increased rate). Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees 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 will pay any court costs, in addition to all other sums provided
by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE
STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S
REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN DIEGO COUNTY, THE
STATE OF CALIFORNIA. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.

LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested either orally or in writing
by Borrower or as provided in this paragraph. Lender may, but need not, require
that all oral requests be confirmed in writing. All communications,
instructions, or directions by telephone or otherwise to Lender are to be
directed to Lender's office shown above. The follwoing party or parties are
authorized as provided in this paragraph to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: MICHAEL FAVISH, PRESIDENT/CEO.
UNADVANCED FUNDS ARE AVAILABLE UNTIL SEPTEMBER 20, 2000. Borrower agrees to be
liable for all sums either: (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (e) Lender in good faith deems itself insecure under this Note or any
other agreement between Lender and Borrower.

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
any applicable statute of limitations, presentment, demand for payment, protest
and notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.

<PAGE>

06-13-2000                       PROMISSORY NOTE                          PAGE 2
LOAN NO 56064                      (CONTINUED)

================================================================================

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.

BORROWER:

FOTOBALL USA, INC.

BY: /S/ MICHAEL FAVISH
    ----------------------------
    MICHAEL FAVISH, PRESIDENT/CEO

================================================================================
Fixed Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.299(C)
                            Concentrex 2000 All Rights reserved.
                            [CA-D20 E3.29 56064UCC.LN C8.OVL]

<PAGE>

                            BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
 PRINCIPAL      LOAN DATE      MATURITY       LOAN NO        CALL      COLLATERAL          ACCOUNT        OFFICER        INITIALS
<S>            <C>            <C>             <C>           <C>          <C>               <C>             <C>             <C>
$250,000.00    06-13-2000     09-20-2004       56064                      0020              206368          125
----------------------------------------------------------------------------------------------------------------------------------
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.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL USA, INC.            LENDER: U.S. BANK NATIONAL ASSOCIATION
          3738 RUFFIN ROAD                      CORPORATE LENDING - KEARNY MESA
          SAN DIEGO, CA 92123                   9005 COMPLEX DRIVE
                                                SAN DIEGO,CA 92123

================================================================================

THIS BUSINESS LOAN AGREEMENT BETWEEN FOTOBALL USA, INC. ("BORROWER") AND U.S.
BANK NATIONAL ASSOCIATION ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS
AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN"
AND COLLECTIVELY AS THE "LOANS." 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 OF 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 SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.

TERM. This Agreement shall be effective as of JUNE 13, 2000, and shall continue
thereafter until all indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.

DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.

     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 FOTOBALL, USA, INC. The word "Borrower"
     also includes, as applicable, all subsidiaries and affiliates of Borrower
     as provided below in the paragraph titled "Subsidiares and Affiliates."

     CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
     Compensation, and Liability Act of 1980, as amended.

     COLLATERAL. The word "Collateral" means and includes without limitation
     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, deed of trust, assignment, pledge, 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.

     ERISA. The word "ERISA" means the Employee Retirement Income Security Act
     of 1974, as amended.

     EVENT OF DEFAULT. The words "Event of Default" mean and include without
     limitation any of the Events of Default set forth below in the section
     titled "EVENTS OF DEFAULT."

     GRANTOR. The word "Grantor" means and includes without limitation each and
     all of the persons or entities granting a Security Interest in any
     Collateral for the Indebtedness, including without limitation all Borrowers
     granting such a Security Interest.

     GUARANTOR. The word "Guarantor" means and includes without limitation each
     and all of the guarantors, sureties, and accommodation parties in
     connection with any Indebtedness.

     INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
     all Loans, together with all other obligations, debts and liabilities of
     Borrower to Lender, or any one or more of them, as well as all claims by
     Lender against Borrower, or any one or more of them; whether now or
     hereafter existing, voluntary or involuntary, due or not due, absolute or
     contingent, liquidated or unliquidated; whether Borrower may be liable
     individually or jointly with others; whether Borrower may be obligated as a
     guarantor, surety, or otherwise; whether recovery upon such Indebtedness
     may be or hereafter may become barred by any statute of limitations; and
     whether such Indebtedness may be or hereafter may become otherwise
     unenforceable.

     LENDER. The word "Lender" means U.S. Bank National Association, its
     successors and assigns.

     LOAN. The word "Loan" or "Loans" means and includes without limitation any
     and all commercial 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 and includes without limitation Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

     PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and security
     interests securing Indebtedness owed by Borrower to Lender; (b) liens for
     taxes, assessments, or similar charges either not yet due or being
     contested in good faith; (c) 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; (d) 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"; (e) liens and security interests which, as of the date of this
     Agreement, have been disclosed to and approved by the Lender in writing;
     and (f) 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 and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

     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 and include without
     limitation any type of collateral security, whether in the form of a lien,
     charge, mortgage, deed of trust, assignment, pledge, 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.

     SARA. The word "SARA" means the Superfund Amendments and Reauthorization
     Act of 1986 as now or hereafter amended.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan 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 in form satisfactory to
     Lender the following documents for the Loan; (a) the Note, (b) Security
     Agreements granting to Lender security interests in the Collateral, (c)
     Financing Statements perfecting Lender's Security Interests; (d) evidence
     of insurance as required below; and (e) any other documents required under
     this Agreement or by Lender or its counsel.

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

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date 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 which is duly organized, validly
     existing, and in good standing under the laws of the State of Delaware

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 2
LOAN NO 56064                       (CONTINUED)

================================================================================

     and is validly existing and in good standing in all states in which
     Borrower is doing business except for states in which failure to be validly
     existing and in good standing would not have a material adverse effect on
     the Borrower's business. Borrower has the full power and authority to own
     its properties and to transact the businesses in which it is presently
     engaged or presently proposes to engage. Borrower also is duly qualified as
     a foreign corporation and is in good standing in all states in which the
     failure to so qualify would have a material adverse effect on its
     businesses or financial condition.

     AUTHORIZATION. The execution, delivery, and performance of this Agreement
     and all Related Documents by Borrower, to the extent to be executed,
     delivered or performed by Borrower, have been duly authorized by all
     necessary action by Borrower; do not require the consent or approval of any
     other person, regulatory authority or governmental body; and do not
     conflict with, result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization, or bylaws,
     or any agreement or other instrument binding upon Borrower or (b) any law,
     governmental regulation, court decree, or order applicable to Borrower.

     FINANCIAL INFORMATION. Each financial statement of Borrower 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
     required hereunder to be given by Borrower when delivered will constitute,
     legal, valid and binding obligations of Borrower enforceable against
     Borrower in accordance with their respective terms.

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

     HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same meanings as set forth in the "CERCLA," "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 to any of the foregoing.
     Except as disclosed to and acknowledged by Lender in writing, Borrower
     represents and warrants that: (a) During the period of Borrower's ownership
     of the properties, there has been no use, generation, manufacture, storage,
     treatment, disposal, release, or threatened release of any hazardous waste
     or substance by any person on, under, about or from the properties. (b)
     Borrower has no knowledge of, or reason to believe that there has been (i)
     any use, generation, manufacture, storage, treatment, disposal, release, or
     threatened release of any hazardous waste or substance on, under, about or
     from the properties by any prior owners or occupants of any of the
     properties, or (ii) any actual or threatened litigation or claims of any
     kind by any person relating to such matters. (c) Neither Borrower nor any
     tenant, contractor, agent or other authorized user of any of the properties
     shall use, generate, manufacture, store, treat, dispose of, or release any
     hazardous waste or substance on, under, about or from any of the
     properties; and any such activity shall be conducted in compliance with all
     applicable federal, state, and local laws, regulations, and ordinances,
     including without limitation those laws, regulations and ordinances
     described above. Borrower authorizes Lender and its agents to enter upon
     the properties to make such inspections and tests as Lender may deem
     appropriate to determine compliance of the properties 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
     properties for hazardous waste and hazardous substances. Borrower hereby
     (a) 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 (b) 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 properties.
     The provisions of this section of the Agreement, including the obligation
     to indemnify, shall survive the payment of the Indebtedness and the
     termination or expiration of this Agreement and shall not be affected by
     Lender's acquisition of any interest in any of the properties, whether by
     foreclosure or otherwise.

     LITIGATION AND CLAIMS. No material 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 in any case disclosed to and acknowledged by Lender in
     writing.

     TAXES. To the best of Borrower's knowledge, all tax returns and reports of
     Borrower 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 directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related Documents are binding upon Borrower as well as upon Borrower's
     successors, representatives and assigns, and are legally enforceable in
     accordance with their respective terms.

     COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
     business or commercial related purposes.

     EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
     have any liability complies in all material respects with all applicable
     requirements of law and regulations, and (i) no Reportable Event nor
     Prohibited Transaction (as defined in ERISA) has occurred with respect to
     any such plan, (ii) Borrower has not withdrawn from any such plan or
     initiated steps to do so, (iii) no steps have been taken to terminate any
     such plan, and (iv) there are no unfunded liabilities other than those
     previously disclosed to Lender in writing.

     INVESTMENT COMPANY ACT. Borrower is not an "investment company" or a
     company "controlled" by an "investment company", within the meaning of the
     Investment Company Act of 1940, as amended.

     PUBLIC UTILITY HOLDING COMPANY ACT. Borrower is not a "holding company", or
     a "subsidiary company" or a "holding company", or an "affiliate" of a
     "holding company" or of a "subsidiary company" of a "holding company",
     within the meaning of the Public Utility Holding Company Act of 1935, as
     amended.

     REGULATIONS G, T AND U. Borrower is not engaged principally, or as one of
     its important activities, in the business of extending credit for the
     purpose of purchasing or carrying margin stock (within the meaning of
     Regulations G, T and U of the Board of Governors of the Federal Reserve
     System).

     LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
     or Borrower's Chief executive office, if Borrower has more than one place
     of business, is located at 3738 RUFFIN ROAD, SAN DIEGO, CA 92123. Unless
     Borrower has designated otherwise in writing this location is also the
     office or offices where Borrower keeps its records concerning the
     Collateral.

     INFORMATION. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     CLAIMS AND DEFENSES. There are no defenses or counterclaims, offsets or
     other adverse claims, demands or actions of any kind, personal or
     otherwise, that Borrower, Grantor, or any Guarantor could assert with
     respect to the Note, Loan, Indebtedness, this Agreement, or the Related
     Documents.

     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
     that Lender, without independent investigation, is relying upon the above
     representations and warranties in extending Loan Advances to Borrower.
     Borrower further agrees that the foregoing representations and warranties
     shall be continuing in nature 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.

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:

     LITIGATION. Promptly inform Lender in writing of (a) all material adverse
     changes in Borrower's financial condition, and (b) 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
     generally accepted accounting principles, applied on a consistent basis,
     and permit Lender to examine and audit Borrower's books and records at all
     reasonable times.

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 3
LOAN NO 56064                       (CONTINUED)

================================================================================

     ADDITIONAL INFORMATION. Furnish such additional information and statements,
     lists of assets and liabilities, agings of receivables and payables,
     inventory schedules, budgets, forecasts, tax returns, and other reports
     with respect to Borrower's financial condition and business operations 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 reasonably 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 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: (a) the
     name of the insurer; (b) the risks insured; (c) the amount of the policy;
     (d) the properties insured; (e) the then current property values on the
     basis of which insurance has been obtained, and the manner of determining
     those values; and (f) 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 material 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. Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver to Lender at any time a written statement of any assessments,
     taxes, charges, levies, liens and claims against Borrower's properties,
     income, or profits.

     PERFORMANCE. Perform and comply with all terms, conditions, and provisions
     set forth in this Agreement and in the Related Documents in a timely
     manner, and promptly notify Lender if Borrower learns of the occurrence of
     any event which constitutes an Event of Default under this Agreement or
     under any of the Related Documents.

     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 and in compliance in all material respects
     with all applicable federal, state and municipal laws, ordinances, rules
     and regulations respecting its properties, charters, businesses and
     operations, including without limitation, compliance with the Americans
     With Disabilities Act and with all minimum funding standards and other
     requirements of ERISA and other laws applicable to Borrower's employee
     benefit plans.

     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
     defined as toxic or a hazardous substance under any applicable federal,
     state, or local law, rule, regulation, order or directive, or any waste or
     by-product thereof, at or affecting any property or any facility owned,
     leased or used by Borrower.

     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 CERTIFICATE. Unless waived in writing by Lender, provide Lender
     at least annually and at the time of each disbursement of Loan proceeds
     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 material
     respects with all environmental protection federal, state and local laws,
     statutes, regulations and ordinances; not cause or permit to exist, as a
     result of an intentional or unintentional action or omission on its 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, 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.

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. (a) 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, (b) except as allowed as a Permitted Lien, sell,
     transfer, mortgage, assign, pledge, lease, grant a security interest in, or
     encumber any of Borrower's assets, or (c) sell with recourse any of
     Borrower's accounts, except to Lender.

     CONTINUITY OF OPERATIONS. (a) Engage in any business activities
     substantially different than those in which Borrower is presently engaged,
     (b) cease operations, liquidate, merge, transfer, acquire or consolidate
     with any other entity, change ownership, change its name, dissolve or
     transfer or sell Collateral out of the ordinary course of business, (c) 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 stock of
     Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
     alter or amend Borrower's capital structure.

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

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor 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; (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.

LOAN AGREEMENT COVENANT & CONDITIONS ADDENDUM. The Loan Agreement Covenant &
Conditions Addendum attached as Exhibit "A" to this agreement is incorporated by
reference herein in full.

RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in,
and hereby assigns, conveys, delivers, pledges, and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts held jointly with someone else and all accounts Borrower may open
in the future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 4
LOAN NO 56064                       (CONTINUED)

================================================================================

permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

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

     DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
     on the Loans.

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

     DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans 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 or on behalf of Borrower or any Grantor under this
     Agreement or the Related Documents is false or misleading in any material
     respect 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 Security
     Agreement to create a valid and perfected Security Interest) at any time
     and for any reason.

     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.

     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, any creditor
     of any Grantor against any collateral securing the Indebtedness, or by any
     governmental agency. This includes a garnishment, attachment, or levy on or
     of any of Borrower's deposit accounts with Lender. However, this Event of
     Default shall not apply if there is a good faith dispute by Borrower or
     Grantor, as the case may be, as to the validity or reasonableness of the
     claim which is the basis of the creditor or forfeiture proceeding, and if
     Borrower or Grantor gives Lender written notice of the creditor or
     forfeiture proceeding and furnishes reserves or a surety bond for the
     creditor or forfeiture proceeding satisfactory to Lender.

     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. 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 the Event of Default.

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

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

     INSECURITY. Lender, in good faith, deems 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; (a) cures the default within fifteen (15)
     days; or (b) 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.

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
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.

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.

     APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
     LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
     UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF SAN
     DIEGO COUNTY, THE STATE OF CALIFORNIA. THIS AGREEMENT SHALL BE GOVERNED BY
     AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

     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 Loans 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 it 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 Loans 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 Loans irrespective of the failure or insolvency of any
     holder of any interest in the Loans. 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.

     BORROWER INFORMATION. Borrower consents to the release of information on or
     about Borrower by Lender in accordance with any court order, law or
     regulation and in response to credit inquiries concerning Borrower.

     NON-LIABILITY OF LENDER. The relationship between Borrower and Lender is a
     debtor and creditor relationship and not fiduciary in nature, nor is the
     relationship to be construed as creating any partnership or joint venture
     between Lender and Borrower. Borrower is exercising its own judgment with
     respect to Borrower's business. All information supplied to Lender is for
     Lender's protection only and no other party is entitled to rely on such
     information. There is no duty for Lender to review, inspect, supervise, or
     inform Borrower of any matter with respect to Borrower's business. Lender
     and Borrower intend that Lender may reasonably rely on all information
     supplied by Borrower to Lender, together with all representations and
     warranties given by Borrower to Lender, without investigation or
     confirmation by Lender and that any investigation or failure to investigate
     will not diminish Lender's right to so rely.

     NOTICE OF LENDER'S BREACH. Borrower must notify Lender in writing of any
     breach of this Agreement or the Related Documents by Lender and any other
     claim, cause of action or offset against Lender within thirty (30) days
     after the occurrence of such breach or after the accrual of such claim,
     cause of action or offset. Borrower waives any claim, cause of action or
     offset for which notice is not given in accordance with this paragraph.
     Lender is entitled to rely on any failure to give such notice.

     BORROWER INDEMNIFICATION. Borrower shall indemnify and hold Lender harmless
     from and against all claims, costs, expenses, losses, damages, and
     liabilities of any kind, including but not limited to attorneys' fees and
     expenses, arising out of any matter relating directly or indirectly to the
     indebtedness, whether resulting from internal disputes of the Borrower,
     disputes between Borrower and any Guarantor, or whether involving any third
     parties, or out of any other matter whatsoever related to this Agreement or
     the Related Documents, but excluding any claim or liability which arises as
     a direct result of Lender's gross negligence or willful misconduct. This
     indemnity shall survive full repayment and satisfaction of the indebtedness
     and termination of this Agreement.

     COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
     of which, when so executed, shall be deemed an original, but all such
     counterparts, taken together, shall constitute one and the same Agreement.

     COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
     expenses, including without limitation attorneys' fees, incurred in
     connection with the preparation, execution, enforcement, modification and
     collection of this Agreement or in connection with the Loans made

<PAGE>

06-13-2000                    BUSINESS LOAN AGREEMENT                     PAGE 5
LOAN NO 56064                       (CONTINUED)

================================================================================

     pursuant to this Agreement. Lender may pay someone else to help collect
     the Loans and to enforce this Agreement, and Borrower will pay that amount.
     This includes, subject to any limits under applicable law, Lender's
     attorneys' fees and Lender's legal expenses, whether or not there is a
     lawsuit, including attorneys' fees for bankruptcy proceedings (including
     efforts to modify or vacate any automatic stay or injunction), appeals, and
     any anticipated post-judgment collection services. Borrower also will pay
     any court costs, in addition to all other sums provided by law.

     NOTICES. All notices required to be given under this Agreement shall be
     given in writing, may be sent by telefacsimile (unless otherwise required
     by law), and shall be effective when actually delivered or when deposited
     with a nationally recognized overnight courier or deposited in the United
     States mail, first class, postage prepaid, addressed to the party to whom
     the notice is to be given at the address shown above. 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. To the extent permitted by
     applicable law, if there is more than one Borrower, notice to any Borrower
     will constitute notice to all Borrowers. For notice purposes, Borrower will
     keep Lender informed at all times of Borrower's current address(es).

     SEVERABILITY. If a court of competent jurisdiction finds any provision of
     this Agreement to be invalid or unenforceable as to any person or
     circumstance, such finding shall not render that provision invalid or
     unenforceable as to any other persons or circumstances. If feasible, any
     such offending provision shall be deemed to be modified to be within the
     limits of enforceability or validity; however, if the offending provision
     cannot be so modified, it shall be stricken and all other provisions of
     this Agreement in all other respects shall remain valid and enforceable.

     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 herein shall include all subsidiaries and affiliates of Borrower.
     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 subsidiary or affiliate of Borrower.

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

     SURVIVAL. All warranties, representations, and covenants made by Borrower
     in this Agreement or in any certificate or other instrument delivered by
     Borrower to Lender under this Agreement shall be considered to have been
     relied upon by Lender and will survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

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

     WAIVER. 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
     obligations of Borrower or of any Grantor 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 in subsequent instances where such consent is required,
     and in all cases such consent may be granted or withheld in the sole
     discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
JUNE 13, 2000.

BORROWER:

FOTOBALL USA, INC.

BY: /S/ MICHAEL FAVISH
    ----------------------------
    MICHAEL FAVISH, PRESIDENT/CEO

FF
LENDER:

U.S. BANK NATIONAL ASSOCIATION

BY: /S/ DARLA CLARK
    ----------------------------
    AUTHORIZED OFFICER

================================================================================
                            LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29a(C)
                            Concentrex 2000 All Rights reserved.
                            [CA-C40 E3.29 F3.29 56064UCC.LN C8.OVL]

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