Document:

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Exhibit 10.2

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS EMPLOYMENT AGREEMENT (this "Agreement") executed and effective the
28th day of June, 2007 (the "Effective Date"), by and between DYNATRONICS
CORPORATION, a Utah corporation having its principal place of business in Salt
Lake City, Utah (the "Company"), and LARRY K. BEARDALL, a resident of Utah (the
"Executive").

                                R E C I T A L S :

         A. The Company desires to retain the services of the Executive,
presently a shareholder, officer and director of the Company, and the Executive
desires to render such services, upon the terms and conditions contained herein.

         B. The Board of Directors of the Company (the "Board"), by appropriate
resolutions, authorized the employment of the Executive as provided for in this
Agreement.

                               A G R E E M E N T :

         NOW, THEREFORE, in consideration of the covenants contained herein, the
above recitals and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                    ARTICLE I
                                     DUTIES
                                     ------

         1.01 Duties. The Company hereby employs the Executive, and the
Executive hereby accepts employment, as the Company's Executive Vice President
of Sales and Marketing upon the terms and conditions contained herein. The
Executive will exercise the authority and assume the responsibilities: (i)
specified in the Company's Bylaws; (ii) of an Executive Vice President of a
corporation of the size and nature of the Company; and (iii) prescribed by the
Board from time to time, with the current description set forth in Exhibit A,
attached hereto and by reference made a part hereof. Executive currently serves
as a director on the Board and the Board shall use its reasonable best efforts
to cause the Executive to remain as a director during the entire Contract Term,
as such term is defined under Article II.

         1.02 Other Business. During the Contract Term, and excluding any
periods of vacation, sick leave or disability to which the Executive is
entitled, the Executive agrees to devote the Executive's full attention and time
to the business and affairs of the Company and, to the extent necessary to
discharge the duties assigned to the Executive hereunder, to use the Executive's
best efforts to perform faithfully and efficiently such duties. Notwithstanding
the foregoing, but subject to (i) the advance approval of the Chairman of the
Board, and (ii) the provisions of Article VI hereof, the Executive shall be
entitled to serve on the board of directors of up to two (2) publicly held
companies other than the Company and a reasonable number of privately held
companies including companies operated or controlled by the Executive or a
relative or family member of the Executive.

                                       1
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                                   ARTICLE II
                               TERM OF AGREEMENT
                               -----------------

         The initial term of this Agreement shall commence on the Effective Date
and shall terminate at 11:59 p.m. Mountain Standard Time on June 30, 2009 (the
"Initial Contract Term") unless sooner terminated hereunder. Thereafter, the
term of this Agreement shall be automatically renewed for successive one-year
terms (each a "Renewal Contract Term") without action by either party; provided,
however, that either party may terminate its obligations hereunder at the end of
any Renewal Contract Term by giving the other party written notice of
termination at least 60 days and no more than 180 days before the end of said
Renewal Contract Term. The Initial Contract Term and any Renewal Contract Terms
are hereinafter collectively referred to as the "Contract Term."

                                   ARTICLE III
                                  COMPENSATION
                                  ------------

         During the Contract Term, the Company shall pay, or cause to be paid to
the Executive in cash in accordance with the normal payroll practices of the
Company for senior executive officers (including deductions, withholdings and
collections as required by law), the following:

         3.01 Annual Base Salary. Executive's current annual base salary
("Annual Base Salary") is equal to One Hundred and Forty Three Thousand Dollars
($143,000) as of the Effective Date. Thereafter, the Compensation Committee will
determine Executive's salary hereunder in the Committee's sole discretion.
Notwithstanding the foregoing, in the event of a Change of Control (as defined
in Article V, below), the annual increase to the Annual Base Salary hereunder
will be an amount equal to the greater of 5 percent of the Annual Base Salary in
the preceding year or the amount determined by the Compensation Committee, with
such increase to become effective July 1st of each fiscal year.

         3.02 Annual Bonus. A cash bonus (the "Annual Bonus") shall be paid each
year in an amount determined by the Compensation Committee, from the pre-tax
operating profits of the Company. The current Annual Bonus level for Executive
is 4 percent of pre-tax operating profits. Operating profits shall exclude
extraordinary items such as the sale of assets or the recognition of gains or
losses not associated with operations. The Compensation Committee of the Board
of Directors shall have sole discretion in determining whether an amount in
question shall be included in calculating operating profit. Notwithstanding
anything set forth above, the Compensation Committee may make adjustments as
deemed appropriate to the structure of the Annual Bonus program from time to
time. Bonuses shall be calculated and paid on a quarterly basis. All accrued
bonuses shall be paid to Executive within 45 days from the end of a quarter
except for the quarter ended June 30th for which any accrued bonus shall be paid
within 60 days. Notwithstanding the foregoing, in the event of a Change in
Control (as defined in Article V, below), the minimum Annual Bonus will be an
amount equal to 4 percent (or such greater amount as the Compensation Committee
may determine) of the Company's pre-tax operating profits annually prior to
payment of any other bonuses based on pre-tax operating profits.

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                                   ARTICLE IV
                                 OTHER BENEFITS
                                 --------------

         4.01 Incentive Savings and Retirement Plans. The Executive shall be
entitled to participate, during the Contract Term, in all incentive (including
annual and long-term incentives), savings and retirement plans, practices,
policies and programs available to other senior executives of the Company.

         4.02 Welfare Benefits. Immediately upon the Effective Date and
throughout the Contract Term, the Executive and/or the Executive's family, as
the case may be, shall be entitled to participate in, and shall receive all
benefits under, all welfare benefit plans, practices, policies and programs
provided by the Company (including without limitation, medical, prescription,
dental, disability, employee life, group life, dependent life, accidental death
and travel accident insurance plans and programs) at a level that is equal to
other senior executives of the Company.

         4.03 Fringe Benefits. Immediately upon the Effective Date and
throughout the Contract Term, the Executive shall be entitled to participate in
all fringe benefit programs provided by the Company to its senior executives. As
of the Effective Date, those fringe benefits include (i) use of a Company
vehicle or a corresponding automobile allowance, including the payment of gas,
oil, maintenance and insurance in connection with such vehicle or allowance, as
the case may be, (ii) life insurance benefit with a minimum face value of
$100,000, with premiums paid by the Company, (iii) additional disability
insurance benefits paid by the Company at levels not less than currently
provided by group and individual policies in effect as of the date hereof, and
(iv) participation in a salary continuation plan as set forth in that certain
Salary Continuation Agreement (the "Salary Continuation Agreement") between the
Company and the Executive and entered into in July 1989, as the same may be
hereafter modified or amended, or any successor plan provided by the Company.

         4.04 Expenses. During the Contract Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable employment-related
expenses which are incurred by the Executive. The Executive shall be reimbursed
upon the Company's receipt of accountings in accordance with practices, policies
and procedures applicable to senior executives of the Company.

         4.05 Office and Support Staff. During the Contract Term, the Executive
shall be entitled to an office, furnishings, other appointments, commensurate
with the position occupied by Executive, all of which shall be adequate for the
performance of the Executive's duties. Executive may hire staff to assist
Executive in his or her duties, subject to approval of the Company's Chief
Executive Officer.

         4.06 Vacation. The Executive shall be entitled to up to four (4) weeks
paid vacation per fiscal year commencing with the Effective Date. Such paid
vacation days shall accrue without cancellation, expiration or forfeiture,
subject however to the policy of the Company that no vacation days may be
carried over from any prior year.

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         4.07 Stock Options. The Executive has previously been granted options
to purchase 165,000 shares (the "Options") of the Company's common voting stock
par value $.001 per share (the "Common Stock"). Subject to (i) the terms of the
Company's 1992 Amended and Restated Stock Option Plan or any successor plan
thereto (the "Stock Plan") and (ii) Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the Options shall be qualified Incentive Stock
Options under Section 422 of the Code.

                                    ARTICLE V
                                CHANGE OF CONTROL
                                -----------------

         5.01 Definitions. The following terms shall have the meaning set forth
below:

         (a) The term "Company Acquisition" shall mean an acquisition of another
corporation, limited liability company, limited partnership, partnership or
similar entity by the Company by any means, including, without limitation, by
means of a merger, acquisition of assets or acquisition of ownership interests.

         (b) The term "Continuing Directors" shall mean those members of the
Board at any relevant time (i) who were directors on the Effective Date or (ii)
who subsequently were approved for nomination, election or appointment to the
Board by at least two-thirds of the Continuing Directors on the Board at the
time of such approval (the directors described in subsection (ii) are referred
to herein as the "Approved Directors"). "Approved Directors" shall not include
those appointed to the board as a term of a negotiated merger or acquisition.

         (c) The term "Change in Control" shall mean a change in control of
beneficial ownership of the Company's voting securities of a nature that would
be required to be reported pursuant to Item 6(e) of Schedule 14A of Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or any similar item on a successor or revised form; provided, however, that a
Change in Control shall be deemed to have occurred when:

              (i) Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding voting securities; or

              (ii) During any period of three consecutive years, the individuals
who at the beginning of such period constituted the Board, together with any
Approved Directors elected during such period, cease for any reason to
constitute at least a majority of the Board; or

              (iii) The shareholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets.

         (d) The term "Good Reason," in connection with the termination by the
Executive of his employment with the Company subsequent to a Change of Control
or Company Acquisition, shall mean:

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              (i) A diminution in the responsibilities, title or office of the
Executive such that he does not serve as Executive Vice President of the Company
(which diminution was not for "Cause" (as defined below) or the result of the
Executive's disability), or the assignment (without the Executive's express
written consent) by the Company to the Executive of any significant duties that
are inconsistent with the Executive's position, duties, responsibilities and
status as Executive Vice President of the Company;

              (ii) The Company's transfer or assignment of the Executive,
without the Executive's prior express written consent, to any location other
than the Company's principal place of business in Salt Lake County, Utah, except
for required travel on Company business to an extent that does not constitute a
substantial abrupt departure from the Executive's normal business travel
obligations;

              (iii) The failure by the Company to continue in effect any
material benefit or compensation plan, life insurance plan, health and medical
benefit plan, disability plan or any other benefit plan in which the Executive
is a participant, or the taking of any action by the Company that would
adversely affect the Executive's right to participate in, or materially reduce
the Executive's benefits under, any of such plans or benefits, or deprive the
Executive of any material fringe benefit enjoyed by the Executive (except where
such failure to continue in effect or taking of such action affects all
executives of the Company who participate in the applicable plan or receive the
applicable benefits); or

              (iv) The failure of the Executive to serve as a director of the
Board (except if such decision not to serve was made voluntarily by the
Executive) at any time from his initial election to the Board through the end of
the Contract Term.

         (e) The terms "Parachute Payments" and "Excess Parachute Payments"
shall each have the meanings attributed to them under Section 280G of the Code,
or any successor section, and any regulations which may be promulgated in
connection with said section.

         5.02 Severance Payments. During the Contract Term, if (a) within six
(6) months after a Change of Control occurs the Executive voluntarily terminates
his employment with the Company or (b) within twelve (12) months after a Change
in Control or a Company Acquisition occurs, the Executive's employment is
terminated either (1) by the Company for any reason other than (A) for Cause (as
defined below), (B) as a result of the Executive's death or disability, or (C)
as a result of the Executive's retirement in accordance with the Company's
general retirement policies, or (2) by the Executive for Good Reason, then:

              (i) the Executive shall be paid an amount in cash equal to (x) one
and one-half times (1.5x) the Annual Base Salary in effect at the time of such
termination and (y) one and one-half times (1.5x) the average Annual Bonus paid
by the Company to Executive over the previous three (3) complete fiscal years;
50% of such amount to be paid within thirty (30) days after such termination and
the balance to be paid ratably over the subsequent six (6) months.

              (ii) the Company shall maintain in full force and effect for
eighteen (18) months after termination, all employee health and medical benefit
plans and programs including, without limitation, the Executive's 401(k) Plan,

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<PAGE>

in which the Executive, his family, or both, were participants immediately prior
to termination; provided that such continued participation is possible under the
general terms and provisions of such plans and programs; provided, however, that
if the Executive becomes eligible to participate in a health and medical benefit
plan or program of another employer which confers substantially similar
benefits, the Executive shall cease to receive benefits under this subparagraph
in respect of such plan or program;

              (iii) all of the Options and other stock options, warrants and
other similar rights granted by the Company to the Executive, if any, shall
immediately and entirely vest and shall be immediately delivered to the
Executive without restriction or limitation of any kind (except for normal
transfer restrictions);

              (iv) the Executive shall be paid an amount equal to the cash
surrender value, if any, of those certain life insurance policies underwritten
by ING/Security Life of Denver (or such successor or replacement policies) owned
by the Company for the purpose of funding the Company's obligations under the
Salary Continuation Agreement; and

              (v) the Company shall transfer to the Executive title, free and
clear of all encumbrances, to either (i) the Company-owned vehicle used by the
Executive at the time the Executive's employment with the Company terminates
(the "Company Vehicle"), or (ii) a vehicle of substantially similar market value
as the market value of the Company Vehicle at the time Executive's employment
with the Company terminates.

         Any obligation owed or amount payable pursuant to this Section together
with any compensation pursuant to Article III that is payable for services
rendered through the effective date of termination, shall constitute the sole
obligation of the Company payable with respect to the termination of the
Executive as provided in this Section. Upon such termination, the Company will
have no obligation to pay Executive any amounts pursuant to the Salary
Continuation Agreement.

         5.03 Parachute Payment Limitation. Notwithstanding any other provision
of this Agreement, if the severance payments under Section 5.02 of this
Agreement, together with any other Parachute Payments made by the Company to the
Executive, if any, are characterized as Excess Parachute Payments, then the
following rules shall apply:

         (a) The Company shall compute the net value to the Executive of all
such severance payments after reduction for the excise taxes imposed by Section
4999, of the Code and for any normal income taxes that would be imposed on the
Executive if such severance payments constituted the Executive's sole taxable
income;

         (b) The Company shall next compute the maximum amount of severance
payments that can be provided without any such payments being characterized as
Excess Parachute Payments, and reduce the result by the amount of any normal
income taxes that would be imposed on the Executive if such reduced severance
benefits constituted the Executive's sole taxable income;

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<PAGE>

         (c) If the amount derived in Section 5.03(a) is greater than the amount
derived in Section 5.03(b), then the Company shall pay the Executive the full
amount of severance payments without reduction. If the amount derived in Section
5.03(a) is not greater than the amount derived in Section 5.03(b), then the
Company shall pay the Executive the maximum amount of severance payments that
can be provided without any such payments being characterized as Excess
Parachute Payments.

         5.04 No Mitigation. The Executive shall not be required to mitigate the
amount of any payment provided for in Section 5.02 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in Section 5.02
be reduced by any compensation earned by the Executive as a result of employment
by another company, self-employment or otherwise.

                                   ARTICLE VI
                              RESTRICTIVE COVENANTS
                              ---------------------

         6.01 Trade Secrets. Confidential and Proprietary Business Information.

         (a) The Company has advised the Executive and the Executive has
acknowledged that it is the policy of the Company to maintain as secret and
confidential all Protected Information (as defined below), and that Protected
Information has been and will be developed at substantial cost and effort to the
Company. "Protected Information" means trade secrets, confidential and
proprietary business information of the Company, any information of the Company
other than information which has entered the public domain (unless such
information entered the public domain through effects of or on account of the
Executive), and all valuable and unique information and techniques acquired,
developed or used by the Company relating to its business, operations,
employees, customers and suppliers, which give the Company a competitive
advantage over those who do not know the information and techniques and which
are protected by the Company from unauthorized disclosure, including but not
limited to, customer lists (including potential customers), sources of supply,
processes, plans, materials, pricing information, internal memoranda, marketing
plans, internal policies, and products and services which may be developed from
time to time by the Company and its agent or employees.

         (b) The Executive acknowledges that the Executive will acquire
Protected Information with respect to the Company and its successors in
interest, which information is a valuable, special and unique asset of the
Company's business and operations and that disclosure of such Protected
Information would cause irreparable damage to the Company.

         (c) Either during or for a period of two (2) years following
termination of employment by the Company, the Executive shall not, directly or
indirectly, divulge, furnish or make accessible to any person, firm,
corporation, association or other entity (otherwise than as may be required in
the regular course of the Executive's employment) nor use in any manner, any
Protected Information, or cause any such information of the Company to enter the
public domain.

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<PAGE>

         6.02 Non-Competition

         (a) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of two (2) years
after the termination of this Agreement, directly or indirectly, in any
capacity, engage or participate in, or become employed by or render advisory or
consulting or other services in connection with any Prohibited Business as
defined in Section 6.02(c).

         (b) The Executive agrees that the Executive shall not during the
Executive's employment with the Company, and, for a period of two (2) years
after the termination of this Agreement, make any financial investment, whether
in the form of equity or debt, or own any interest, directly or indirectly, in
any Prohibited Business. Nothing in this Section 6.02(b) shall, however,
restrict the Executive from making any investment in any company whose stock is
listed on a national securities exchange; provided that (i) such investment does
not give the Executive the right or ability to control or influence the policy
decisions of any Prohibited Business, and (ii) such investment does not create a
conflict of interest between the Executive's duties hereunder and the
Executive's interest in such investment.

         (c) For purposes of this Section 6.02, "Prohibited Business" shall be
defined as any business and any branch, office or operation thereof, which is a
competitor of the Company and which has established or seeks to establish
contact, in whatever form (including, but not limited to solicitation of sales,
or the receipt or submission of bids), with any entity who is at any time a
client, customer or supplier of the Company (including but not limited to all
subdivisions of the federal government.)

         6.03 Non-Solicitation. From the date hereof until two (2) years after
the Executive's termination of employment with the Company, the Executive shall
not, directly or indirectly (a) encourage any employee or supplier of the
Company or its successors in interest to leave his or her employment with the
Company or its successors in interest, (b) employ, hire, solicit or cause to be
employed, hired or solicited (other than by the Company or its successors in
interest), or encourage others to employ or hire any person who within two (2)
years prior thereto was employed by the Company or its successors in interest,
or (c) establish a business with, or encourage others to establish a business
with, any person who within two (2) years prior thereto was an employee or
supplier of the Company or its successors in interest.

         6.04 Survival of Undertakings and Injunctive Relief.

         (a) The provisions of Sections 6.01, 6.02 and 6.03 shall survive the
termination of the Executive's employment with the Company irrespective of the
reasons therefor.

         (b) The Executive acknowledges and agrees that the restrictions imposed
upon the Executive by Sections 6.01, 6.02 and 6.03 and the purpose of such
restrictions are reasonable and are designed to protect the Protected
Information and the continued success of the Company without unduly restricting
the Executive's future employment by others. Furthermore, the Executive
acknowledges that, in view of the Protected Information which the Executive has
or will acquire or has or will have access to and in view of the necessity of

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the restrictions contained in Sections 6.01, 6.02 and 6.03, any violation of any
provision of Sections 6.01, 6.02 and 6.03 hereof would cause irreparable injury
to the Company and its successors in interest with respect to the resulting
disruption in their operations. By reason of the foregoing the Executive
consents and agrees that if the Executive violates any of the provisions of
Sections 6.01, 6.02 or 6.03 of this Agreement, the Company and its successors in
interest as the case may be, shall be entitled, in addition to any other
remedies that they may have, including money damages, to an injunction to be
issued by a court of competent jurisdiction, restraining the Executive from
committing or continuing any violation of such Sections of this Agreement.

         In the event of any such violation of Sections 6.01, 6.02 or 6.03 of
this Agreement, the Executive further agrees that the time periods set forth in
such Sections shall be extended by the period of such violation.

                                   ARTICLE VII
                                   TERMINATION
                                   -----------

         7.01 Termination of Employment. The Executive's employment may be
terminated (i) at any time during the Contract Term by mutual agreement of the
parties, (ii) at the end of any Renewal Contract Term if written notice of
non-renewal is given by either party to the other at least 90 days prior to the
end of said Renewal Contract Term or (iii) as otherwise provided in this
Article.

         7.02 Termination for Cause. The Company may terminate the Executive's
employment for Cause by giving the Executive seven (7) days prior written notice
of such termination. For purposes of this Agreement, "Cause" for termination
shall mean

              (i) the willful failure or refusal to carry out the reasonable
directions of the Board, which directions are consistent with the Executive's
duties as set forth under this Agreement and have been given to the Executive in
writing but which directions the Executive has failed to follow or implement
within thirty (30) days after said written notice, other than a failure
resulting from the Executive's complete or partial incapacity due to physical or
mental illness or impairment;

              (ii) a conviction for a violation of a state or federal criminal
law involving the commission of a felony;

              (iii) a willful act by the Executive that constitutes gross
negligence in the
performance of the Executive's  duties under this Agreement and which materially
injures  the  Company.  No act,  or failure to act,  by the  Executive  shall be
considered   "willful"  unless  committed  without  good  faith  and  without  a
reasonable belief that the act or omission was in the Company's best interest;

              (iv) a material breach by the Executive of the terms of this
Agreement, which breach has not been cured by the Executive within fifteen (15)
days of written notice of said breach by the Company;

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              (v) repeated unethical business practices by the Executive in
connection with the Company's business, which unethical business practices
continue after fifteen (15) days after written notice thereof by the Company; or

              (vi) habitual use of alcohol or drugs by the Executive.

         Upon termination for Cause, the Executive shall not be entitled to
payment of any compensation other than salary and benefits under this Agreement
earned up to the date of such termination and any stock options, warrants or
similar rights which have vested at the date of such termination.

         7.03 Termination Without Cause. Should the Executive's employment be
terminated for a reason other than as specifically set forth in Sections 7.01
and 7.02 or Article V above the Company shall pay and/or provide to the
Executive each of the benefits and payments provided in Section 5.02 (i)-(v).

                                  ARTICLE VIII
                                  MISCELLANEOUS
                                  -------------

         8.1 Assignment, Successors. This Agreement may not be assigned by
either party hereto without the prior written consent of the other party. This
Agreement shall be binding upon and inure to the benefit of the Executive and
the Executive's estate and the Company and any assignee of or successor to the
Company.

         8.2 Beneficiary. If the Executive dies during the Contract Term, the
Company shall pay as an additional death benefit (and not in lieu of any other
such benefit to which Executive may be entitled at such time) the Annual Base
Salary under paragraph 3.01 for the remainder of the Contract Term in a lump sum
payment to the Executive's beneficiary or beneficiaries designated in writing by
the Executive (collectively the "Beneficiary") and if no such Beneficiary is
designated, to the Executive's estate; provided, however, that such sum shall be
reduced by the amounts, if any, that are paid to the Beneficiary or the estate
of Executive, as the case may be, under the Salary Continuation Agreement during
the remainder of the Contract Term.

         8.3 Nonalienation of Benefits. Benefits payable under this Agreement
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
hereunder shall be void.

         8.4 Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.

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         8.5 Amendment and Waiver. This Agreement shall not be altered, amended
or modified except by written instrument executed by the Company and the
Executive. A waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition and any waiver of any other term, covenant, agreement or
condition, and any waiver of any default in any such term, covenant, agreement
or condition shall not be deemed a waiver of any later default thereof or of any
other term, covenant, agreement or condition.

         8.6 Notices. All notices and other communications hereunder shall be in
writing and delivered by hand or by first class registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

         If to the Company:       DYNATRONICS CORPORATION
                                  7030 Park Centre Drive
                                  Salt Lake City, Utah 84121

         With a copy to:          DURHAM, EVANS, JONES & PINEGAR
                                  Attn: Wayne D. Swan, Esq.
                                  111 East Broadway, Suite 900
                                  P.O. Box 4050
                                  Salt Lake City, Utah 84110

         If to the Executive:     Larry K. Beardall
                                  8898 Cobblestone Way
                                  Sandy, Utah 84093

         Either party may from time to time designate a new address by notice
given in accordance with this Section. Notice and communications shall be
effective when actually received by the addressee.

         8.7 Counterpart Originals. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         8.8 Entire Agreement. This Agreement forms the entire agreement between
the parties hereto with respect to any severance payment and with respect to the
subject matter contained in the Agreement.

         8.9 Applicable Law. The provisions of this Agreement shall be
interpreted and construed in accordance with the laws of the state of Utah,
without regard to its choice of law principles.

         8.10 Effect on Other Agreements. This Agreement shall supersede
entirely all prior agreements (including, without limitation, any existing
employment agreement), promises and representations regarding employment by the

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Company and severance or other payments contingent upon termination of
employment not referenced by this agreement. Notwithstanding the foregoing, the
Executive shall be entitled to any other severance plan applicable to other
senior executives of the Company.

         8.11 Extension or Renegotiation. The parties hereto agree that at any
time prior to the expiration of this Agreement, they may extend or renegotiate
this Agreement upon mutually agreeable terms and conditions.

         IN WITNESS WHEREOF the parties have executed this Employment Agreement
on the date first written above.

                                  DYNATRONICS CORPORATION,
                                  a Utah corporation

                                  By:  /s/ Kelvyn H. Cullimore, Jr.
                                  ------------------------------------------
                                  Name: Kelvyn H. Cullimore, Jr.
                                  ------------------------------------------
                                  Title: President and CEO
                                  ------------------------------------------

                                  LARRY K. BEARDALL,
                                  an individual

                                   /s/ Larry K. Beardall
                                  ------------------------------------------
                                  Larry K. Beardall

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                                    EXHIBIT A

         Responsibilities and Authority of Executive Vice President of Sales and
Marketing

Responsibilities:

         Second in command of the Company

         Assumes responsibility of President/CEO in the latter's absence Manages
         and directs all Sales and Marketing functions

         Hiring of personnel for his department

         Develops Sales and Marketing strategies

         Develops product definition for all manufactured products

         Drives for improvement of existing products

         Establishes Customer Service Policies and Procedures

         Evaluates products for distribution

         Management Team Member

         Member Board of Directors

Authority:

         Acts in full stead of President/CEO in the latter's absence

         Fully empowered to decide and implement Marketing and Sales strategies
         including retaining and dismissing the services of dealers and sales
         representatives

         Establishment of incentive programs within allowed budgets

         Hires needed personnel to meet the Marketing and Sales business plan
         (compensation packages require advance approval of the President/CEO)

         Approves expenditures for sales travel, trade shows, advertising and
         other budget categories within his purview (as approved by the Board)

         Latitude to discount sales as appropriate

         May grant exceptions to Company policies for employees under his
         management

         Signs Purchase Orders for equipment, supplies, and services for his
         department: </= $5,000 (Higher amounts require approval of
         President/CEO)

         Approves selling price of all Dynatronics for-sale product

         Approves non-manufactured products for distribution

                                       13

--------------------------------------------------------------------------------================================================================================

Exhibit 10.3

                        *000000000000009001095506292007*

                                 PROMISSORY NOTE

       Principal          Loan Date       Maturity           Loan No

     $6,000,000.00        06-29-2007     12-15-2008            9001

     Call / Coll          Account         Officer    Initials

          ,2              2999005          05556

         References  in the  shaded  area are for  Lender's  use only and do not
limit the applicability of this document to any particular loan or item.

         Any item above  containing  "***" has been  omitted  due to text length
limitations.
    Borrower:                         Lender:
        DYNATRONICS CORPORATION          ZIONS FIRST NATIONAL BANK
        7030 PARK CENTRE DRIVE           SALT LAKE COMMERCIAL BANKING DIVISION
        SALT LAKE CITY, UT  84121        1 SOUTH MAIN
                                         STE 300
                                         SALT LAKE CITY, UT  84111

Principal Amount:  $6,000,000.00                           Initial Rate:  8.750%

                          Date of Note: June 29, 2007

PROMISE TO PAY. DYNATRONICS  CORPORATION  ("Borrower")  promises to pay to ZIONS
FIRST NATIONAL BANK  ("Lender"),  or order, in lawful money of the United States
of America, the principal amount of Six Million & 00/100 Dollars ($6,000,000.00)
or so  much  as  may be  outstanding,  together  with  interest  on  the  unpaid
outstanding principal balance of each advance. Interest shall be calculated from
the date of each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued  unpaid  interest on December 15, 2008.  In addition,  Borrower
will pay regular monthly  payments of all accrued unpaid interest due as of each
payment date,  beginning July 15, 2007, with all subsequent interest payments to
be due on the same day of each month  after  that.  Unless  otherwise  agreed or
required  by  applicable  law,  payments  will be  applied  first to any  unpaid
collection  costs;  then to any accrued unpaid interest;  and then to principal.
The annual interest rate for this Note is computed on a 365/360 basis;  that is,
by  applying  the  ratio of the  annual  interest  rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the  principal  balance  is  outstanding.  Borrower  will pay  Lender at
Lender's  address  shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an  independent  index which is the Prime Rate.
Prime  Rate is to be  strictly  interpreted  and is not  intended  to serve  any
purpose other than  providing an index to determine  the variable  interest rate
used herein.  It is not the lowest rate at which Zions First  National  Bank may
make  loans to any of its  customers,  either now or in the  future.  Prime Rate
means an index  which is  determined  daily  by the  published  commercial  loan
variable rate index held by any two of the following banks:  J.P. Morgan Chase &
Co.,  Wells Fargo Bank N.A., and Bank of America N.A. In the event no two of the
above banks have the same  published  rate, the bank having the median rate will
establish the Prime Rate (the "Index").  The Index is not necessarily the lowest
rate charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan,  Lender may  designate a  substitute  index  after  notifying
Borrower.  Lender  will tell  Borrower  the current  Index rate upon  Borrower's
request.  The  interest  rate  change  will not occur  more often than each Day.
Borrower  understands  that  Lender may make loans based on other rates as well.
The Index currently is 8.250% per annum.  The interest rate to be applied to the
unpaid principal  balance during this Note will be at a rate of 0.500 percentage
points over the Index, resulting in an initial rate of 8.750% per annum. NOTICE:
Under no  circumstances  will the  interest  rate on this  Note be more than the
maximum rate allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are  earned  fully as of the date of the loan and will not be  subject to refund
upon early  payment  (whether  voluntary or as a result of  default),  except as
otherwise  required by law.  Except for the foregoing,  Borrower may pay without
penalty  all or a portion  of the  amount  owed  earlier  than it is due.  Early
payments will not,  unless agreed to by Lender in writing,  relieve  Borrower of
Borrower's  obligation to continue to make payments of accrued unpaid  interest.
Rather,  early payments will reduce the principal  balance due.  Borrower agrees
not to send  Lender  payments  marked  "paid in full",  "without  recourse",  or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of  Lender's  rights  under  this  Note,  and  Borrower  will  remain
obligated to pay any further amount owed to Lender.  All written  communications
concerning  disputed  amounts,  including any check or other payment  instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed  amount must be mailed or delivered to: Zions First National Bank,
P.O. Box 25822 Salt Lake City, UT 84125-0822.

INTEREST  AFTER  DEFAULT.  Upon  default,  including  failure  to pay upon final
maturity,  the  interest  rate on this Note shall be increased by adding a 3.000
percentage point margin  ("Default Rate Margin").  The Default Rate Margin shall
also apply to each  succeeding  interest rate change that would have applied had
there been no default.  However,  in no event will the interest  rate exceed the
maximum interest rate limitations under applicable law.

DEFAULT.  Each of the following shall  constitute an event of default ("Event of
Default") under this Note:

         Payment Default. Borrower fails to make any payment when due under this
         Note.

         Other  Defaults.  Borrower fails to comply with or to perform any other
         term,  obligation,  covenant or condition  contained in this Note or in
         any of the related  documents or to comply with or to perform any term,
         obligation,  covenant or  condition  contained  in any other  agreement
         between Lender and Borrower.

         False  Statements.  Any warranty,  representation  or statement made or
         furnished to Lender by Borrower or on Borrower's behalf under this Note
         or the  related  documents  is  false  or  misleading  in any  material
         respect,  either now or at the time made or furnished or becomes  false
         or misleading at any time thereafter.

         Insolvency. The dissolution or termination of Borrower's existence as a
         going  business,  the  insolvency  of Borrower,  the  appointment  of a
         receiver for any part of Borrower's  property,  any  assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Borrower.

         Creditor or Forfeiture  Proceedings.  Commencement  of  foreclosure  or
         forfeiture  proceedings,  whether by  judicial  proceeding,  self-help,
         repossession or any other method, by any creditor of Borrower or by any

                                       1
<PAGE>

         governmental  agency  against any  collateral  securing the loan.  This
         includes a garnishment of any of Borrower's accounts, including deposit
         accounts,  with Lender.  However, this Event of Default shall not apply
         if there is a good faith  dispute by  Borrower  as to the  validity  or
         reasonableness  of the  claim  which is the  basis of the  creditor  or
         forfeiture  proceeding  and if Borrower  gives Lender written notice of
         the creditor or forfeiture  proceeding  and deposits with Lender monies
         or a surety  bond for the  creditor  or  forfeiture  proceeding,  in an
         amount  determined  by  Lender,  in its  sole  discretion,  as being an
         adequate reserve or bond for the dispute.

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

         Change In  Ownership.  Any  single  person or entity  acquires a 30% or
         greater ownership interest in the common stock of Borrower.

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

         Insecurity.  Lender in good faith believes itself insecure.

         Cure  Provisions.  If any  default,  other than a default in payment is
         curable and if Borrower  has not been given a notice of a breach of the
         same provision of this Note within the preceding twelve (12) months, it
         may be cured if Borrower,  after  receiving  written notice from Lender
         demanding  cure of such default:  (1) cures the default  within fifteen
         (15) days;  or (2) if the cure  requires  more than  fifteen (15) days,
         immediately  initiates  steps  which  Lender  deems  in  Lender's  sole
         discretion  to  be  sufficient  to  cure  the  default  and  thereafter
         continues and completes all reasonable and necessary  steps  sufficient
         to produce compliance as soon as reasonably practical.

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

ATTORNEYS' FEES;  EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes,  subject to any  limits  under  applicable  law,  Lender's  reasonable
attorneys' fees and Lender's legal expenses,  whether or not there is a lawsuit,
including without  limitation all reasonable  attorneys' fees and legal expenses
for bankruptcy  proceedings (including efforts to modify or vacate any automatic
stay or injunction),  and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.

GOVERNING  LAW.  This Note will be governed by federal law  applicable to Lender
and, to the extent not  preempted  by federal law, the laws of the State of Utah
without regard to its conflicts of law  provisions.  This Note has been accepted
by Lender in the State of Utah.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of SALT LAKE County, State of Utah.

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $15.00 if  Borrower
makes a payment on Borrower's  loan and the check or  preauthorized  charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF.  To the extent  permitted by applicable  law, Lender reserves a
right of  setoff in all  Borrower's  accounts  with  Lender  (whether  checking,
savings,  or some other  account).  This  includes all accounts  Borrower  holds
jointly  with  someone  else and all  accounts  Borrower may open in the future.
However,  this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower  authorizes Lender, to the
extent  permitted by  applicable  law, to charge or setoff all sums owing on the
indebtedness  against any and all such  accounts,  and, at Lender's  option,  to
administratively  freeze all such  accounts to allow Lender to protect  Lender's
charge  and setoff  rights  provided  in this  paragraph.  Lender  agrees not to
exercise  the right of  set-off  unless an Event of Default  continues  to exist
fifteen (15) days after  Lender's  notification  of default has been received in
writing by Borrower.

COLLATERAL.  Borrower  acknowledges  this Note is secured by in  addition to any
other collateral, a Commercial Security Agreement of even date herein.

LINE OF CREDIT.  This Note evidences a revolving line of credit.  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  following  person  currently is  authorized to request
advances and authorize  payments under the line of credit until Lender  receives
from Borrower,  at Lender's address shown above, written notice of revocation of
his  or  her  authority:   KELVYN  CULLIMORE,   JR.,  President  of  DYNATRONICS
CORPORATION.  Borrower agrees to be liable for all sums either:  (A) advanced in
accordance with the instructions of an authorized  person or (B) credited to any
of Borrower's  accounts with Lender.  The unpaid principal balance owing on this
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
believes itself insecure.

ARBITRATION DISCLOSURES.

         1.  ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
         VERY LIMITED REVIEW BY A COURT.
         2. IN  ARBITRATION  THE PARTIES ARE WAIVING  THEIR RIGHT TO LITIGATE IN
         COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
         3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
         4.  ARBITRATORS ARE NOT REQUIRED TO INCLUDE  FACTUAL  FINDINGS OR LEGAL
         REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
         ARBITRATORS' RULINGS IS VERY LIMITED.
         5. A PANEL OF  ARBITRATORS  MIGHT INCLUDE AN  ARBITRATOR  WHO IS OR WAS
         AFFILIATED WITH THE BANKING INDUSTRY.
         6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
         THOSE CONCERNING THE AGREEMENT.
         7. IF YOU HAVE QUESTIONS  ABOUT  ARBITRATION,  CONSULT YOUR ATTORNEY OR
         THE AMERICAN ARBITRATION ASSOCIATION.

         (a) Any claim or controversy  ("Dispute")  between or among the parties
         and their employees,  agents, affiliates,  and assigns,  including, but
         not limited to, Disputes  arising out of or relating to this agreement,

                                       2
<PAGE>

         this  arbitration  provision  ("arbitration  clause"),  or any  related
         agreements or  instruments  relating  hereto or delivered in connection
         herewith ("Related Agreements"),  and including,  but not limited to, a
         Dispute based on or arising from an alleged tort,  shall at the request
         of any party be resolved by binding  arbitration in accordance with the
         applicable  arbitration rules of the American  Arbitration  Association
         (the "Administrator").  The provisions of this arbitration clause shall
         survive any termination,  amendment, or expiration of this agreement or
         Related  Agreements.  The provisions of this  arbitration  clause shall
         supersede any prior arbitration agreement between or among the parties.

         (b) The arbitration  proceedings  shall be conducted in a city mutually
         agreed by the parties.  Absent such an agreement,  arbitration  will be
         conducted  in  Salt  Lake  City,  Utah or such  other  place  as may be
         determined   by  the   Administrator.   The   Administrator   and   the
         arbitrator(s)  shall have the  authority to the extent  practicable  to
         take any action to require the  arbitration  proceeding to be completed
         and the  arbitrator(s)'  award issued  within 150 days of the filing of
         the Dispute with the  Administrator.  The arbitrator(s)  shall have the
         authority  to impose  sanctions  on any party that fails to comply with
         time  periods  imposed  by  the  Administrator  or  the  arbitrator(s),
         including the sanction of summarily  dismissing  any Dispute or defense
         with prejudice.  The arbitrator(s)  shall have the authority to resolve
         any Dispute  regarding the terms of this  agreement,  this  arbitration
         clause,  or  Related  Agreements,  including  any claim or  controversy
         regarding the  arbitrability  of any Dispute.  All limitations  periods
         applicable to any Dispute or defense,  whether by statute or agreement,
         shall  apply  to  any   arbitration   proceeding   hereunder   and  the
         arbitrator(s) shall have the authority to decide whether any Dispute or
         defense is barred by a  limitations  period  and,  if so, to  summarily
         enter an award  dismissing  any Dispute or defense on that  basis.  The
         doctrines of  compulsory  counterclaim,  res judicata,  and  collateral
         estoppel shall apply to any arbitration  proceeding hereunder so that a
         party must state as a counterclaim  in the  arbitration  proceeding any
         claim or controversy  which arises out of the transaction or occurrence
         that is the subject matter of the Dispute. The arbitrator(s) may in the
         arbitrator(s)'  discretion  and  at  the  request  of  any  party:  (1)
         consolidate in a single arbitration  proceeding any other claim arising
         out of the same transaction involving another party to that transaction
         that is bound by an arbitration clause with Lender,  such as borrowers,
         guarantors,  sureties, and owners of collateral; and (2) consolidate or
         administer  multiple  arbitration  claims or  controversies  as a class
         action  in  accordance  with  Rule 23 of the  Federal  Rules  of  Civil
         Procedure.

         (c) The arbitrator(s) shall be selected in accordance with the rules of
         the Administrator from panels maintained by the Administrator. A single
         arbitrator  shall have  expertise in the subject matter of the Dispute.
         Where three arbitrators conduct an arbitration proceeding,  the Dispute
         shall be decided by a majority vote of the three arbitrators,  at least
         one of whom must have  expertise  in the subject  matter of the Dispute
         and  at  least  one  of  whom  must  be  a  practicing  attorney.   The
         arbitrator(s) shall award to the prevailing party recovery of all costs
         and   fees   (including   attorneys'   fees  and   costs,   arbitration
         administration   fees  and  costs,   and   arbitrator(s)'   fees).  The
         arbitrator(s), either during the pendency of the arbitration proceeding
         or as part of the  arbitration  award,  also may grant  provisional  or
         ancillary  remedies including but not limited to an award of injunctive
         relief, foreclosure, sequestration,  attachment, replevin, garnishment,
         or the appointment of a receiver.

         (d)  Judgement  upon an  arbitration  award may be entered in any court
         having  jurisdiction,   subject  to  the  following   limitation:   the
         arbitration  award is binding  upon the parties only if the amount does
         not exceed Four Million Dollars  ($4,000,000.00);  if the award exceeds
         that limit,  either party may demand the right to a court trial. Such a
         demand  must be filed with the  Administrator  within  thirty (30) days
         following the date of the  arbitration  award;  if such a demand is not
         made with that time period,  the amount of the arbitration  award shall
         be binding. The computation of the total amount of an arbitration award
         shall  include   amounts   awarded  for  attorneys'   fees  and  costs,
         arbitration administration fees and costs, and arbitrator(s)' fees.

         (e) No provision of this  arbitration  clause,  nor the exercise of any
         rights hereunder, shall limit the right of any party to: (1) judicially
         or  non-judicially  foreclose  against  any real or  personal  property
         collateral  or  other  security;   (2)  exercise  self-help   remedies,
         including but not limited to  repossession  and setoff  rights;  or (3)
         obtain from a court having  jurisdiction  thereover any  provisional or
         ancillary  remedies  including  but not limited to  injunctive  relief,
         foreclosure,  sequestration,  attachment, replevin, garnishment, or the
         appointment  of a receiver.  Such rights can be  exercised at any time,
         before or after initiation of an arbitration proceeding,  except to the
         extent such action is contrary to the arbitration  award.  The exercise
         of such rights shall not constitute a waiver of the right to submit any
         Dispute to  arbitration,  and any claim or  controversy  related to the
         exercise  of such rights  shall be a Dispute to be  resolved  under the
         provisions  of  this  arbitration   clause.   Any  party  may  initiate
         arbitration with the Administrator. If any party desires to arbitrate a
         Dispute  asserted  against  such  party in a  complaint,  counterclaim,
         cross-claim, or third-party complaint thereto, or in an answer or other
         reply to any such pleading,  such party must make an appropriate motion
         to the trial court seeking to compel arbitration,  which motion must be
         filed  with the court  within 45 days of service  of the  pleading,  or
         amendment  thereto,  setting  forth such  Dispute.  If  arbitration  is
         compelled  after  commencement  of litigation  of a Dispute,  the party
         obtaining an order compelling  arbitration  shall commence  arbitration
         and pay the  Administrator's  filing  fees and costs  within 45 days of
         entry of such order.  Failure to do so shall constitute an agreement to
         proceed with  litigation  and waiver of the right to arbitrate.  In any
         arbitration  commenced  by a consumer  regarding  a  consumer  Dispute,
         Lender  shall pay one half of the  Administrator's  filing  fee,  up to
         $250.

         (f)  Notwithstanding  the  applicability  of  any  other  law  to  this
         agreement,  the arbitration  clause, or Related  Agreements  between or
         among the parties,  the Federal Arbitration Act, 9 U.S.C.  Section 1 et
         seq.,  shall  apply  to the  construction  and  interpretation  of this
         arbitration  clause. If any provision of this arbitration clause should
         be  determined  to be  unenforceable,  all  other  provisions  of  this
         arbitration clause shall remain in full force and effect.

WAIVER OF CLAIMS.  BORROWER (i) REPRESENTS THAT IT HAS NO DEFENSES TO OR SETOFFS
AGAINST ANY INDEBTEDNESS OR OTHER  OBLIGATIONS OWING TO LENDER OR ITS AFFILIATES
(THE "OBLIGATIONS"),  NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR ANY MATTER
WHATSOEVER,  RELATED OR UNRELATED TO THE  OBLIGATIONS,  AND (ii) RELEASES LENDER
AND ITS  AFFILIATES  FROM ALL  CLAIMS,  CAUSES OF ACTION,  AND COSTS,  IN LAW OR
EQUITY,  EXISTING AS OF THE DATE OF THIS NOTE, WHICH BORROWER HAS OR MAY HAVE BY
REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER, RELATED OR
UNRELATED TO THE  OBLIGATIONS,  INCLUDING THE SUBJECT MATTER OF THIS NOTE.  THIS
PROVISION  SHALL NOT APPLY TO CLAIMS  FOR  PERFORMANCE  OF  EXPRESS  CONTRACTUAL
OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.

PRIOR NOTE. This is a renewal of a Promissory Note from Borrower to Lender dated
December 20, 2005 in the original principal amount of $4,500,000.00.

LOAN  AGREEMENT.  This  Promissory  Note  is made  with  reference  to the  Loan
Agreement of even date herewith, which supersedes any previous Loan Agreement.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs,  personal  representatives,  successors and assigns,  and
shall inure to the benefit of Lender and its successors and assigns.

                                       3
<PAGE>

GENERAL PROVISIONS.  If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note.  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  presentment,  demand for payment,  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. The obligations under this Note are joint and several.

                                       4
<PAGE>

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

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

DYNATRONICS CORPORATION

By: /s/ KELVYN CULLIMORE, JR.
-----------------------------------
KELVYN CULLIMORE, JR., President of
DYNATRONICS CORPORATION

   LASER PRO Lending, Ver. 5.36.00.004 Copr. Harland Financial Solutions, Inc.
                      1997, 2007. All Rights Reserved. - UT
                 C:\COMML\CFI\LPL\D20.FC TR-68454 PR-ARRLOC (M)

                                       5

--------------------------------------------------------------------------------

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

                        *000000000000009001023506292007*

                          COMMERCIAL SECURITY AGREEMENT

       Principal          Loan Date       Maturity           Loan No

     $6,000,000.00        06-29-2007     12-15-2008            9001

       Call / Coll          Account         Officer          Initials

            ,2              2999005          05556

References  in the shaded  area are for  Lender's  use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing "***" has been omitted due to text length limitations.

 Borrower:                              Lender:
      DYNATRONICS CORPORATION              ZIONS FIRST NATIONAL BANK
      7030 PARK CENTRE DRIVE               SALT LAKE COMMERCIAL BANKING DIVISION
      SALT LAKE CITY, UT  84121            1 SOUTH MAIN
                                           STE 300
Grantor:                                   SALT LAKE CITY, UT  84111

      DYNATRONICS CORPORATION
      DYNATRONICS DISTRIBUTION
        COMPANY, LLC
      7030 PARK CENTRE DRIVE
      SALT LAKE CITY, UT  84121

THIS  COMMERCIAL  SECURITY  AGREEMENT  dated June 29, 2007, is made and executed
among  DYNATRONICS  CORPORATION;   and  DYNATRONICS  DISTRIBUTION  COMPANY,  LLC
("Grantor"); DYNATRONICS CORPORATION ("Borrower"); and ZIONS FIRST NATIONAL BANK
("Lender").

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

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

         All Inventory, Chattel Paper, Accounts and General Intangibles

In addition, the word "Collateral" also includes all the following,  whether now
owned or hereafter  acquired,  whether now existing or  hereafter  arising,  and
wherever located:

         (A) All accessions,  attachments,  accessories, tools, parts, supplies,
         replacements  of and  additions  to any  of  the  collateral  described
         herein, whether added now or later.

         (B) All products  and produce of any of the property  described in this
         Collateral section.

         (C) All accounts,  general  intangibles,  instruments,  rents,  monies,
         payments,  and  all  other  rights,  arising  out  of  a  sale,  lease,
         consignment or other  disposition  of any of the property  described in
         this Collateral section.

         (D)  All  proceeds  (including   insurance  proceeds)  from  the  sale,
         destruction,  loss,  or  other  disposition  of  any  of  the  property
         described in this Collateral  section,  and sums due from a third party
         who has  damaged  or  destroyed  the  Collateral  or from that  party's
         insurer, whether due to judgment, settlement or other process.

         (E) All records and data  relating to any of the property  described in
         this Collateral section, whether in the form of a writing,  photograph,
         microfilm,  microfiche,  or  electronic  media,  together  with  all of
         Grantor's right,  title,  and interest in and to all computer  software
         required to utilize,  create, maintain, and process any such records or
         data on electronic media.

CROSS-COLLATERALIZATION.  In addition to the Note,  this  Agreement  secures all
obligations,  debts and liabilities, plus interest thereon, of either Grantor or
Borrower to Lender,  or any one or more of them, as well as all claims by Lender
against Borrower and Grantor or any one or more of them, whether now existing or
hereafter  arising,  whether  related or  unrelated  to the purpose of the Note,
whether  voluntary  or  otherwise,  whether due or not due,  direct or indirect,
determined or undetermined,  absolute or contingent, liquidated or unliquidated,
whether  Borrower or Grantor may be liable  individually or jointly with others,
whether obligated as guarantor,  surety,  accommodation party or otherwise,  and
whether  recovery upon such amounts may be or hereafter may become barred by any
statute of limitations,  and whether the obligation to repay such amounts may be
or hereafter may become otherwise unenforceable.

FUTURE  ADVANCES.  In addition to the Note,  this  Agreement  secures all future
advances made by Lender to Borrower  regardless of whether the advances are made
a) pursuant to a commitment or b) for the same purposes.

BORROWER'S WAIVERS AND RESPONSIBILITIES. Except as otherwise required under this
Agreement or by  applicable  law, (A) Borrower  agrees that Lender need not tell
Borrower  about any action or  inaction  Lender  takes in  connection  with this
Agreement;  (B)  Borrower  assumes  the  responsibility  for being  and  keeping
informed  about the  Collateral;  and (C) Borrower  waives any defenses that may
arise because of any action or inaction of Lender,  including without limitation
any failure of Lender to realize upon the  Collateral  or any delay by Lender in
realizing upon the  Collateral;  and Borrower  agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.

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GRANTOR'S  REPRESENTATIONS  AND  WARRANTIES.  Grantor  warrants  that:  (A) this
Agreement  is executed at  Borrower's  request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the  Collateral to Lender;  (C) Grantor has  established  adequate
means of  obtaining  from  Borrower  on a  continuing  basis  information  about
Borrower's  financial  condition;  and (D) Lender has made no  representation to
Grantor about Borrower or Borrower's creditworthiness.

GRANTOR'S  WAIVERS.  Grantor waives all  requirements of  presentment,  protest,
demand,  and notice of dishonor or  non-payment  to Borrower or Grantor,  or any
other  party to the  Indebtedness  or the  Collateral.  Lender may do any of the
following  with  respect  to any  obligation  of  any  Borrower,  without  first
obtaining  the  consent  of  Grantor:  (A) grant any  extension  of time for any
payment,  (B) grant any renewal, (C) permit any modification of payment terms or
other terms,  or (D) exchange or release any  Collateral or other  security.  No
such act or failure to act shall affect  Lender's  rights against Grantor or the
Collateral.

RIGHT OF SETOFF.  To the extent  permitted by applicable  law, Lender reserves a
right of  setoff  in all  Grantor's  accounts  with  Lender  (whether  checking,
savings,  or some other  account).  This  includes  all accounts  Grantor  holds
jointly  with  someone  else and all  accounts  Grantor  may open in the future.
However,  this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor  authorizes  Lender, to the
extent  permitted by  applicable  law, to charge or setoff all sums owing on the
Indebtedness  against any and all such  accounts,  and, at Lender's  option,  to
administratively  freeze all such  accounts to allow Lender to protect  Lender's
charge and setoff  rights  provided in this  paragraph.  . Lender  agrees not to
exercise  its right of setoff  unless  any Event of Default  continues  to exist
fifteen (15) days after  Lender's  notification  of default has been received in
writing by Borrower.

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

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

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

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

         Enforceability of Collateral.  To the extent the Collateral consists of
         accounts,  chattel  paper,  or general  intangibles,  as defined by the
         Uniform  Commercial  Code,  the Collateral is enforceable in accordance
         with its terms, is genuine, and fully complies with all applicable laws
         and regulations  concerning form, content and manner of preparation and
         execution,  and all persons appearing to be obligated on the Collateral
         have  authority  and capacity to contract and are in fact  obligated as
         they appear to be on the  Collateral.  At the time any account  becomes
         subject to a security interest in favor of Lender, the account shall be
         a  good  and  valid  account  representing  an  undisputed,  bona  fide
         indebtedness  incurred  by the account  debtor,  for  merchandise  held
         subject to delivery  instructions  or  previously  shipped or delivered
         pursuant to a contract of sale, or for services previously performed by
         Grantor with or for the account debtor.

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

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

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

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

         Repairs and  Maintenance.  Grantor agrees to keep and maintain,  and to
         cause others to keep and maintain, the Collateral in good order, repair
         and  condition  at all times  while this  Agreement  remains in effect.

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<PAGE>

         Grantor  further agrees to pay when due all claims for work done on, or
         services  rendered  or  material   furnished  in  connection  with  the
         Collateral  so that no lien or  encumbrance  may ever  attach  to or be
         filed against the Collateral.

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

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

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

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

         Maintenance of Casualty  Insurance.  Grantor shall procure and maintain
         all risks  insurance,  including  without  limitation  fire,  theft and
         liability  coverage  together  with such other  insurance as Lender may
         require with respect to the Collateral, in form, amounts, coverages and
         basis  reasonably  acceptable  to Lender  and  issued  by a company  or
         companies  reasonably  acceptable to Lender.  Grantor,  upon request of
         Lender,  will  deliver  to  Lender  from time to time the  policies  or
         certificates  of insurance in form  satisfactory  to Lender,  including
         stipulations that coverages will not be cancelled or diminished without
         at least  ten  (10)  days'  prior  written  notice  to  Lender  and not
         including any disclaimer of the insurer's liability for failure to give
         such a notice.  Each insurance policy also shall include an endorsement
         providing  that coverage in favor of Lender will not be impaired in any
         way by any act,  omission or default of Grantor or any other person. In
         connection  with all policies  covering assets in which Lender holds or
         is offered a security  interest,  Grantor will provide Lender with such
         loss payable or other endorsements as Lender may require. If Grantor at
         any time fails to obtain or maintain any  insurance  as required  under
         this Agreement,  Lender may (but shall not be obligated to) obtain such
         insurance as Lender deems  appropriate,  including if Lender so chooses
         "single interest insurance," which will cover only Lender's interest in
         the Collateral.

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

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

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

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

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except
as  otherwise  provided  below  with  respect  to  accounts,  Grantor  may  have
possession  of the  tangible  personal  property and  beneficial  use of all the

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Collateral  and may use it in any  lawful  manner  not  inconsistent  with  this
Agreement or the Related Documents,  provided that Grantor's right to possession
and  beneficial use shall not apply to any  Collateral  where  possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral.  Until otherwise notified by Lender, Grantor may collect any of
the Collateral  consisting of accounts.  At any time and even though no Event of
Default  exists,  Lender may  exercise its rights to collect the accounts and to
notify account  debtors to make payments  directly to Lender for  application to
the  Indebtedness.  If  Lender  at any time has  possession  of any  Collateral,
whether  before  or after an Event of  Default,  Lender  shall be deemed to have
exercised  reasonable care in the custody and  preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any  request  by Grantor  shall not of itself be deemed to be a
failure to exercise  reasonable  care.  Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral  against prior parties,
nor to protect,  preserve or maintain any security  interest given to secure the
Indebtedness.  Lender  agrees not to exercise this right until fifteen (15) days
after Lender's written notification to Borrower.

LENDER'S  EXPENDITURES.  If any action or  proceeding  is  commenced  that would
materially  affect  Lender's  interest in the  Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents,  including
but not limited to  Grantor's  failure to  discharge or pay when due any amounts
Grantor is  required to  discharge  or pay under this  Agreement  or any Related
Documents,  Lender on Grantor's  behalf may (but shall not be obligated to) take
any  action  that  Lender  deems  appropriate,  including  but  not  limited  to
discharging or paying all taxes,  liens,  security  interests,  encumbrances and
other  claims,  at any time  levied or placed on the  Collateral  and paying all
costs  for  insuring,  maintaining  and  preserving  the  Collateral.  All  such
expenditures  incurred  or paid by  Lender  for such  purposes  will  then  bear
interest at the rate  charged  under the Note from the date  incurred or paid by
Lender to the date of repayment by Grantor. All such expenses will become a part
of the Indebtedness and, at Lender's option,  will (A) be payable on demand; (B)
be added to the balance of the Note and be apportioned among and be payable with
any  installment  payments  to  become  due  during  either  (1) the term of any
applicable  insurance  policy;  or (2) the remaining term of the Note; or (C) be
treated  as a  balloon  payment  which  will be due and  payable  at the  Note's
maturity.  The Agreement also will secure  payment of these amounts.  Such right
shall be in addition  to all other  rights and  remedies to which  Lender may be
entitled  upon  Default.  Lender  agrees to provide  Borrower  fifteen (15) days
written  notice of its intent to costs for which  Borrower  will be  responsible
under the terms of this Agreement

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

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

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

         False  Statements.  Any warranty,  representation  or statement made or
         furnished  to  Lender  by  Borrower  or  Grantor  or on  Borrower's  or
         Grantor's behalf under this Agreement or the Related Documents is false
         or misleading in any material  respect,  either now or at the time made
         or furnished or becomes false or misleading at any time thereafter.

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

         Insolvency.  The  dissolution or termination of Borrower's or Grantor's
         existence as a going  business,  the insolvency of Borrower or Grantor,
         the  appointment  of a receiver for any part of Borrower's or Grantor's
         property,  any  assignment  for the benefit of  creditors,  any type of
         creditor  workout,  or the  commencement  of any  proceeding  under any
         bankruptcy or insolvency laws by or against Borrower or Grantor.

         Creditor or Forfeiture  Proceedings.  Commencement  of  foreclosure  or
         forfeiture  proceedings,  whether by  judicial  proceeding,  self-help,
         repossession  or any other  method,  by any  creditor  of  Borrower  or
         Grantor or by any governmental  agency against any collateral  securing
         the  Indebtedness.  This includes a garnishment of any of Borrower's or
         Grantor's accounts,  including deposit accounts,  with Lender. However,
         this Event of Default  shall not apply if there is a good faith dispute
         by Borrower  or Grantor 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 deposits with Lender monies or a surety bond
         for the creditor or forfeiture  proceeding,  in an amount determined by
         Lender,  in its sole  discretion,  as being an adequate reserve or bond
         for the dispute.

         Events  Affecting  Guarantor.  Any of the preceding  events occurs with
         respect to any guarantor,  endorser,  surety, or accommodation party of
         any  of  the   Indebtedness   or  guarantor,   endorser,   surety,   or
         accommodation  party dies or becomes incompetent or revokes or disputes
         the validity of, or liability under, any Guaranty of the Indebtedness.

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

         Cure  Provisions.  If any  default,  other than a default in payment is
         curable  and if Grantor  has not been given a notice of a breach of the
         same  provision  of this  Agreement  within the  preceding  twelve (12)
         months, it may be cured if Grantor, after receiving written notice from
         Lender  demanding  cure of such default:  (1) cures the default  within
         fifteen (15) days;  or (2) if the cure  requires more than fifteen (15)
         days,  immediately  initiates steps which Lender deems in Lender's sole
         discretion  to  be  sufficient  to  cure  the  default  and  thereafter
         continues and completes all reasonable and necessary  steps  sufficient
         to produce compliance as soon as reasonably practical.

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

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

         Assemble  Collateral.  Lender may require  Grantor to deliver to Lender
         all or any portion of the  Collateral and any and all  certificates  of
         title  and other  documents  relating  to the  Collateral.  Lender  may
         require  Grantor to assemble  the  Collateral  and make it available to
         Lender at a place to be  designated  by Lender.  Lender also shall have
         full power to enter upon the property of Grantor to take  possession of
         and remove the Collateral.  If the Collateral  contains other goods not
         covered by this Agreement at the time of  repossession,  Grantor agrees
         Lender may take such other goods, provided that Lender makes reasonable
         efforts to return them to Grantor after repossession.

         Sell the  Collateral.  Lender  shall  have full  power to sell,  lease,
         transfer,  or otherwise deal with the Collateral or proceeds thereof in
         Lender's own name or that of Grantor. Lender may sell the Collateral at

                                       4
<PAGE>

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

         Appoint  Receiver.  Lender  shall  have the  right  to have a  receiver
         appointed to take possession of all or any part of the Collateral, with
         the power to protect  and  preserve  the  Collateral,  to  operate  the
         Collateral preceding foreclosure or sale, and to collect the Rents from
         the Collateral  and apply the proceeds,  over and above the cost of the
         receivership,   against  the  Indebtedness.Grantor  hereby  waives  any
         requirement that the receiver be impartial and  disinterested as to all
         of  the  parties  and  agrees  that  employment  by  Lender  shall  not
         disqualify a person from serving as a receiver.

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

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

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

         Election of Remedies.  Except as may be prohibited  by applicable  law,
         all  of  Lender's  rights  and  remedies,  whether  evidenced  by  this
         Agreement,  the Related  Documents,  or by any other writing,  shall be
         cumulative and may be exercised singularly or concurrently. Election by
         Lender to pursue  any  remedy  shall not  exclude  pursuit of any other
         remedy,  and an  election  to make  expenditures  or to take  action to
         perform an obligation of Grantor under this Agreement,  after Grantor's
         failure  to  perform,  shall not  affect  Lender's  right to  declare a
         default and exercise its remedies.

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

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

         Arbitration Disclosures.

         1.  ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
         VERY LIMITED REVIEW BY A COURT.
         2. IN  ARBITRATION  THE PARTIES ARE WAIVING  THEIR RIGHT TO LITIGATE IN
         COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
         3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
         4.  ARBITRATORS ARE NOT REQUIRED TO INCLUDE  FACTUAL  FINDINGS OR LEGAL
         REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
         ARBITRATORS' RULINGS IS VERY LIMITED.
         5. A PANEL OF  ARBITRATORS  MIGHT INCLUDE AN  ARBITRATOR  WHO IS OR WAS
         AFFILIATED WITH THE BANKING INDUSTRY.
         6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
         THOSE CONCERNING THE AGREEMENT.
         7. IF YOU HAVE QUESTIONS  ABOUT  ARBITRATION,  CONSULT YOUR ATTORNEY OR
         THE AMERICAN ARBITRATION ASSOCIATION.

         (a) Any claim or controversy  ("Dispute")  between or among the parties
         and their employees,  agents, affiliates,  and assigns,  including, but
         not limited to, Disputes  arising out of or relating to this agreement,
         this  arbitration  provision  ("arbitration  clause"),  or any  related
         agreements or  instruments  relating  hereto or delivered in connection
         herewith ("Related Agreements"),  and including,  but not limited to, a
         Dispute based on or arising from an alleged tort,  shall at the request
         of any party be resolved by binding  arbitration in accordance with the
         applicable  arbitration rules of the American  Arbitration  Association
         (the "Administrator").  The provisions of this arbitration clause shall
         survive any termination,  amendment, or expiration of this agreement or
         Related  Agreements.  The provisions of this  arbitration  clause shall
         supersede any prior arbitration agreement between or among the parties.

         (b) The arbitration  proceedings  shall be conducted in a city mutually
         agreed by the parties.  Absent such an agreement,  arbitration  will be
         conducted  in  Salt  Lake  City,  Utah or such  other  place  as may be
         determined   by  the   Administrator.   The   Administrator   and   the
         arbitrator(s)  shall have the  authority to the extent  practicable  to
         take any action to require the  arbitration  proceeding to be completed
         and the  arbitrator(s)'  award issued  within 150 days of the filing of
         the Dispute with the  Administrator.  The arbitrator(s)  shall have the
         authority  to impose  sanctions  on any party that fails to comply with
         time  periods  imposed  by  the  Administrator  or  the  arbitrator(s),
         including the sanction of summarily  dismissing  any Dispute or defense
         with prejudice.  The arbitrator(s)  shall have the authority to resolve
         any Dispute  regarding the terms of this  agreement,  this  arbitration
         clause,  or  Related  Agreements,  including  any claim or  controversy
         regarding the  arbitrability  of any Dispute.  All limitations  periods
         applicable to any Dispute or defense,  whether by statute or agreement,
         shall  apply  to  any   arbitration   proceeding   hereunder   and  the
         arbitrator(s) shall have the authority to decide whether any Dispute or
         defense is barred by a  limitations  period  and,  if so, to  summarily
         enter an award  dismissing  any Dispute or defense on that  basis.  The
         doctrines of  compulsory  counterclaim,  res judicata,  and  collateral
         estoppel shall apply to any arbitration  proceeding hereunder so that a
         party must state as a counterclaim  in the  arbitration  proceeding any
         claim or controversy  which arises out of the transaction or occurrence
         that is the subject matter of the Dispute. The arbitrator(s) may in the
         arbitrator(s)'  discretion  and  at  the  request  of  any  party:  (1)
         consolidate in a single arbitration  proceeding any other claim arising
         out of the same transaction involving another party to that transaction
         that is bound by an arbitration clause with Lender,  such as borrowers,
         guarantors,  sureties, and owners of collateral; and (2) consolidate or
         administer  multiple  arbitration  claims or  controversies  as a class
         action  in  accordance  with  Rule 23 of the  Federal  Rules  of  Civil
         Procedure.

         (c) The arbitrator(s) shall be selected in accordance with the rules of
         the Administrator from panels maintained by the Administrator. A single

                                       5
<PAGE>

         arbitrator  shall have  expertise in the subject matter of the Dispute.
         Where three arbitrators conduct an arbitration proceeding,  the Dispute
         shall be decided by a majority vote of the three arbitrators,  at least
         one of whom must have  expertise  in the subject  matter of the Dispute
         and  at  least  one  of  whom  must  be  a  practicing  attorney.   The
         arbitrator(s) shall award to the prevailing party recovery of all costs
         and   fees   (including   attorneys'   fees  and   costs,   arbitration
         administration   fees  and  costs,   and   arbitrator(s)'   fees).  The
         arbitrator(s), either during the pendency of the arbitration proceeding
         or as part of the  arbitration  award,  also may grant  provisional  or
         ancillary  remedies including but not limited to an award of injunctive
         relief, foreclosure, sequestration,  attachment, replevin, garnishment,
         or the appointment of a receiver.

         (d)  Judgement  upon an  arbitration  award may be entered in any court
         having  jurisdiction,   subject  to  the  following   limitation:   the
         arbitration  award is binding  upon the parties only if the amount does
         not exceed Four Million Dollars  ($4,000,000.00);  if the award exceeds
         that limit,  either party may demand the right to a court trial. Such a
         demand  must be filed with the  Administrator  within  thirty (30) days
         following the date of the  arbitration  award;  if such a demand is not
         made with that time period,  the amount of the arbitration  award shall
         be binding. The computation of the total amount of an arbitration award
         shall  include   amounts   awarded  for  attorneys'   fees  and  costs,
         arbitration administration fees and costs, and arbitrator(s)' fees.

         (e) No provision of this  arbitration  clause,  nor the exercise of any
         rights hereunder, shall limit the right of any party to: (1) judicially
         or  non-judicially  foreclose  against  any real or  personal  property
         collateral  or  other  security;   (2)  exercise  self-help   remedies,
         including but not limited to  repossession  and setoff  rights;  or (3)
         obtain from a court having  jurisdiction  thereover any  provisional or
         ancillary  remedies  including  but not limited to  injunctive  relief,
         foreclosure,  sequestration,  attachment, replevin, garnishment, or the
         appointment  of a receiver.  Such rights can be  exercised at any time,
         before or after initiation of an arbitration proceeding,  except to the
         extent such action is contrary to the arbitration  award.  The exercise
         of such rights shall not constitute a waiver of the right to submit any
         Dispute to  arbitration,  and any claim or  controversy  related to the
         exercise  of such rights  shall be a Dispute to be  resolved  under the
         provisions  of  this  arbitration   clause.   Any  party  may  initiate
         arbitration with the Administrator. If any party desires to arbitrate a
         Dispute  asserted  against  such  party in a  complaint,  counterclaim,
         cross-claim, or third-party complaint thereto, or in an answer or other
         reply to any such pleading,  such party must make an appropriate motion
         to the trial court seeking to compel arbitration,  which motion must be
         filed  with the court  within 45 days of service  of the  pleading,  or
         amendment  thereto,  setting  forth such  Dispute.  If  arbitration  is
         compelled  after  commencement  of litigation  of a Dispute,  the party
         obtaining an order compelling  arbitration  shall commence  arbitration
         and pay the  Administrator's  filing  fees and costs  within 45 days of
         entry of such order.  Failure to do so shall constitute an agreement to
         proceed with  litigation  and waiver of the right to arbitrate.  In any
         arbitration  commenced  by a consumer  regarding  a  consumer  Dispute,
         Lender  shall pay one half of the  Administrator's  filing  fee,  up to
         $250.

         (f)  Notwithstanding  the  applicability  of  any  other  law  to  this
         agreement,  the arbitration  clause, or Related  Agreements  between or
         among the parties,  the Federal Arbitration Act, 9 U.S.C.  Section 1 et
         seq.,  shall  apply  to the  construction  and  interpretation  of this
         arbitration  clause. If any provision of this arbitration clause should
         be  determined  to be  unenforceable,  all  other  provisions  of  this
         arbitration clause shall remain in full force and effect.

         Attorneys'  Fees;  Expenses.  Grantor  agrees to pay upon demand all of
         Lender's costs and expenses,  including Lender's reasonable  attorneys'
         fees and  Lender's  legal  expenses,  incurred in  connection  with the
         enforcement of this  Agreement.  Lender may hire or pay someone else to
         help  enforce  this  Agreement,  and  Grantor  shall  pay the costs and
         expenses  of such  enforcement.  Costs and  expenses  include  Lender's
         reasonable  attorneys' fees and legal expenses  whether or not Lender's
         salaried  employee  and  whether or not there is a  lawsuit,  including
         reasonable   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.  Grantor  also shall pay all court costs and such  additional
         fees as may be directed by the court.

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

         Governing   Law.  This  Agreement  will  be  governed  by  federal  law
         applicable  to Lender and, to the extent not  preempted by federal law,
         the laws of the State of Utah  without  regard to its  conflicts of law
         provisions.  This Agreement has been accepted by Lender in the State of
         Utah.

         Choice of Venue.  If there is a lawsuit,  Grantor  agrees upon Lender's
         request  to  submit  to the  jurisdiction  of the  courts  of SALT LAKE
         County, State of Utah.

         Joint and Several  Liability.  All  obligations of Borrower and Grantor
         under this Agreement shall be joint and several,  and all references to
         Grantor  shall  mean  each and every  Grantor,  and all  references  to
         Borrower  shall  mean each and every  Borrower.  This  means  that each
         Borrower and Grantor  signing below is responsible  for all obligations
         in  this  Agreement.  Where  any  one  or  more  of  the  parties  is a
         corporation,  partnership, limited liability company or similar entity,
         it is not necessary for Lender to inquire into the powers of any of the
         officers,  directors,  partners,  members,  or other  agents  acting or
         purporting to act on the entity's  behalf,  and any obligations made or
         created in reliance upon the professed exercise of such powers shall be
         guaranteed under this Agreement.

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

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

         Power  of  Attorney.   Grantor  hereby  appoints  Lender  as  Grantor's
         irrevocable attorney-in-fact for the purpose of executing any documents
         necessary  to perfect,  amend,  or to continue  the  security  interest
         granted in this Agreement or to demand  termination of filings of other
         secured   parties.   Lender  may  at  any  time,  and  without  further
         authorization  from  Grantor,  file a  carbon,  photographic  or  other
         reproduction of any financing statement or of this Agreement for use as
         a financing  statement.  Grantor will reimburse Lender for all expenses
         for the perfection and the  continuation  of the perfection of Lender's
         security interest in the Collateral.

                                       6
<PAGE>

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

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

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

         Time is of the Essence.  Time is of the essence in the  performance  of
         this Agreement.

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

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

         Borrower.  The  word  "Borrower"  means  DYNATRONICS   CORPORATION  and
         includes all  co-signers  and co-makers  signing the Note and all their
         successors and assigns.

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

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

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

         Event of Default.  The words "Event of Default"  mean any of the events
         of default set forth in this  Agreement in the default  section of this
         Agreement.

         Grantor.  The  word  "Grantor"  means  DYNATRONICS   CORPORATION;   and
         DYNATRONICS DISTRIBUTION COMPANY, LLC.

         Guaranty.  The word  "Guaranty"  means  the  guaranty  from  guarantor,
         endorser,  surety, or accommodation party to Lender,  including without
         limitation a guaranty of all or part of the Note.

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

         Indebtedness.  The  word  "Indebtedness"  means  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  ZIONS  FIRST  NATIONAL  BANK,  its
         successors and assigns.

         Note.   The  word  "Note"  means  the  Note  executed  by   DYNATRONICS
         CORPORATION  in the principal  amount of  $6,000,000.00  dated June 29,
         2007,  together with all renewals of, extensions of,  modifications of,
         refinancings of,  consolidations  of, and substitutions for the note or
         credit agreement.

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

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

BORROWER  AND  GRANTOR  HAVE  READ AND  UNDERSTOOD  ALL THE  PROVISIONS  OF THIS
COMMERCIAL  SECURITY  AGREEMENT AND AGREE TO ITS TERMS.  THIS AGREEMENT IS DATED
JUNE 29, 2007.

                                       7
<PAGE>

     GRANTOR:

     DYNATRONICS CORPORATION

     By: /s/ KELVYN CULLIMORE, JR.
     -----------------------------------
     KELVYN CULLIMORE, JR., President of
     DYNATRONICS CORPORATION

     DYNATRONICS DISTRIBUTION COMPANY, LLC

     By: /s/ KELVYN CULLIMORE, JR.
     -------------------------------------
     KELVYN H. CULLIMORE, JR., Manager of
     DYNATRONICS DISTRIBUTION COMPANY, LLC

     BORROWER:

     DYNATRONICS CORPORATION

     By: /s/ KELVYN CULLIMORE, JR.
     -----------------------------------
     KELVYN CULLIMORE, JR., President of
     DYNATRONICS CORPORATION

                    LASER PRO Lending, Ver. 5.36.00.004 Copr.
                 Harland Financial Solutions, Inc. 1997, 2007.
                           All Rights Reserved. - UT
                 C:\COMML\CFI\LPL\E40.FC TR-68454 PR-ARRLOC (M)

                                       8

--------------------------------------------------------------------------------

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

                        *000000000000009001007006292007*

                      BUSINESS LOAN AGREEMENT (ASSET BASED)

       Principal          Loan Date       Maturity           Loan No

     $6,000,000.00        06-29-2007     12-15-2008            9001

      Call / Coll          Account         Officer         Initials

           ,2              2999005          05556

         References in the shaded area are for Lender's use only and do not
limit the applicability of this document to any particular loan or item.

         Any item above containing "***" has been omitted due to text length
limitations.

Borrower:                               Lender:
      DYNATRONICS CORPORATION              ZIONS FIRST NATIONAL BANK
      7030 PARK CENTRE DRIVE               SALT LAKE COMMERCIAL BANKING DIVISION
      SALT LAKE CITY, UT  84121            1 SOUTH MAIN
                                           STE 300
                                           SALT LAKE CITY, UT  84111

THIS  BUSINESS  LOAN  AGREEMENT  (ASSET  BASED) dated June 29, 2007, is made and
executed between DYNATRONICS  CORPORATION  ("Borrower") and ZIONS FIRST NATIONAL
BANK  ("Lender") 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 or other  financial  accommodations,  including those which may be
described  on any  exhibit or  schedule  attached  to this  Agreement  ("Loan").
Borrower  understands and agrees that: (A) in granting,  renewing,  or extending
any Loan,  Lender is relying upon Borrower's  representations,  warranties,  and
agreements  as set  forth in this  Agreement;  (B) the  granting,  renewing,  or
extending  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 remain subject to
the terms and conditions of this Agreement.

TERM.  This Agreement shall be effective as of June 29, 2007, and shall continue
in full force and effect until such time as all of Borrower's  Loans in favor of
Lender have been paid in full, including principal,  interest,  costs, expenses,
attorneys'  fees, and other fees and charges,  or until such time as the parties
may agree in writing to terminate this Agreement.

ADVANCE  AUTHORITY.  The  following  person  currently is  authorized to request
advances and authorize  payments under the line of credit until Lender  receives
from Borrower,  at Lender's address shown above, written notice of revocation of
his  or  her  authority:   KELVYN  CULLIMORE,   JR.,  President  of  DYNATRONICS
CORPORATION.

LINE OF CREDIT.  Lender  agrees to make  Advances to Borrower  from time to time
from the date of this Agreement to the Expiration  Date,  provided the aggregate
amount of such  Advances  outstanding  at any time does not exceed the Borrowing
Base.  Within the  foregoing  limits,  Borrower may borrow,  partially or wholly
prepay, and reborrow under this Agreement as follows:

         Conditions  Precedent to Each Advance.  Lender's obligation to make any
         Advance to or for the  account of  Borrower  under  this  Agreement  is
         subject to the  following  conditions  precedent,  with all  documents,
         instruments,  opinions,  reports,  and other items  required under this
         Agreement to be in form and substance satisfactory to Lender:

              (1) Lender shall have received  evidence  that this  Agreement and
              all Related  Documents have been duly  authorized,  executed,  and
              delivered by Borrower to Lender.

              (2)  Lender  shall  have   received   such  opinions  of  counsel,
              supplemental opinions, and documents as Lender may request.

              (3) The security  interests in the Collateral shall have been duly
              authorized,  created,  and perfected  with first lien priority and
              shall be in full force and effect.

              (4) All guaranties required by Lender for the credit facility(ies)
              shall have been executed by each  Guarantor,  delivered to Lender,
              and be in full force and effect.

              (5)  Lender,  at its option and for its sole  benefit,  shall have
              conducted  an  audit of  Borrower's  Accounts,  Inventory,  books,
              records, and operations, and Lender shall be satisfied as to their
              condition.

              (6)  Borrower  shall  have paid to Lender  all  fees,  costs,  and
              expenses  specified in this Agreement and the Related Documents as
              are then due and payable.

              (7) There  shall not exist at the time of any  Advance a condition
              which would  constitute an Event of Default under this  Agreement,
              and  Borrower  shall  have  delivered  to  Lender  the  compliance
              certificate  called for in the paragraph below titled  "Compliance
              Certificates."

Making Loan Advances. Advances under this credit facility, as well as directions
for payment from Borrower's  accounts,  may be requested orally or in writing by
authorized persons.  Lender may, but need not, require that all oral requests be
confirmed in writing.  Each Advance  shall be  conclusively  deemed to have been
made at the request of and for the benefit of Borrower (1) when  credited to any
deposit  account of  Borrower  maintained  with  Lender or (2) when  advanced in
accordance with the instructions of an authorized person. Lender, at its option,
may set a cutoff time,  after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.

Mandatory Loan Repayments.  If at any time the aggregate principal amount of the
outstanding  Advances  shall exceed the  applicable  Borrowing  Base,  Borrower,
immediately  upon  written or oral  notice from  Lender,  shall pay to Lender an
amount equal to the difference between the outstanding  principal balance of the
Advances and the Borrowing Base. On the Expiration  Date,  Borrower shall pay to
Lender  in full the  aggregate  unpaid  principal  amount of all  Advances  then
outstanding and all accrued unpaid interest,  together with all other applicable
fees, costs and charges, if any, not yet paid.

Loan  Account.  Lender shall  maintain on its books a record of account in which
Lender  shall make entries for each Advance and such other debits and credits as
shall be  appropriate  in  connection  with the credit  facility.  Lender  shall

                                       1
<PAGE>

provide  Borrower  with  periodic  statements  of  Borrower's   account,   which
statements  shall be  considered  to be  correct  and  conclusively  binding  on
Borrower unless Borrower notifies Lender to the contrary within thirty (30) days
after  Borrower's  receipt  of any such  statement  which  Borrower  deems to be
incorrect.

COLLATERAL.  To secure payment of the Primary Credit Facility and performance of
all other  Loans,  obligations  and duties owed by Borrower to Lender,  Borrower
(and  others,  if  required)  shall grant to Lender  Security  Interests in such
property and assets as Lender may require.  Lender's  Security  Interests in the
Collateral shall be continuing liens and shall include the proceeds and products
of the Collateral,  including without  limitation the proceeds of any insurance.
With respect to the  Collateral,  Borrower agrees and represents and warrants to
Lender:

         Perfection  of  Security  Interests.  Borrower  agrees to  execute  all
         documents  perfecting  Lender's  Security Interest and to take whatever
         actions  are  requested  by Lender to  perfect  and  continue  Lender's
         Security Interests in the Collateral.  Upon request of Lender, Borrower
         will  deliver  to Lender  any and all of the  documents  evidencing  or
         constituting the Collateral,  and Borrower will note Lender's  interest
         upon any and all chattel  paper and  instruments  if not  delivered  to
         Lender for possession by Lender.  Contemporaneous with the execution of
         this  Agreement,  Borrower  will  execute  one or  more  UCC  financing
         statements and any similar  statements as may be required by applicable
         law,  and  Lender  will file  such  financing  statements  and all such
         similar statements in the appropriate  location or locations.  Borrower
         hereby  appoints  Lender as its  irrevocable  attorney-in-fact  for the
         purpose of executing any documents  necessary to perfect or to continue
         any  Security  Interest.  Lender may at any time,  and without  further
         authorization from Borrower, file a carbon,  photograph,  facsimile, or
         other  reproduction  of any financing  statement for use as a financing
         statement.  Borrower  will  reimburse  Lender for all  expenses for the
         perfection,  termination,  and the  continuation  of the  perfection of
         Lender's  security  interest in the Collateral.  Borrower promptly will
         notify Lender before any change in Borrower's name including any change
         to the assumed business names of Borrower.  Borrower also promptly will
         notify Lender before any change in Borrower's Social Security Number or
         Employer  Identification  Number.  Borrower  further  agrees  to notify
         Lender  in  writing  prior to any  change in  address  or  location  of
         Borrower's  principal  governance  office or should  Borrower  merge or
         consolidate with any other entity.

         Collateral  Records.  Borrower  does now,  and at all  times  hereafter
         shall,  keep correct and  accurate  records of the  Collateral,  all of
         which records  shall be available to Lender or Lender's  representative
         upon demand for  inspection and copying at any  reasonable  time.  With
         respect to the  Accounts,  Borrower  agrees to keep and  maintain  such
         records as Lender may require, including without limitation information
         concerning  Eligible Accounts and Account balances and agings.  Records
         related to Accounts  (Receivables)  are or will be located at 7030 Park
         Centre Drive,  Salt Lake City, UT 84121. With respect to the Inventory,
         Borrower  agrees  to keep and  maintain  such  records  as  Lender  may
         require,  including without limitation  information concerning Eligible
         Inventory and records itemizing and describing the kind, type, quality,
         and  quantity  of  Inventory,  Borrower's  Inventory  costs and selling
         prices,  and the daily withdrawals and additions to Inventory.  Records
         related to Inventory  are or will be located at 7030 Park Centre Drive,
         Salt Lake City, UT 84121. The above is an accurate and complete list of
         all locations at which  Borrower  keeps or maintains  business  records
         concerning Borrower's collateral.

         Collateral  Schedules.  Concurrently with the execution and delivery of
         this Agreement,  Borrower shall execute and deliver to Lender schedules
         of Accounts  and  Inventory  and  schedules  of Eligible  Accounts  and
         Eligible  Inventory in form and substance  satisfactory  to the Lender.
         Thereafter  supplemental  schedules shall be delivered according to the
         following schedule: With respect to Eligible Accounts,  schedules shall
         be delivered every 30 days.

         Representations and Warranties Concerning Accounts. With respect to the
         Accounts,  Borrower represents and warrants to Lender: (1) Each Account
         represented by Borrower to be an Eligible  Account for purposes of this
         Agreement conforms to the requirements of the definition of an Eligible
         Account;  (2) All Account  information listed on schedules delivered to
         Lender will be true and correct,  subject to immaterial  variance;  and
         (3) Lender, its assigns, or agents shall have the right at any time and
         at Borrower's expense to inspect, examine, and audit Borrower's records
         and to confirm with Account Debtors the accuracy of such Accounts.

         Representations and Warranties  Concerning  Inventory.  With respect to
         the  Inventory,  Borrower  represents  and warrants to Lender:  (1) All
         Inventory represented by Borrower to be Eligible Inventory for purposes
         of this  Agreement  conforms to the  requirements  of the definition of
         Eligible  Inventory;  (2) All  Inventory  values  listed  on  schedules
         delivered  to Lender will be true and  correct,  subject to  immaterial
         variance;  (3) The  value  of the  Inventory  will be  determined  on a
         consistent  accounting  basis;  (4) Except as agreed to the contrary by
         Lender  in  writing,  all  Eligible  Inventory  is now and at all times
         hereafter  will be in Borrower's  physical  possession and shall not be
         held by others on consignment, sale on approval, or sale or return; (5)
         Except as reflected in the Inventory schedules delivered to Lender, all
         Eligible  Inventory is now and at all times  hereafter  will be of good
         and merchantable  quality, free from defects; (6) Eligible Inventory is
         not now and will not at any time  hereafter  be  stored  with a bailee,
         warehouseman,  or similar party without Lender's prior written consent,
         and, in such event,  Borrower will concurrently at the time of bailment
         cause any such  bailee,  warehouseman,  or  similar  party to issue and
         deliver to Lender, in form acceptable to Lender,  warehouse receipts in
         Lender name  evidencing the storage of Inventory;  and (7) Lender,  its
         assigns,  or agents shall have the right at any time and at  Borrower's
         expense to inspect and examine the  Inventory and to check and test the
         same as to quality, quantity, value, and condition.

         Remittance Account. Borrower agrees that Lender may at any time require
         Borrower  to  institute  procedures  whereby  the  payments  and  other
         proceeds of the Accounts  shall be paid by the Account  Debtors under a
         remittance  account or lock box  arrangement  with Lender,  or Lender's
         agent, or with one or more financial institutions designated by Lender.
         Borrower  further agrees that, if no Event of Default exists under this
         Agreement,  any and all of such funds  received under such a remittance
         account or lock box  arrangement  shall,  at Lender's sole election and
         discretion,  either  be (1)  paid  or  turned  over  to  Borrower;  (2)
         deposited into one or more accounts for the benefit of Borrower  (which
         deposit accounts shall be subject to a security  assignment in favor of
         Lender);  (3) deposited into one or more accounts for the joint benefit
         of  Borrower  and Lender  (which  deposit  accounts  shall  likewise be
         subject  to a  security  assignment  in favor of  Lender);  (4) paid or
         turned over to Lender to be applied to the  Indebtedness  in such order
         and priority as Lender may determine within its sole discretion; or (5)
         any combination of the foregoing as Lender shall determine from time to
         time.  Borrower  further  agrees  that,  should  one or more  Events of
         Default  exist,  any and all funds  received  under  such a  remittance
         account or lock box arrangement  shall be paid or turned over to Lender
         to be applied to the Indebtedness,  again in such order and priority as
         Lender may determine within its sole discretion.

LETTER OF CREDIT FACILITY.  Subject to the terms of this Agreement,  Lender will
issue letters of credit (each a "Letter of Credit") on behalf of Borrower.  Upon
the  issuance  of a Letter of  Credit,  the amount  available  under the Line of
Credit shall be automatically reduced by the amount of the Letter of Credit.

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

         Loan  Documents.   Borrower  shall  provide  to  Lender  the  following
         documents for the Loan: (1) the Note; (2) Security  Agreements granting

                                       2
<PAGE>

         to  Lender  security   interests  in  the  Collateral;   (3)  financing
         statements  and  all  other  documents   perfecting  Lender's  Security
         Interests;  (4) evidence of insurance as required  below;  (5) together
         with all such Related Documents as Lender may require for the Loan; all
         in form and substance satisfactory to Lender and Lender's counsel.

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

         Fees and Expenses  Under This  Agreement.  Borrower  shall have paid to
         Lender all fees,  costs,  and expenses  specified in this Agreement and
         the Related Documents as are then due and payable.

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

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

REPRESENTATIONS  AND WARRANTIES.  Borrower represents and warrants to Lender, as
of the  date of this  Agreement,  as of the  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 for profit which is, and at all
         times shall be, duly organized,  validly existing, and in good standing
         under and by virtue of the laws of the State of Utah.  Borrower is duly
         authorized to transact  business in all other states in which  Borrower
         is doing business, having obtained all necessary filings,  governmental
         licenses  and  approvals  for each  state in  which  Borrower  is doing
         business.  Specifically,  Borrower  is, and at all times shall be, duly
         qualified as a foreign  corporation  in all states in which the failure
         to so qualify would have a material  adverse  effect on its business or
         financial  condition.  Borrower has the full power and authority to own
         its  properties  and to transact  the business in which it is presently
         engaged or presently  proposes to engage.  Borrower maintains an office
         at 7030 PARK CENTRE DRIVE,  SALT LAKE CITY, UT 84121.  Unless  Borrower
         has designated otherwise in writing, the principal office is the office
         at which  Borrower  keeps its books and records  including  its records
         concerning  the  Collateral.  Borrower  will notify Lender prior to any
         change in the  location  of  Borrower's  state of  organization  or any
         change in Borrower's  name.  Borrower shall do all things  necessary to
         preserve and to keep in full force and effect its existence, rights and
         privileges,  and shall comply with all regulations,  rules, ordinances,
         statutes,  orders and decrees of any governmental or quasi-governmental
         authority  or court  applicable  to Borrower  and  Borrower's  business
         activities.

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

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

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

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

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

         Hazardous Substances. Except as disclosed to and acknowledged by Lender
         in writing,  Borrower  represents  and  warrants  that:  (1) During the
         period of  Borrower's  ownership of the  Collateral,  there has been no
         use, generation,  manufacture, storage, treatment, disposal, release or
         threatened release of any Hazardous  Substance by any person on, under,
         about or from any of the Collateral.  (2) Borrower has no knowledge of,
         or reason to believe that there has been (a) any breach or violation of
         any Environmental Laws; (b) any use, generation,  manufacture, storage,
         treatment,  disposal,  release or  threatened  release of any Hazardous
         Substance on, under,  about or from the  Collateral by any prior owners
         or occupants of any of the Collateral;  or (c) any actual or threatened
         litigation  or  claims  of any  kind  by any  person  relating  to such
         matters.  (3) Neither  Borrower  nor any tenant,  contractor,  agent or
         other  authorized  user of any of the Collateral  shall use,  generate,
         manufacture,   store,  treat,  dispose  of  or  release  any  Hazardous
         Substance on, under, about or from any of the Collateral;  and any such
         activity shall be conducted in compliance with all applicable  federal,
         state, and local laws, regulations,  and ordinances,  including without
         limitation all Environmental  Laws.  Borrower authorizes Lender and its
         agents to enter upon the Collateral to make such  inspections and tests
         as  Lender  may  deem  appropriate  to  determine   compliance  of  the
         Collateral with this section of the Agreement. Any inspections or tests
         made by Lender shall be at Borrower's expense and for Lender's purposes
         only and  shall  not be  construed  to  create  any  responsibility  or
         liability on the part of Lender to Borrower or to any other person. The
         representations and warranties contained herein are based on Borrower's
         due diligence in  investigating  the Collateral for hazardous waste and
         Hazardous  Substances.  Borrower  hereby  (1)  releases  and waives any
         future claims against Lender for indemnity or contribution in the event
         Borrower becomes liable for cleanup or other costs under any such laws,
         and (2) agrees to indemnify,  defend,  and hold harmless Lender against
         any  and all  claims,  losses,  liabilities,  damages,  penalties,  and
         expenses  which  Lender may  directly or  indirectly  sustain or suffer
         resulting  from a  breach  of this  section  of the  Agreement  or as a
         consequence of any use,  generation,  manufacture,  storage,  disposal,
         release or threatened  release of a hazardous waste or substance on the
         Collateral. The provisions of this section of the Agreement,  including
         the  obligation to indemnify  and defend,  shall survive the payment of
         the  Indebtedness  and the  termination,  expiration or satisfaction of
         this Agreement and shall not be affected by Lender's acquisition of any
         interest in any of the Collateral, whether by foreclosure or otherwise.

         Litigation   and   Claims.   No   litigation,   claim,   investigation,
         administrative proceeding or similar action (including those for unpaid
         taxes) against  Borrower is pending or  threatened,  and no other event
         has occurred which may materially adversely affect Borrower's financial

                                       3
<PAGE>

         condition  or  properties,  other  than  litigation,  claims,  or other
         events,  if any, that have been disclosed to and acknowledged by Lender
         in writing.

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

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

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

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

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

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

         Financial Statements.  Furnish Lender with the following:

              Annual  Statements.  As soon as  available,  but in no event later
              than  one-hundred-twenty  (120) days after the end of each  fiscal
              year,  Borrower's  balance sheet and income statement for the year
              ended,  audited by a certified public  accountant  satisfactory to
              Lender. Financial Statements shall be consolidated and include 10K
              statements.

              Interim  Statements.  As soon as available,  but in no event later
              than  sixty  (60)  days  after  the  end of each  fiscal  quarter,
              Borrower's 10Q balance sheet and profit and loss statement for the
              period ended, prepared by Borrower.

         All  financial  reports  required to be provided  under this  Agreement
         shall be  prepared in  accordance  with GAAP,  applied on a  consistent
         basis, and certified by Borrower as being true and correct.

         Additional   Information.   Furnish  such  additional  information  and
         statements, as Lender may request from time to time.

         Financial Covenants and Ratios. Comply with the following covenants and
         ratios:

              Tangible Net Worth  Requirements.  Borrower  shall comply with the
              following net worth ratio requirements:

              Debt / Worth Ratio. Maintain a ratio of Debt / Worth not in excess
              of 2.500 to 1.000. The ratio "Debt / Worth" means Borrower's Total
              Liabilities   divided  by  Borrower's  Tangible  Net  Worth.  This
              leverage ratio will be evaluated as of each quarter-end.

              Except as  provided  above,  all  computations  made to  determine
              compliance with the requirements contained in this paragraph shall
              be  made  in  accordance   with  generally   accepted   accounting
              principles,  applied  on a  consistent  basis,  and  certified  by
              Borrower as being true and correct.

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

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

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

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

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

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

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

         Compliance  with  Governmental  Requirements.  Comply  with  all  laws,
         ordinances,  and  regulations,  now  or  hereafter  in  effect,  of all
         governmental  authorities  applicable  to  the  conduct  of  Borrower's

                                       4
<PAGE>

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

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

         Compliance  Certificates.  Unless waived in writing by Lender,  provide
         Lender  within  sixty (60) days after the end of each  fiscal  quarter,
         with a certificate  executed by Borrower's chief financial officer,  or
         other  officer  or person  acceptable  to Lender,  certifying  that the
         representations and warranties set forth in this Agreement are true and
         correct as of the date of the certificate and further  certifying that,
         as of the date of the  certificate,  no Event of Default  exists  under
         this Agreement.

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

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

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

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

         Indebtedness and Liens. (1) Sell, transfer,  mortgage,  assign, pledge,
         lease,  grant a security  interest  in, or encumber  any of  Borrower's
         assets  (except  as  allowed  as  Permitted  Liens),  or (3) sell  with
         recourse any of Borrower's accounts, except to Lender.

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

         Loans,  Acquisitions  and  Guaranties.  (1) Loan,  invest in or advance
         money  or  assets  to any  other  person,  enterprise  or  entity,  (2)
         purchase,  create or acquire any  interest in any other  enterprise  or
         entity,  or (3) incur any obligation as surety or guarantor  other than
         in the ordinary course of business.

         Agreements.  Borrower will not enter into any agreement  containing any
         provisions  which would be violated or breached by the  performance  of
         Borrower's obligations under this Agreement or in connection herewith.

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

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

                                       5
<PAGE>

charge  and setoff  rights  provided  in this  paragraph.  Lender  agrees not to
exercise  its right of setoff  unless  any Event of Default  continues  to exist
fifteen (15) days after  Lender's  notification  of default has been received in
writing by Borrower.

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

         Payment Default.  Borrower fails to make any payment when due under the
         Loan.

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

         False  Statements.  Any warranty,  representation  or statement made or
         furnished  to Lender by Borrower  or on  Borrower's  behalf  under this
         Agreement  or the  Related  Documents  is  false or  misleading  in any
         material  respect,  either  now or at the  time  made or  furnished  or
         becomes false or misleading at any time thereafter.

         Insolvency. The dissolution or termination of Borrower's existence as a
         going  business,  the  insolvency  of Borrower,  the  appointment  of a
         receiver for any part of Borrower's  property,  any  assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Borrower.

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

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

         Events  Affecting  Guarantor.  Any of the preceding  events occurs with
         respect to any  Guarantor of any of the  Indebtedness  or any Guarantor
         dies or becomes incompetent, or revokes or disputes the validity of, or
         liability  under, any Guaranty of the  Indebtedness.  In the event of a
         death, Lender, at its option, may, but shall not be required to, permit
         the  Guarantor's  estate  to  assume  unconditionally  the  obligations
         arising under the guaranty in a manner  satisfactory to Lender, and, in
         doing so, cure any Event of Default.

         Change in  Ownership.  Any  single  person or entity  acquires a 30% or
         greater ownership interest in the common stock of Borrower.

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

         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 if Borrower  or  Grantor,  as the case may be,
         after  receiving  written  notice  from Lender  demanding  cure of such
         default:  (1) cure the default  within fifteen (15) days; or (2) if the
         cure requires more than fifteen (15) days,  immediately  initiate steps
         which Lender deems in Lender's sole discretion to be sufficient to cure
         the default and  thereafter  continue and complete all  reasonable  and
         necessary steps sufficient to produce  compliance as soon as reasonably
         practical.

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

INVENTORY REPORTS. Borrower shall furnish Lender with a monthly Inventory report
within  20 days of the end of each  month  in form  and  content  acceptable  to
Lender.

ACCOUNTS  PAYABLE AGING.  Borrower shall furnish to Lender a quarterly  Accounts
Payable  Aging  report  within  20 days of the  end of  each  quarter  in a form
acceptable to Lender.

AUTHORIZATION TO VERIFY ACCOUNTS  RECEIVABLE.  Borrower hereby authorizes Lender
to verify its accounts  receivable  through  written and/or verbal  verification
methods at the discretion of the Lender.

WAIVER OF CLAIMS.  BORROWER (i) REPRESENTS THAT IT HAS NO DEFENSES TO OR SETOFFS
AGAINST ANY INDEBTEDNESS OR OTHER  OBLIGATIONS OWING TO LENDER OR ITS AFFILIATES
(THE "OBLIGATIONS"),  NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR ANY MATTER
WHATSOEVER,  RELATED OR UNRELATED TO THE  OBLIGATIONS,  AND (ii) RELEASES LENDER
AND ITS  AFFILIATES  FROM ALL  CLAIMS,  CAUSES OF ACTION,  AND COSTS,  IN LAW OR
EQUITY, EXISTING AS OF THE DATE OF THIS AGREEMENT WHICH BORROWER HAS OR MAY HAVE
BY REASON OF ANY MATTER OF ANY CONCEIVABLE KIND OR CHARACTER WHATSOEVER, RELATED
OR UNRELATED TO THE OBLIGATIONS, INCLUDING THE SUBJECT MATTER OF THIS AGREEMENT.
THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF EXPRESS  CONTRACTUAL
OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.

FIELD  EXAM.  A field  examination  will be  performed  annually  on  Borrower's
accounting records to verify reliability of collateral information.

DEFINITION  OF NOTE . "Note" as  referenced  herein  is  hereby  deleted  in its
entirety and replaced with the following:

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.

                                       6
<PAGE>

ACCOUNTS  RECEIVABLE AGING.  Borrower shall furnish to Lender a monthly Accounts
Receivable  Aging  report  within  20 days of the  end of each  month  in a form
acceptable to Lender.

EARNINGS BEFORE INTEREST AND TAXES.  Borrower shall maintain a ratio of earnings
calculated  before  interest,  taxes,  depreciation  and amortization to current
portion of long term indebtedness plus interest expense of not less than 1.15 to
1.00, measured quarterly on a "per quarter" basis,  commencing June 30, 2007. On
June 30, 2008 and quarterly thereafter, the ratio shall be measured based on the
current quarter and the immediately preceding three (3) quarters.

PROFITABLITY. Borrower shall maintain a profit calculated prior to allowance for
taxes, measured quarterly on a "per quarter" basis, commencing June 30, 2007. On
June 30, 2008 and quarterly thereafter, profitability shall be measured based on
the current quarter and the immediately preceding three (3) quarters.

TERMINATION OF COMPETING LIENS. Borrower agrees that any liens that may be prior
in  seniority  to  Lender's  security  interest  in  the  Collateral,  including
Collateral from entities being acquired by Borrower,  shall be terminated at the
closing of this Loan or at least prior to its  inclusion in the  Borrowing  Base
calculation.

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

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

         Arbitration Disclosures.
         1.  ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
         VERY LIMITED REVIEW BY A COURT.
         2. IN  ARBITRATION  THE PARTIES ARE WAIVING  THEIR RIGHT TO LITIGATE IN
         COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
         3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
         4.  ARBITRATORS ARE NOT REQUIRED TO INCLUDE  FACTUAL  FINDINGS OR LEGAL
         REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
         ARBITRATORS' RULINGS IS VERY LIMITED.
         5. A PANEL OF  ARBITRATORS  MIGHT INCLUDE AN  ARBITRATOR  WHO IS OR WAS
         AFFILIATED WITH THE BANKING INDUSTRY.
         6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
         THOSE CONCERNING THE AGREEMENT.
         7. IF YOU HAVE QUESTIONS  ABOUT  ARBITRATION,  CONSULT YOUR ATTORNEY OR
         THE AMERICAN ARBITRATION ASSOCIATION.

         (a) Any claim or controversy  ("Dispute")  between or among the parties
         and their employees,  agents, affiliates,  and assigns,  including, but
         not limited to, Disputes  arising out of or relating to this agreement,
         this  arbitration  provision  ("arbitration  clause"),  or any  related
         agreements or  instruments  relating  hereto or delivered in connection
         herewith ("Related Agreements"),  and including,  but not limited to, a
         Dispute based on or arising from an alleged tort,  shall at the request
         of any party be resolved by binding  arbitration in accordance with the
         applicable  arbitration rules of the American  Arbitration  Association
         (the "Administrator").  The provisions of this arbitration clause shall
         survive any termination,  amendment, or expiration of this agreement or
         Related  Agreements.  The provisions of this  arbitration  clause shall
         supersede any prior arbitration agreement between or among the parties.

         (b) The arbitration  proceedings  shall be conducted in a city mutually
         agreed by the parties.  Absent such an agreement,  arbitration  will be
         conducted  in  Salt  Lake  City,  Utah or such  other  place  as may be
         determined   by  the   Administrator.   The   Administrator   and   the
         arbitrator(s)  shall have the  authority to the extent  practicable  to
         take any action to require the  arbitration  proceeding to be completed
         and the  arbitrator(s)'  award issued  within 150 days of the filing of
         the Dispute with the  Administrator.  The arbitrator(s)  shall have the
         authority  to impose  sanctions  on any party that fails to comply with
         time  periods  imposed  by  the  Administrator  or  the  arbitrator(s),
         including the sanction of summarily  dismissing  any Dispute or defense
         with prejudice.  The arbitrator(s)  shall have the authority to resolve
         any Dispute  regarding the terms of this  agreement,  this  arbitration
         clause,  or  Related  Agreements,  including  any claim or  controversy
         regarding the  arbitrability  of any Dispute.  All limitations  periods
         applicable to any Dispute or defense,  whether by statute or agreement,
         shall  apply  to  any   arbitration   proceeding   hereunder   and  the
         arbitrator(s) shall have the authority to decide whether any Dispute or
         defense is barred by a  limitations  period  and,  if so, to  summarily
         enter an award  dismissing  any Dispute or defense on that  basis.  The
         doctrines of  compulsory  counterclaim,  res judicata,  and  collateral
         estoppel shall apply to any arbitration  proceeding hereunder so that a
         party must state as a counterclaim  in the  arbitration  proceeding any
         claim or controversy  which arises out of the transaction or occurrence
         that is the subject matter of the Dispute. The arbitrator(s) may in the
         arbitrator(s)'  discretion  and  at  the  request  of  any  party:  (1)
         consolidate in a single arbitration  proceeding any other claim arising
         out of the same transaction involving another party to that transaction
         that is bound by an arbitration clause with Lender,  such as borrowers,
         guarantors,  sureties, and owners of collateral; and (2) consolidate or
         administer  multiple  arbitration  claims or  controversies  as a class
         action  in  accordance  with  Rule 23 of the  Federal  Rules  of  Civil
         Procedure.

         (c) The arbitrator(s) shall be selected in accordance with the rules of
         the Administrator from panels maintained by the Administrator. A single
         arbitrator  shall have  expertise in the subject matter of the Dispute.
         Where three arbitrators conduct an arbitration proceeding,  the Dispute
         shall be decided by a majority vote of the three arbitrators,  at least
         one of whom must have  expertise  in the subject  matter of the Dispute
         and  at  least  one  of  whom  must  be  a  practicing  attorney.   The
         arbitrator(s) shall award to the prevailing party recovery of all costs
         and   fees   (including   attorneys'   fees  and   costs,   arbitration
         administration   fees  and  costs,   and   arbitrator(s)'   fees).  The
         arbitrator(s), either during the pendency of the arbitration proceeding
         or as part of the  arbitration  award,  also may grant  provisional  or
         ancillary  remedies including but not limited to an award of injunctive
         relief, foreclosure, sequestration,  attachment, replevin, garnishment,
         or the appointment of a receiver.

         (d)  Judgement  upon an  arbitration  award may be entered in any court
         having  jurisdiction,   subject  to  the  following   limitation:   the
         arbitration  award is binding  upon the parties only if the amount does
         not exceed Four Million Dollars  ($4,000,000.00);  if the award exceeds
         that limit,  either party may demand the right to a court trial. Such a
         demand  must be filed with the  Administrator  within  thirty (30) days
         following the date of the  arbitration  award;  if such a demand is not
         made with that time period,  the amount of the arbitration  award shall
         be binding. The computation of the total amount of an arbitration award
         shall  include   amounts   awarded  for  attorneys'   fees  and  costs,
         arbitration administration fees and costs, and arbitrator(s)' fees.

         (e) No provision of this  arbitration  clause,  nor the exercise of any
         rights hereunder, shall limit the right of any party to: (1) judicially
         or  non-judicially  foreclose  against  any real or  personal  property
         collateral  or  other  security;   (2)  exercise  self-help   remedies,
         including but not limited to  repossession  and setoff  rights;  or (3)
         obtain from a court having  jurisdiction  thereover any  provisional or
         ancillary  remedies  including  but not limited to  injunctive  relief,
         foreclosure,  sequestration,  attachment, replevin, garnishment, or the

                                       7
<PAGE>

         appointment  of a receiver.  Such rights can be  exercised at any time,
         before or after initiation of an arbitration proceeding,  except to the
         extent such action is contrary to the arbitration  award.  The exercise
         of such rights shall not constitute a waiver of the right to submit any
         Dispute to  arbitration,  and any claim or  controversy  related to the
         exercise  of such rights  shall be a Dispute to be  resolved  under the
         provisions  of  this  arbitration   clause.   Any  party  may  initiate
         arbitration with the Administrator. If any party desires to arbitrate a
         Dispute  asserted  against  such  party in a  complaint,  counterclaim,
         cross-claim, or third-party complaint thereto, or in an answer or other
         reply to any such pleading,  such party must make an appropriate motion
         to the trial court seeking to compel arbitration,  which motion must be
         filed  with the court  within 45 days of service  of the  pleading,  or
         amendment  thereto,  setting  forth such  Dispute.  If  arbitration  is
         compelled  after  commencement  of litigation  of a Dispute,  the party
         obtaining an order compelling  arbitration  shall commence  arbitration
         and pay the  Administrator's  filing  fees and costs  within 45 days of
         entry of such order.  Failure to do so shall constitute an agreement to
         proceed with  litigation  and waiver of the right to arbitrate.  In any
         arbitration  commenced  by a consumer  regarding  a  consumer  Dispute,
         Lender  shall pay one half of the  Administrator's  filing  fee,  up to
         $250.

         (f)  Notwithstanding  the  applicability  of  any  other  law  to  this
         agreement,  the arbitration  clause, or Related  Agreements  between or
         among the parties,  the Federal Arbitration Act, 9 U.S.C.  Section 1 et
         seq.,  shall  apply  to the  construction  and  interpretation  of this
         arbitration  clause. If any provision of this arbitration clause should
         be  determined  to be  unenforceable,  all  other  provisions  of  this
         arbitration clause shall remain in full force and effect.

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

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

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

         Governing   Law.  This  Agreement  will  be  governed  by  federal  law
         applicable  to Lender and, to the extent not  preempted by federal law,
         the laws of the State of Utah  without  regard to its  conflicts of law
         provisions.  This Agreement has been accepted by Lender in the State of
         Utah.

         Choice of Venue.  If there is a lawsuit,  Borrower agrees upon Lender's
         request  to  submit  to the  jurisdiction  of the  courts  of SALT LAKE
         County, State of Utah.

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

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

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

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

         Successors and Assigns. All covenants and agreements by or on behalf of
         Borrower  contained in this  Agreement or any Related  Documents  shall
         bind  Borrower's  successors and assigns and shall inure to the benefit

                                       8
<PAGE>

         of Lender and its successors and assigns.  Borrower shall not, however,
         have the right to assign  Borrower's rights under this Agreement or any
         interest therein, without the prior written consent of Lender.

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

         Time is of the Essence.  Time is of the essence in the  performance  of
         this Agreement.

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

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

         Account  Debtor.  The words "Account  Debtor" mean the person or entity
         obligated upon an Account.

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

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

         Borrower.  The  word  "Borrower"  means  DYNATRONICS   CORPORATION  and
         includes all  co-signers  and co-makers  signing the Note and all their
         successors and assigns.

         Borrowing Base. The words "Borrowing Base" mean as determined by Lender
         from time to time,  the lesser of (a)  $6,000,000.00  or (b) the sum of
         (i) 80.000% of the  aggregate  amount of Eligible  Accounts,  plus (ii)
         35.000% of the aggregate  amount of Eligible  Inventory,  not to exceed
         $2,250,000.00.

         Business Day. The words  "Business Day" mean a day on which  commercial
         banks are open in the State of Utah.

         Collateral. The word "Collateral" means all property and assets granted
         as collateral  security for a Loan,  whether real or personal property,
         whether granted  directly or indirectly,  whether granted now or in the
         future,  and  whether  granted  in the  form  of a  security  interest,
         mortgage, collateral mortgage, deed of trust, assignment,  pledge, crop
         pledge, chattel mortgage,  collateral chattel mortgage,  chattel trust,
         factor's lien, equipment trust,  conditional sale, trust receipt, lien,
         charge, lien or title retention contract, lease or consignment intended
         as  a  security  device,   or  any  other  security  or  lien  interest
         whatsoever,  whether created by law, contract,  or otherwise.  The word
         Collateral also includes without limitation all collateral described in
         the Collateral section of this Agreement.

         Eligible Accounts.  The words "Eligible Accounts" mean at any time, all
         of  Borrower's  Accounts  which contain  selling  terms and  conditions
         acceptable to Lender.  The net amount of any Eligible  Account  against
         which  Borrower  may  borrow  shall  exclude  all  returns,  discounts,
         credits,  and  offsets of any  nature.  Unless  otherwise  agreed to by
         Lender in writing, Eligible Accounts do not include:

              (1) Accounts with respect to which the Account  Debtor is employee
              or agent of Borrower.

              (2)  Accounts  with  respect  to which  the  Account  Debtor  is a
              subsidiary  of, or affiliated  with Borrower or its  shareholders,
              officers, or directors.

              (3)   Accounts   with   respect  to  which  goods  are  placed  on
              consignment,  guaranteed  sale,  or other terms by reason of which
              the payment by the Account Debtor may be conditional.

              (4)  Accounts  with  respect  to which  Borrower  is or may become
              liable to the Account  Debtor for goods sold or services  rendered
              by the Account Debtor to Borrower.

              (5)  Accounts  which are  subject  to  dispute,  counterclaim,  or
              setoff.

              (6) Accounts which have not been paid in full within 120 days from
              the invoice date.

              (7) Accounts with respect to which Lender, in its sole discretion,
              deems the  creditworthiness  or financial condition of the Account
              Debtor to be unsatisfactory.

              (8) Accounts of any Account  Debtor who has filed or has had filed
              against it a petition in bankruptcy or an  application  for relief
              under  any   provision   of  any  state  or  federal   bankruptcy,
              insolvency,  or debtor-in-relief  acts; or who has had appointed a
              trustee,  custodian,  or receiver  for the assets of such  Account
              Debtor; or who has made an assignment for the benefit of creditors
              or has  become  insolvent  or  fails  generally  to pay its  debts
              (including its payrolls) as such debts become due.

              (9)  Accounts  with  respect  to which the  Account  Debtor is the
              United States government or any department or agency of the United
              States.

              (10) That  portion of the Accounts  of any single  Account  Debtor
              which exceeds 10.000% of all of Borrower's Accounts.

              (12)  Accounts  with respect to which the Account  Debtor is not a
              resident  of the United  States or one of the  following  Canadian
              Provinces: British Columbia, Alberta,  Saskatchewan,  Manitoba, or
              Ontario,  except to the extent  such  Accounts  are  supported  by
              insurance, bonds, or other assurances satisfactory to Lender.

              Accounts  which  Lender in its sole  discretion  reasonably  deems
              ineligible.

         Eligible Inventory.  The words "Eligible  Inventory" mean, at any time,
         all of Borrower's Inventory as defined below, except:

                                       9
<PAGE>

              (1) Inventory which is not owned by Borrower free and clear of all
              security  interests,  liens,  encumbrances,  and  claims  of third
              parties.

              (2) Inventory which Lender,  in its sole  discretion,  deems to be
              obsolete,  unsalable,  damaged,  defective,  or unfit for  further
              processing.

              (3) Work in progress.

              (4)  Inventory  which is not for direct  resale  including but not
              limited to packaging, labeling, and manufacturing supplies.

              (5) Inventory  which is prohibited from being sold by any federal,
              state, or local governmental agency.

              Inventory  which Lender in its sole  discretion  reasonably  deems
              ineligible.

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

         Event of Default.  The words "Event of Default"  mean any of the events
         of default set forth in this  Agreement in the default  section of this
         Agreement.

         Expiration  Date.  The  words   "Expiration  Date"  mean  the  date  of
         termination of Lender's commitment to lend under this Agreement.

         GAAP.  The word "GAAP" means generally accepted accounting principles.

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

         Guarantor.  The  word  "Guarantor"  means  any  guarantor,  surety,  or
         accommodation party of any or all of the Loan.

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

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

         Indebtedness.  The  word  "Indebtedness"  means  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.

         Inventory.  The word "Inventory" means all of Borrower's raw materials,
         work in process,  finished goods,  merchandise,  parts and supplies, of
         every  kind  and  description,  and  goods  held  for  sale or lease or
         furnished  under  contracts  of  service in which  Borrower  now has or
         hereafter  acquires any right,  whether held by Borrower or others, and
         all documents of title,  warehouse  receipts,  bills of lading, and all
         other  documents  of  every  type  covering  all  or  any  part  of the
         foregoing.  Inventory includes inventory  temporarily out of Borrower's
         custody or possession and all returns on Accounts.

         Lender.  The  word  "Lender"  means  ZIONS  FIRST  NATIONAL  BANK,  its
         successors and assigns.

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

         Note.   The  word  "Note"  means  the  Note  executed  by   DYNATRONICS
         CORPORATION  in the principal  amount of  $6,000,000.00  dated June 29,
         2007,  together with all renewals of, extensions of,  modifications of,
         refinancings of,  consolidations  of, and substitutions for the note or
         credit agreement.

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

         Primary Credit  Facility.  The words "Primary Credit Facility" mean the
         credit  facility  described  in the  Line  of  Credit  section  of this
         Agreement.

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

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

         Security  Interest.   The  words  "Security   Interest"  mean,  without
         limitation,  any and all  types of  collateral  security,  present  and
         future, whether in the form of a lien, charge,  encumbrance,  mortgage,

                                       10
<PAGE>

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

         Tangible  Net Worth.  The words  "Tangible  Net Worth" mean  Borrower's
         total  assets   excluding  all  intangible   assets  (i.e.,   goodwill,
         trademarks,  patents, copyrights,  organizational expenses, and similar
         intangible items, but including leaseholds and leasehold  improvements)
         less total debt.

FINAL AGREEMENT.  Borrower  understands that this Agreement and the related loan
documents are the final expression of the agreement  between Lender and Borrower
and may not be contradicted by evidence of any alleged oral agreement.

                                       11
<PAGE>

BORROWER  ACKNOWLEDGES  HAVING READ ALL THE  PROVISIONS  OF THIS  BUSINESS  LOAN
AGREEMENT  (ASSET  BASED) AND BORROWER  AGREES TO ITS TERMS.  THIS BUSINESS LOAN
AGREEMENT (ASSET BASED) IS DATED JUNE 29, 2007.

     BORROWER:

     DYNATRONICS CORPORATION

     By: /s/ KELVYN CULLIMORE, JR.,
     ---------------------------------------------
     KELVYN CULLIMORE, JR.,  President of
     DYNATRONICS CORPORATION

     LENDER:

     ZIONS FIRST NATIONAL BANK

     By: /s/ Tracy Groll
     ---------------------------------------------
     Tracy Groll
     Authorized Signer

                    LASER PRO Lending, Ver. 5.36.00.004 Copr.
                 Harland Financial Solutions, Inc. 1997, 2007.
    All Rights Reserved. - UT C:\COMML\CFI\LPL\C40.FC TR-68454 PR-ARRLOC (M)

                                       12

--------------------------------------------------------------------------------

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

                        *000000000000009012095506262007*

                                 PROMISSORY NOTE

       Principal          Loan Date       Maturity           Loan No

     $1,500,000.00        06-26-2007     12-26-2017            9012

  Call / Coll          Account         Officer        Initials

    2 / 6980           2999005          05556

         References in the shaded area are for Lender's use only and do not
limit the applicability of this document to any particular loan or item.

         Any item above containing "***" has been omitted due to text length
limitations.

Borrower:                              Lender:
        DYNATRONICS CORPORATION           ZIONS FIRST NATIONAL BANK
        7030 PARK CENTRE DRIVE            SALT LAKE COMMERCIAL BANKING DIVISION
         SALT LAKE CITY, UT  84121        1 SOUTH MAIN
                                          STE 300
                                          SALT LAKE CITY, UT  84111

     Principal Amount:  $1,500,000.00               Date of Note:  June 26, 2007

PROMISE TO PAY. DYNATRONICS  CORPORATION  ("Borrower")  promises to pay to ZIONS
FIRST NATIONAL BANK  ("Lender"),  or order, in lawful money of the United States
of America,  the principal  amount of One Million Five Hundred Thousand & 00/100
Dollars ($1,500,000.00),  together with interest on the unpaid principal balance
from June 26, 2007, until paid in full.

PAYMENT.  Subject to any payment  changes  resulting  from changes in the Index,
Borrower will pay this loan in accordance with the following payment schedule: 6
monthly  consecutive  interest payments,  beginning July 26, 2007, with interest
calculated on the unpaid  principal  balances at an interest rate based on the 5
year LIBOR/Swap rate. Lender's LIBOR/Swap rate is to be strictly interpreted and
is not  intended to serve any other  purpose  other than  providing  an index to
determine  the  interest  rate used  herein.  Lender's  LIBOR/Swap  rate may not
necessarily be the same as the quoted offer side in the Eurodollar  time deposit
market by any  particular  institution  or service  applicable  to any  interest
period. As used herein,  Lender's  LIBOR/Swap rate shall mean the rate per annum
quoted by Lender as Lender's 5 year  LIBOR/Swap  rate based upon the  LIBOR/Swap
rate as  quoted  for U.S.  Dollars  by  Bloomberg  or other  comparable  pricing
services  selected  by  Lender  (currently  5.610%),  plus  a  margin  of  3.500
percentage points,  resulting in an initial interest rate of 9.110%; 119 monthly
consecutive  principal and interest payments in the initial amount of $19,200.44
each,  beginning  January  26,  2008,  with  interest  calculated  on the unpaid
principal  balances at an  interest  rate based on the 5 year  LIBOR/Swap  rate.
Lender's  LIBOR/Swap  rate is to be strictly  interpreted and is not intended to
serve any other purpose other than  providing an index to determine the interest
rate used herein.  Lender's  LIBOR/Swap  rate may not necessarily be the same as
the quoted offer side in the  Eurodollar  time deposit  market by any particular
institution  or service  applicable  to any  interest  period.  As used  herein,
Lender's  LIBOR/Swap  rate  shall  mean the rate per  annum  quoted by Lender as
Lender's 5 year  LIBOR/Swap  rate based upon the  LIBOR/Swap  rate as quoted for
U.S.  Dollars by  Bloomberg or other  comparable  pricing  services  selected by
Lender (currently 5.610%),  plus a margin of 3.500 percentage points,  resulting
in an initial interest rate of 9.110%; and one principal and interest payment of
$19,199.98  on  December  26,  2017,  with  interest  calculated  on the  unpaid
principal  balances at an  interest  rate based on the 5 year  LIBOR/Swap  rate.
Lender's  LIBOR/Swap  rate is to be strictly  interpreted and is not intended to
serve any other purpose other than  providing an index to determine the interest
rate used herein.  Lender's  LIBOR/Swap  rate may not necessarily be the same as
the quoted offer side in the  Eurodollar  time deposit  market by any particular
institution  or service  applicable  to any  interest  period.  As used  herein,
Lender's  LIBOR/Swap  rate  shall  mean the rate per  annum  quoted by Lender as
Lender's 5 year  LIBOR/Swap  rate based upon the  LIBOR/Swap  rate as quoted for
U.S.  Dollars by  Bloomberg or other  comparable  pricing  services  selected by
Lender (currently 5.610%),  plus a margin of 3.500 percentage points,  resulting
in an initial interest rate of 9.110%.  This estimated final payment is based on
the assumption  that all payments will be made exactly as scheduled and that the
Index does not change;  the actual final  payment will be for all  principal and
accrued interest not yet paid, together with any other unpaid amounts under this
Note.  Unless otherwise  agreed or required by applicable law,  payments will be
applied  first  to any  unpaid  collection  costs;  then to any  accrued  unpaid
interest;  and then to  principal.  The  annual  interest  rate for this Note is
computed  on a 365/360  basis;  that is,  by  applying  the ratio of the  annual
interest rate over a year of 360 days,  multiplied by the outstanding  principal
balance,  multiplied  by the  actual  number of days the  principal  balance  is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time  based  on  changes  in an  independent  index  which is the 5 year
LIBOR/Swap rate. Lender's  LIBOR/Swap rate is to be strictly  interpreted and is
not  intended  to serve any  other  purpose  other  than  providing  an index to
determine  the  interest  rate used  herein.  Lender's  LIBOR/Swap  rate may not
necessarily be the same as the quoted offer side in the Eurodollar  time deposit
market by any  particular  institution  or service  applicable  to any  interest
period. As used herein,  Lender's  LIBOR/Swap rate shall mean the rate per annum
quoted by Lender as Lender's 5 year  LIBOR/Swap  rate based upon the  LIBOR/Swap
rate as  quoted  for U.S.  Dollars  by  Bloomberg  or other  comparable  pricing
services  selected by Lender (the  "Index").  The Index is not  necessarily  the
lowest rate  charged by Lender on its loans.  If the Index  becomes  unavailable
during the term of this loan,  Lender may  designate  a  substitute  index after
notifying  Borrower.  Lender  will tell  Borrower  the  current  Index rate upon
Borrower's request. The interest rate change will not occur more often than each
five years. Borrower understands that Lender may make loans based on other rates
as well. The Index currently is 5.610% per annum.  The interest rate or rates to
be applied to the unpaid principal  balance during this Note will be the rate or
rates  set forth  herein in the  "Payment"  section.  Notwithstanding  any other
provision of this Note,  after the first payment  stream,  the interest rate for
each subsequent  payment stream will be effective as of the last payment date of
the just-ending payment stream. NOTICE: Under no circumstances will the interest
rate on this Note be more than the  maximum  rate  allowed  by  applicable  law.
Whenever increases occur in the interest rate, Lender, at its option, may do one
or more of the following:  (A) increase Borrower's payments to ensure Borrower's
loan will pay off by its original final  maturity date, (B) increase  Borrower's
payments to cover  accruing  interest,  (C)  increase  the number of  Borrower's
payments,  and (D) continue  Borrower's payments at the same amount and increase
Borrower's final payment.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are  earned  fully as of the date of the loan and will not be  subject to refund
upon early  payment  (whether  voluntary or as a result of  default),  except as

                                       1
<PAGE>

otherwise  required by law.  Except for the foregoing,  Borrower may pay without
penalty  all or a portion  of the  amount  owed  earlier  than it is due.  Early
payments will not,  unless agreed to by Lender in writing,  relieve  Borrower of
Borrower's  obligation to continue to make payments under the payment  schedule.
Rather,  early payments will reduce the principal  balance due and may result in
Borrower's  making fewer  payments.  Borrower agrees not to send Lender payments
marked "paid in full",  "without  recourse",  or similar  language.  If Borrower
sends such a payment, Lender may accept it without losing any of Lender's rights
under this Note,  and Borrower will remain  obligated to pay any further  amount
owed  to  Lender.  All  written  communications   concerning  disputed  amounts,
including any check or other payment  instrument that indicates that the payment
constitutes  "payment in full" of the amount owed or that is tendered with other
conditions or limitations or as full  satisfaction  of a disputed amount must be
mailed or delivered  to:  Zions First  National  Bank,  P.O. Box 25822 Salt Lake
City, UT 84125-0822.

INTEREST  AFTER  DEFAULT.  Upon  default,  including  failure  to pay upon final
maturity,  the  interest  rate on this Note shall be increased by adding a 3.000
percentage point margin  ("Default Rate Margin").  The Default Rate Margin shall
also apply to each  succeeding  interest rate change that would have applied had
there been no default. After maturity, or after this Note would have matured had
there been no  default,  the Default  Rate Margin will  continue to apply to the
final  interest  rate  described  in this  Note.  However,  in no event will the
interest rate exceed the maximum interest rate limitations under applicable law.

DEFAULT.  Each of the following shall  constitute an event of default ("Event of
Default") under this Note:

         Payment Default. Borrower fails to make any payment when due under this
         Note.

         Other  Defaults.  Borrower fails to comply with or to perform any other
         term,  obligation,  covenant or condition  contained in this Note or in
         any of the related  documents or to comply with or to perform any term,
         obligation,  covenant or  condition  contained  in any other  agreement
         between Lender and Borrower.

         False  Statements.  Any warranty,  representation  or statement made or
         furnished to Lender by Borrower or on Borrower's behalf under this Note
         or the  related  documents  is  false  or  misleading  in any  material
         respect,  either now or at the time made or furnished or becomes  false
         or misleading at any time thereafter.

         Insolvency. The dissolution or termination of Borrower's existence as a
         going  business,  the  insolvency  of Borrower,  the  appointment  of a
         receiver for any part of Borrower's  property,  any  assignment for the
         benefit of creditors, any type of creditor workout, or the commencement
         of any proceeding under any bankruptcy or insolvency laws by or against
         Borrower.

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

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

         Change In  Ownership.  Any  single  person or entity  acquires a 30% or
         greater ownership interest in the common stock of Borrower.

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

         Cure  Provisions.  If any  default,  other than a default in payment is
         curable and if Borrower  has not been given a notice of a breach of the
         same provision of this Note within the preceding twelve (12) months, it
         may be cured if Borrower,  after  receiving  written notice from Lender
         demanding  cure of such default:  (1) cures the default  within fifteen
         (15) days;  or (2) if the cure  requires  more than  fifteen (15) days,
         immediately  initiates  steps  which  Lender  deems  in  Lender's  sole
         discretion  to  be  sufficient  to  cure  the  default  and  thereafter
         continues and completes all reasonable and necessary  steps  sufficient
         to produce compliance as soon as reasonably practical.

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

ATTORNEYS' FEES;  EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes,  subject to any  limits  under  applicable  law,  Lender's  reasonable
attorneys' fees and Lender's legal expenses,  whether or not there is a lawsuit,
including without  limitation all reasonable  attorneys' fees and legal expenses
for bankruptcy  proceedings (including efforts to modify or vacate any automatic
stay or injunction),  and appeals. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.

GOVERNING  LAW.  This Note will be governed by federal law  applicable to Lender
and, to the extent not  preempted  by federal law, the laws of the State of Utah
without regard to its conflicts of law  provisions.  This Note has been accepted
by Lender in the State of Utah.

CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of SALT LAKE County, State of Utah.

DISHONORED  ITEM FEE.  Borrower  will pay a fee to Lender of $15.00 if  Borrower
makes a payment on Borrower's  loan and the check or  preauthorized  charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF.  To the extent  permitted by applicable  law, Lender reserves a
right of  setoff in all  Borrower's  accounts  with  Lender  (whether  checking,
savings,  or some other  account).  This  includes all accounts  Borrower  holds
jointly  with  someone  else and all  accounts  Borrower may open in the future.
However,  this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower  authorizes Lender, to the
extent  permitted by  applicable  law, to charge or setoff all sums owing on the
indebtedness  against any and all such  accounts,  and, at Lender's  option,  to
administratively  freeze all such  accounts to allow Lender to protect  Lender's
charge  and setoff  rights  provided  in this  paragraph.  Lender  agrees not to
exercise  its right of  set-off  unless an Event of Default  continues  to exist
fifteen (15) days after  Lender's  notification  of default has been received in
writing by Borrower.

                                       2
<PAGE>

ARBITRATION DISCLOSURES.

         1.  ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
         VERY LIMITED REVIEW BY A COURT.

         2. IN  ARBITRATION  THE PARTIES ARE WAIVING  THEIR RIGHT TO LITIGATE IN
         COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.

         3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.

         4.  ARBITRATORS ARE NOT REQUIRED TO INCLUDE  FACTUAL  FINDINGS OR LEGAL
         REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
         ARBITRATORS' RULINGS IS VERY LIMITED.

         5. A PANEL OF  ARBITRATORS  MIGHT INCLUDE AN  ARBITRATOR  WHO IS OR WAS
         AFFILIATED WITH THE BANKING INDUSTRY.

         6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
         THOSE CONCERNING THE AGREEMENT.

         7. IF YOU HAVE QUESTIONS  ABOUT  ARBITRATION,  CONSULT YOUR ATTORNEY OR
         THE AMERICAN ARBITRATION ASSOCIATION.

         (a) Any claim or controversy  ("Dispute")  between or among the parties
         and their employees,  agents, affiliates,  and assigns,  including, but
         not limited to, Disputes  arising out of or relating to this agreement,
         this  arbitration  provision  ("arbitration  clause"),  or any  related
         agreements or  instruments  relating  hereto or delivered in connection
         herewith ("Related Agreements"),  and including,  but not limited to, a
         Dispute based on or arising from an alleged tort,  shall at the request
         of any party be resolved by binding  arbitration in accordance with the
         applicable  arbitration rules of the American  Arbitration  Association
         (the "Administrator").  The provisions of this arbitration clause shall
         survive any termination,  amendment, or expiration of this agreement or
         Related  Agreements.  The provisions of this  arbitration  clause shall
         supersede any prior arbitration agreement between or among the parties.

         (b) The arbitration  proceedings  shall be conducted in a city mutually
         agreed by the parties.  Absent such an agreement,  arbitration  will be
         conducted  in  Salt  Lake  City,  Utah or such  other  place  as may be
         determined   by  the   Administrator.   The   Administrator   and   the
         arbitrator(s)  shall have the  authority to the extent  practicable  to
         take any action to require the  arbitration  proceeding to be completed
         and the  arbitrator(s)'  award issued  within 150 days of the filing of
         the Dispute with the  Administrator.  The arbitrator(s)  shall have the
         authority  to impose  sanctions  on any party that fails to comply with
         time  periods  imposed  by  the  Administrator  or  the  arbitrator(s),
         including the sanction of summarily  dismissing  any Dispute or defense
         with prejudice.  The arbitrator(s)  shall have the authority to resolve
         any Dispute  regarding the terms of this  agreement,  this  arbitration
         clause,  or  Related  Agreements,  including  any claim or  controversy
         regarding the  arbitrability  of any Dispute.  All limitations  periods
         applicable to any Dispute or defense,  whether by statute or agreement,
         shall  apply  to  any   arbitration   proceeding   hereunder   and  the
         arbitrator(s) shall have the authority to decide whether any Dispute or
         defense is barred by a  limitations  period  and,  if so, to  summarily
         enter an award  dismissing  any Dispute or defense on that  basis.  The
         doctrines of  compulsory  counterclaim,  res judicata,  and  collateral
         estoppel shall apply to any arbitration  proceeding hereunder so that a
         party must state as a counterclaim  in the  arbitration  proceeding any
         claim or controversy  which arises out of the transaction or occurrence
         that is the subject matter of the Dispute. The arbitrator(s) may in the
         arbitrator(s)'  discretion  and  at  the  request  of  any  party:  (1)
         consolidate in a single arbitration  proceeding any other claim arising
         out of the same transaction involving another party to that transaction
         that is bound by an arbitration clause with Lender,  such as borrowers,
         guarantors,  sureties, and owners of collateral; and (2) consolidate or
         administer  multiple  arbitration  claims or  controversies  as a class
         action  in  accordance  with  Rule 23 of the  Federal  Rules  of  Civil
         Procedure.

         (c) The arbitrator(s) shall be selected in accordance with the rules of
         the Administrator from panels maintained by the Administrator. A single
         arbitrator  shall have  expertise in the subject matter of the Dispute.
         Where three arbitrators conduct an arbitration proceeding,  the Dispute
         shall be decided by a majority vote of the three arbitrators,  at least
         one of whom must have  expertise  in the subject  matter of the Dispute
         and  at  least  one  of  whom  must  be  a  practicing  attorney.   The
         arbitrator(s) shall award to the prevailing party recovery of all costs
         and   fees   (including   attorneys'   fees  and   costs,   arbitration
         administration   fees  and  costs,   and   arbitrator(s)'   fees).  The
         arbitrator(s), either during the pendency of the arbitration proceeding
         or as part of the  arbitration  award,  also may grant  provisional  or
         ancillary  remedies including but not limited to an award of injunctive
         relief, foreclosure, sequestration,  attachment, replevin, garnishment,
         or the appointment of a receiver.

         (d)  Judgement  upon an  arbitration  award may be entered in any court
         having  jurisdiction,   subject  to  the  following   limitation:   the
         arbitration  award is binding  upon the parties only if the amount does
         not exceed Four Million Dollars  ($4,000,000.00);  if the award exceeds
         that limit,  either party may demand the right to a court trial. Such a
         demand  must be filed with the  Administrator  within  thirty (30) days
         following the date of the  arbitration  award;  if such a demand is not
         made with that time period,  the amount of the arbitration  award shall
         be binding. The computation of the total amount of an arbitration award
         shall  include   amounts   awarded  for  attorneys'   fees  and  costs,
         arbitration administration fees and costs, and arbitrator(s)' fees.

         (e) No provision of this  arbitration  clause,  nor the exercise of any
         rights hereunder, shall limit the right of any party to: (1) judicially
         or  non-judicially  foreclose  against  any real or  personal  property
         collateral  or  other  security;   (2)  exercise  self-help   remedies,
         including but not limited to  repossession  and setoff  rights;  or (3)
         obtain from a court having  jurisdiction  thereover any  provisional or
         ancillary  remedies  including  but not limited to  injunctive  relief,
         foreclosure,  sequestration,  attachment, replevin, garnishment, or the
         appointment  of a receiver.  Such rights can be  exercised at any time,
         before or after initiation of an arbitration proceeding,  except to the
         extent such action is contrary to the arbitration  award.  The exercise
         of such rights shall not constitute a waiver of the right to submit any
         Dispute to  arbitration,  and any claim or  controversy  related to the
         exercise  of such rights  shall be a Dispute to be  resolved  under the
         provisions  of  this  arbitration   clause.   Any  party  may  initiate
         arbitration with the Administrator. If any party desires to arbitrate a
         Dispute  asserted  against  such  party in a  complaint,  counterclaim,
         cross-claim, or third-party complaint thereto, or in an answer or other
         reply to any such pleading,  such party must make an appropriate motion
         to the trial court seeking to compel arbitration,  which motion must be
         filed  with the court  within 45 days of service  of the  pleading,  or
         amendment  thereto,  setting  forth such  Dispute.  If  arbitration  is
         compelled  after  commencement  of litigation  of a Dispute,  the party
         obtaining an order compelling  arbitration  shall commence  arbitration
         and pay the  Administrator's  filing  fees and costs  within 45 days of
         entry of such order.  Failure to do so shall constitute an agreement to
         proceed with  litigation  and waiver of the right to arbitrate.  In any
         arbitration  commenced  by a consumer  regarding  a  consumer  Dispute,
         Lender  shall pay one half of the  Administrator's  filing  fee,  up to
         $250.

         (f)  Notwithstanding  the  applicability  of  any  other  law  to  this
         agreement,  the arbitration  clause, or Related  Agreements  between or
         among the parties,  the Federal Arbitration Act, 9 U.S.C.  Section 1 et
         seq.,  shall  apply  to the  construction  and  interpretation  of this
         arbitration  clause. If any provision of this arbitration clause should
         be  determined  to be  unenforceable,  all  other  provisions  of  this
         arbitration clause shall remain in full force and effect.

WAIVER OF CLAIMS.  BORROWER  (i)  REPRESENTS  THAT THEY HAVE NO  DEFENSES  TO OR
SETOFFS  AGAINST ANY  INDEBTEDNESS OR OTHER  OBLIGATIONS  OWING TO LENDER OR ITS
AFFILIATES (THE "OBLIGATIONS"),  NOR CLAIMS AGAINST LENDER OR ITS AFFILIATES FOR
ANY  MATTER  WHATSOEVER,  RELATED  OR  UNRELATED  TO THE  OBLIGATIONS,  AND (ii)
RELEASES LENDER AND ITS AFFILIATES FROM ALL CLAIMS, CAUSES OF ACTION, AND COSTS,
IN LAW OR EQUITY,  EXISTING AS OF THE DATE OF THIS NOTE,  WHICH  BORROWER HAS OR

                                       3
<PAGE>

MAY  HAVE  BY  REASON  OF  ANY  MATTER  OF ANY  CONCEIVABLE  KIND  OR  CHARACTER
WHATSOEVER,  RELATED OR  UNRELATED  TO THE  OBLIGATIONS,  INCLUDING  THE SUBJECT
MATTER OF THIS NOTE. THIS PROVISION SHALL NOT APPLY TO CLAIMS FOR PERFORMANCE OF
EXPRESS CONTRACTUAL OBLIGATIONS OWING TO BORROWER BY LENDER OR ITS AFFILIATES.

         LOAN  AGREEMENT.  This  Promissory  Note is made with  reference to the
         Business Loan Agreement of even date herewith.

         LINE OF CREDIT. This Note evidences a straight line of credit. Advances
         under this Note, may be requested by Borrower or an authorized  person.
         Lender may, but need not,  require that all oral  requests be confirmed
         in writing. All communications, instructions, or direction by telephone
         or  otherwise  to Lender are to be directed to  Lender's  office  shown
         above.  Borrower agrees to be liable for all sums either:  (a) advanced
         in accordance with the instructions of an authorized person:  KELVYN H.
         CULLIMORE,  JR., PRESIDENT OF DYNATRONICS CORPORATION;  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 obligations 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 believes itself insecure.

         Advances will be allowed on the line until December 26, 2007.

         SUCCESSOR  INTERESTS.  The terms of this  Note  shall be  binding  upon
         Borrower,   and  upon  Borrower's  heirs,   personal   representatives,
         successors  and  assigns,  and shall inure to the benefit of Lender and
         its successors and assigns.

         GENERAL PROVISIONS.  If any part of this Note cannot be enforced,  this
         fact will not  affect  the rest of the Note.  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 presentment,  demand for
         payment,  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.  The
         obligations under this Note are joint and several.

                                       4
<PAGE>

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

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

DYNATRONICS CORPORATION

By: /s/ KELVYN CULLIMORE, JR.
---------------------------------------------
KELVYN CULLIMORE, JR.,
President of DYNATRONICS CORPORATION

                    LASER PRO Lending, Ver. 5.36.00.004 Copr.
                 Harland Financial Solutions, Inc. 1997, 2007.
     All Rights Reserved. - UT C:\COMML\CFI\LPL\D20.FC TR-68318 PR-ZSLR (M)

                                       5

--------------------------------------------------------------------------------

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

RECORDATION REQUESTED BY:
         ZIONS FIRST NATIONAL BANK
         SALT LAKE COMMERCIAL BANKING DIVISION
         1 SOUTH MAIN
         STE 300
         SALT LAKE CITY, UT  84111

WHEN RECORDED MAIL TO:
         Zions First National Bank
         Loan Servicing Group - UT RDWG 0187
         2460 South 3270 West
         West Valley City, UT  84119

                                SPACE ABOVE THIS LINE IS FOR RECORDER'S USE ONLY

                        *000000000000009012034006262007*

                                  DEED OF TRUST

THIS DEED OF TRUST is dated June 26,  2007,  among  DRAFT ONLY DOCS  DYNATRONICS
CORPORATION  ("Trustor");  ZIONS FIRST NATIONAL BANK, whose address is SALT LAKE
COMMERCIAL  BANKING  DIVISION,  1 SOUTH MAIN,  STE 300, SALT LAKE CITY, UT 84111
(referred to below  sometimes as "Lender" and sometimes as  "Beneficiary");  and
ZIONS FIRST  NATIONAL BANK,  whose address is 2460 SOUTH 3270 WEST,  WEST VALLEY
CITY, UT 84119 (referred to below as "Trustee").

CONVEYANCE AND GRANT. For valuable consideration, Trustor irrevocably grants and
conveys to Trustee in trust,  with power of sale,  for the  benefit of Lender as
Beneficiary, all of Trustor's right, title, and interest in and to the following
described real property,  together with all existing or subsequently  erected or
affixed buildings,  improvements and fixtures; all easements, rights of way, and
appurtenances;  all water,  water  rights and ditch rights  (including  stock in
utilities with ditch or irrigation rights); and all other rights, royalties, and
profits  relating  to  the  real  property,  including  without  limitation  all
minerals,  oil,  gas,  geothermal  and similar  matters,  (the "Real  Property")
located in SALT LAKE County, State of Utah:

         See  EXHIBIT  "A",  which is  attached to this Deed of Trust and made a
         part of this Deed of Trust as if fully set forth herein.

The Real  Property or its address is commonly  known as 7030 PARK CENTRE  DRIVE,
SALT LAKE  CITY,  UT  84121.  The Real  Property  tax  identification  number is
22-28-103-001.

Trustor  presently  assigns to Lender (also known as Beneficiary in this Deed of
Trust) all of  Trustor's  right,  title,  and interest in and to all present and
future  leases of the  Property  and all Rents from the  Property.  In addition,
Trustor  grants to Lender a Uniform  Commercial  Code  security  interest in the
Personal Property and Rents.

THIS DEED OF TRUST,  INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST
IN THE RENTS  AND  PERSONAL  PROPERTY,  IS GIVEN TO SECURE  (A)  PAYMENT  OF THE
INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS  UNDER THE NOTE, THE
RELATED  DOCUMENTS,  AND THIS  DEED OF  TRUST.  THIS  DEED OF TRUST IS GIVEN AND
ACCEPTED ON THE FOLLOWING TERMS:

PAYMENT AND  PERFORMANCE.  Except as  otherwise  provided in this Deed of Trust,
Trustor  shall pay to Lender all  amounts  secured by this Deed of Trust as they
become due, and shall  strictly and in a timely manner  perform all of Trustor's
obligations under the Note, this Deed of Trust, and the Related Documents.

POSSESSION  AND  MAINTENANCE  OF THE  PROPERTY.  Trustor  agrees that  Trustor's
possession  and  use  of  the  Property  shall  be  governed  by  the  following
provisions:

         Possession  and Use.  Until  the  occurrence  of an  Event of  Default,
         Trustor may (1) remain in possession  and control of the Property;  (2)
         use, operate or manage the Property; and (3) collect the Rents from the
         Property. The following provisions relate to the use of the Property or
         to other  limitations on the Property.  This instrument is a Trust Deed
         executed in  conformity  with the Utah Trust Deed Act, UCA 57-1-19,  et
         seq.

         Duty to Maintain.  Trustor  shall  maintain the Property in  tenantable
         condition  and  promptly   perform  all  repairs,   replacements,   and
         maintenance necessary to preserve its value.

         Compliance With Environmental  Laws. Trustor represents and warrants to
         Lender  that:  (1)  During  the period of  Trustor's  ownership  of the
         Property,  there  has been no use,  generation,  manufacture,  storage,
         treatment,  disposal,  release or  threatened  release of any Hazardous
         Substance  by any person on,  under,  about or from the  Property;  (2)
         Trustor has no knowledge  of, or reason to believe that there has been,
         except  as  previously  disclosed  to and  acknowledged  by  Lender  in

                                       1
<PAGE>

         writing, (a) any breach or violation of any Environmental Laws, (b) any
         use, generation,  manufacture, storage, treatment, disposal, release or
         threatened release of any Hazardous  Substance on, under, about or from
         the Property by any prior owners or occupants of the  Property,  or (c)
         any actual or threatened litigation or claims of any kind by any person
         relating to such matters; and (3) Except as previously disclosed to and
         acknowledged by Lender in writing,  (a) neither Trustor nor any tenant,
         contractor,  agent or other  authorized user of the Property shall use,
         generate,   manufacture,  store,  treat,  dispose  of  or  release  any
         Hazardous Substance on, under, about or from the Property;  and (b) any
         such  activity  shall be conducted in  compliance  with all  applicable
         federal,  state, and local laws, regulations and ordinances,  including
         without  limitation all Environmental  Laws.  Trustor authorizes Lender
         and its agents to enter upon the Property to make such  inspections and
         tests,  at  Trustor's  expense,  as  Lender  may  deem  appropriate  to
         determine  compliance  of the Property with this section of the Deed of
         Trust.  Any  inspections  or tests made by Lender shall be for Lender's
         purposes  only and shall not be construed to create any  responsibility
         or liability  on the part of Lender to Trustor or to any other  person.
         The  representations  and  warranties  contained  herein  are  based on
         Trustor's  due  diligence in  investigating  the Property for Hazardous
         Substances.  Trustor  hereby (1) releases and waives any future  claims
         against  Lender for  indemnity  or  contribution  in the event  Trustor
         becomes  liable for cleanup or other costs under any such laws; and (2)
         agrees to indemnify,  defend,  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 Deed of Trust or as a consequence  of any
         use, generation,  manufacture, storage, disposal, release or threatened
         release  occurring  prior to  Trustor's  ownership  or  interest in the
         Property,  whether  or not the same was or should  have  been  known to
         Trustor. The provisions of this section of the Deed of Trust, including
         the  obligation to indemnify  and defend,  shall survive the payment of
         the  Indebtedness  and the satisfaction and reconveyance of the lien of
         this Deed of Trust and shall not be affected by Lender's acquisition of
         any interest in the Property, whether by foreclosure or otherwise.

         Nuisance,  Waste.  Trustor  shall not  cause,  conduct  or  permit  any
         nuisance nor commit,  permit, or suffer any stripping of or waste on or
         to the Property or any portion of the  Property.  Without  limiting the
         generality of the foregoing,  Trustor will not remove,  or grant to any
         other party the right to remove,  any timber,  minerals  (including oil
         and gas), coal,  clay,  scoria,  soil,  gravel or rock products without
         Lender's prior written consent.

         Removal  of  Improvements.  Trustor  shall not  demolish  or remove any
         Improvements  from the Real  Property  without  Lender's  prior written
         consent. As a condition to the removal of any Improvements,  Lender may
         require Trustor to make arrangements  satisfactory to Lender to replace
         such Improvements with Improvements of at least equal value.

         Lender's Right to Enter. Lender and Lender's agents and representatives
         may enter upon the Real Property at all  reasonable  times to attend to
         Lender's  interests  and to inspect the Real  Property  for purposes of
         Trustor's  compliance  with the  terms and  conditions  of this Deed of
         Trust.

         Compliance  with  Governmental  Requirements.  Trustor  shall  promptly
         comply with all laws, ordinances, and regulations,  now or hereafter in
         effect,  of all  governmental  authorities  applicable  to  the  use or
         occupancy of the Property,  including without limitation, the Americans
         With  Disabilities Act. Trustor may contest in good faith any such law,
         ordinance, or regulation and withhold compliance during any proceeding,
         including  appropriate  appeals, so long as Trustor has notified Lender
         in writing  prior to doing so and so long as, in Lender's sole opinion,
         Lender's  interests  in the Property  are not  jeopardized.  Lender may
         require Trustor to post adequate security or a surety bond,  reasonably
         satisfactory to Lender, to protect Lender's interest.

         Duty to Protect.  Trustor agrees neither to abandon or leave unattended
         the  Property.  Trustor  shall do all other acts,  in addition to those
         acts set forth above in this section,  which from the character and use
         of the  Property are  reasonably  necessary to protect and preserve the
         Property.

DUE ON SALE - CONSENT  BY  LENDER.  Lender  may,  at  Lender's  option,  declare
immediately due and payable all sums secured by this Deed of Trust upon the sale
or transfer,  without Lender's prior written consent,  of all or any part of the
Real Property,  or any interest in the Real Property. A "sale or transfer" means
the  conveyance  of Real  Property  or any right,  title or interest in the Real
Property;   whether  legal,  beneficial  or  equitable;   whether  voluntary  or
involuntary;  whether by outright sale, deed,  installment  sale contract,  land
contract,  contract for deed,  leasehold interest with a term greater than three
(3) years,  lease-option  contract, or by sale,  assignment,  or transfer of any
beneficial  interest in or to any land trust holding title to the Real Property,
or by any other method of conveyance of an interest in the Real Property. If any
Trustor is a corporation, transfer also includes ownership by a single person or
entity of 30% or greater of common stock, of such Trustor.

TAXES AND LIENS. The following provisions relating to the taxes and liens on the
Property are part of this Deed of Trust:

         Payment.  Trustor  shall  pay  when  due  (and in all  events  prior to
         delinquency) all taxes, special taxes, assessments,  charges (including
         water and sewer), fines and impositions levied against or on account of
         the Property, and shall pay when due all claims for work done on or for
         services rendered or material furnished to the Property.  Trustor shall
         maintain the Property  free of all liens having  priority over or equal
         to the interest of Lender under this Deed of Trust, except for the lien
         of taxes and assessments not due, except for the Existing  Indebtedness
         referred  to below,  and except as  otherwise  provided in this Deed of
         Trust.

         Right to Contest.  Trustor may withhold payment of any tax, assessment,
         or claim in connection with a good faith dispute over the obligation to
         pay, so long as Lender's  interest in the Property is not  jeopardized.
         If a lien arises or is filed as a result of  nonpayment,  Trustor shall
         within  fifteen (15) days after the lien arises or, if a lien is filed,
         within fifteen (15) days after Trustor has notice of the filing, secure
         the  discharge of the lien,  or if  requested  by Lender,  deposit with
         Lender cash or a  sufficient  corporate  surety bond or other  security
         satisfactory  to Lender in an amount  sufficient  to discharge the lien
         plus any costs and  reasonable  attorneys'  fees, or other charges that
         could accrue as a result of a  foreclosure  or sale under the lien.  In
         any contest,  Trustor  shall defend itself and Lender and shall satisfy
         any adverse judgment before enforcement  against the Property.  Trustor
         shall  name  Lender as an  additional  obligee  under any  surety  bond
         furnished in the contest proceedings.

         Evidence  of  Payment.  Trustor  shall  upon  demand  furnish to Lender
         satisfactory  evidence of payment of the taxes or assessments and shall
         authorize the appropriate governmental official to deliver to Lender at
         any time a written  statement of the taxes and assessments  against the
         Property.

         Notice of  Construction.  Trustor  shall notify Lender at least fifteen
         (15) days before any work is commenced,  any services are furnished, or
         any  materials are supplied to the Property,  if any  mechanic's  lien,
         materialmen's  lien,  or other lien could be asserted on account of the
         work,  services,  or  materials.  Trustor  will upon  request of Lender
         furnish  to Lender  advance  assurances  satisfactory  to  Lender  that
         Trustor can and will pay the cost of such improvements.

PROPERTY DAMAGE  INSURANCE.  The following  provisions  relating to insuring the
Property are a part of this Deed of Trust.

         Maintenance of Insurance.  Trustor shall procure and maintain  policies
         of fire insurance with standard  extended  coverage  endorsements  on a
         replacement   basis  for  the  full   insurable   value   covering  all
         Improvements  on the Real  Property  in an amount  sufficient  to avoid
         application of any coinsurance  clause,  and with a standard  mortgagee
         clause in favor of Lender.  Trustor  shall also  procure  and  maintain
         comprehensive  general liability  insurance in such coverage amounts as
         Lender may request with  Trustee and Lender  being named as  additional

                                       2
<PAGE>

         insureds in such liability  insurance policies.  Additionally,  Trustor
         shall  maintain  such other  insurance,  including  but not  limited to
         hazard,  business  interruption,  and boiler  insurance,  as Lender may
         reasonably  require.  Policies  shall  be  written  in  form,  amounts,
         coverages  and basis  reasonably  acceptable  to Lender and issued by a
         company or companies  reasonably  acceptable to Lender.  Trustor,  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 Trustor or any other  person.
         Should  the Real  Property  be  located  in an area  designated  by the
         Director of the Federal Emergency  Management Agency as a special flood
         hazard  area,  Trustor  agrees to obtain  and  maintain  Federal  Flood
         Insurance, if available, within 45 days after notice is given by Lender
         that the Property is located in a special  flood  hazard area,  for the
         full  unpaid  principal  balance of the loan and any prior liens on the
         property  securing the loan, up to the maximum  policy limits set under
         the National  Flood  Insurance  Program,  or as  otherwise  required by
         Lender, and to maintain such insurance for the term of the loan.

         Application of Proceeds.  Trustor shall  promptly  notify Lender of any
         loss or  damage  to the  Property.  Lender  may  make  proof of loss if
         Trustor  fails  to do so  within  fifteen  (15)  days of the  casualty.
         Whether or not Lender's  security is impaired,  Lender may, at Lender's
         election,  receive and retain the proceeds of any  insurance  and apply
         the proceeds to the reduction of the Indebtedness,  payment of any lien
         affecting the Property,  or the restoration and repair of the Property.
         If Lender  elects to apply the  proceeds  to  restoration  and  repair,
         Trustor  shall repair or replace the damaged or destroyed  Improvements
         in a manner  satisfactory to Lender.  Lender shall,  upon  satisfactory
         proof of such  expenditure,  pay or reimburse Trustor from the proceeds
         for the  reasonable  cost of repair or restoration if Trustor is not in
         default  under  this Deed of Trust.  Any  proceeds  which have not been
         disbursed  within 180 days after their receipt and which Lender has not
         committed to the repair or  restoration  of the Property  shall be used
         first to pay any amount owing to Lender under this Deed of Trust,  then
         to pay accrued interest, and the remainder, if any, shall be applied to
         the principal balance of the Indebtedness. If Lender holds any proceeds
         after payment in full of the Indebtedness,  such proceeds shall be paid
         to Trustor as Trustor's interests may appear.

         Trustor's Report on Insurance. Upon request of Lender, however not more
         than  once a year,  Trustor  shall  furnish  to Lender a report on each
         existing policy of insurance showing:  (1) the name of the insurer; (2)
         the risks  insured;  (3) the  amount of the  policy;  (4) the  property
         insured,  the then current replacement value of such property,  and the
         manner of determining  that value;  and (5) the expiration  date of the
         policy.  Trustor  shall,  upon request of Lender,  have an  independent
         appraiser  satisfactory to Lender determine the cash value  replacement
         cost of the Property.

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

WARRANTY;  DEFENSE OF TITLE. The following  provisions  relating to ownership of
the Property are a part of this Deed of Trust:

         Title.  Trustor  warrants  that:  (a) Trustor holds good and marketable
         title of record to the  Property in fee  simple,  free and clear of all
         liens and encumbrances  other than those set forth in the Real Property
         description or in any title insurance  policy,  title report,  or final
         title opinion issued in favor of, and accepted by, Lender in connection
         with this Deed of Trust, and (b) Trustor has the full right, power, and
         authority to execute and deliver this Deed of Trust to Lender.

         Defense of Title.  Subject to the  exception  in the  paragraph  above,
         Trustor  warrants  and will  forever  defend the title to the  Property
         against the lawful  claims of all  persons.  In the event any action or
         proceeding is commenced that questions  Trustor's title or the interest
         of Trustee or Lender under this Deed of Trust, Trustor shall defend the
         action at Trustor's  expense.  Trustor may be the nominal party in such
         proceeding,  but  Lender  shall  be  entitled  to  participate  in  the
         proceeding  and to be  represented  in the  proceeding  by  counsel  of
         Lender's  own  choice,  and  Trustor  will  deliver,  or  cause  to  be
         delivered,  to Lender such  instruments as Lender may request from time
         to time to permit such participation.

         Compliance With Laws.  Trustor warrants that the Property and Trustor's
         use of  the  Property  complies  with  all  existing  applicable  laws,
         ordinances, and regulations of governmental authorities.

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

CONDEMNATION.  The following provisions relating to condemnation proceedings are
a part of this Deed of Trust:

         Proceedings.  If any proceeding in condemnation is filed, Trustor shall
         promptly notify Lender in writing, and Trustor shall promptly take such
         steps as may be  necessary  to defend  the action and obtain the award.
         Trustor may be the nominal party in such  proceeding,  but Lender shall
         be entitled to  participate  in the proceeding and to be represented in
         the  proceeding by counsel of its own choice,  and Trustor will deliver
         or cause to be delivered to Lender such  instruments and  documentation
         as may be  requested  by  Lender  from  time  to time  to  permit  such
         participation.

         Application  of Net  Proceeds.  If all or any part of the  Property  is
         condemned  by  eminent  domain  proceedings  or by  any  proceeding  or
         purchase in lieu of  condemnation,  Lender may at its election  require
         that all or any portion of the net  proceeds of the award be applied to
         the Indebtedness or the repair or restoration of the Property.  The net
         proceeds  of the  award  shall  mean the  award  after  payment  of all
         reasonable costs,  expenses, and attorneys' fees incurred by Trustee or
         Lender in connection with the condemnation.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following
provisions  relating to governmental  taxes, fees and charges are a part of this
Deed of Trust:

         Current Taxes, Fees and Charges. Upon request by Lender,  Trustor shall
         execute  such  documents  in  addition  to this  Deed of Trust and take
         whatever  other  action is  requested by Lender to perfect and continue
         Lender's lien on the Real Property.  Trustor shall reimburse Lender for
         all taxes, as described below,  together with all expenses  incurred in
         recording,  perfecting  or  continuing  this Deed of  Trust,  including
         without  limitation  all taxes,  fees,  documentary  stamps,  and other
         charges for recording or registering this Deed of Trust.

                                       3
<PAGE>

         Taxes.  The  following  shall  constitute  taxes to which this  section
         applies: (1) a specific tax upon this type of Deed of Trust or upon all
         or any part of the  Indebtedness  secured by this Deed of Trust;  (2) a
         specific  tax on Trustor  which  Trustor is  authorized  or required to
         deduct from payments on the  Indebtedness  secured by this type of Deed
         of Trust;  (3) a tax on this type of Deed of Trust  chargeable  against
         the Lender or the holder of the Note;  and (4) a specific tax on all or
         any  portion  of the  Indebtedness  or on  payments  of  principal  and
         interest made by Trustor.

         Subsequent  Taxes.  If any tax to which this section applies is enacted
         subsequent to the date of this Deed of Trust, this event shall have the
         same effect as an Event of Default,  and Lender may exercise any or all
         of its  available  remedies  for an Event of Default as provided  below
         unless Trustor either (1) pays the tax before it becomes delinquent, or
         (2) contests the tax as provided  above in the Taxes and Liens  section
         and deposits with Lender cash or a sufficient  corporate surety bond or
         other security satisfactory to Lender.

SECURITY AGREEMENT;  FINANCING STATEMENTS.  The following provisions relating to
this Deed of Trust as a security agreement are a part of this Deed of Trust:

         Security  Agreement.   This  instrument  shall  constitute  a  Security
         Agreement to the extent any of the Property constitutes  fixtures,  and
         Lender  shall  have all of the  rights  of a  secured  party  under the
         Uniform Commercial Code as amended from time to time.

         Security Interest.  Upon request by Lender, Trustor shall take whatever
         action is requested by Lender to perfect and continue Lender's security
         interest in the Rents and Personal  Property.  In addition to recording
         this Deed of Trust in the real  property  records,  Lender  may, at any
         time and without  further  authorization  from  Trustor,  file executed
         counterparts,  copies  or  reproductions  of this  Deed of  Trust  as a
         financing  statement.  Trustor shall reimburse  Lender for all expenses
         incurred in  perfecting  or continuing  this  security  interest.  Upon
         default,  Trustor  shall  not  remove,  sever or  detach  the  Personal
         Property from the Property.  Upon default,  Trustor shall  assemble any
         Personal  Property  not  affixed to the  Property  in a manner and at a
         place reasonably convenient to Trustor and Lender and make it available
         to Lender  within three (3) days after  receipt of written  demand from
         Lender to the extent permitted by applicable law.

         Addresses.  The  mailing  addresses  of  Trustor  (debtor)  and  Lender
         (secured party) from which information concerning the security interest
         granted by this Deed of Trust may be obtained  (each as required by the
         Uniform  Commercial  Code) are as stated on the first page of this Deed
         of Trust.

FURTHER  ASSURANCES;  ATTORNEY-IN-FACT.  The  following  provisions  relating to
further assurances and attorney-in-fact are a part of this Deed of Trust:

         Further Assurances. At any time, and from time to time, upon request of
         Lender,  Trustor will make,  execute and  deliver,  or will cause to be
         made,  executed or delivered,  to Lender or to Lender's  designee,  and
         when  requested by Lender,  cause to be filed,  recorded,  refiled,  or
         rerecorded,  as the case may be, at such times and in such  offices and
         places  as Lender  may deem  appropriate,  any and all such  mortgages,
         deeds  of  trust,  security  deeds,   security  agreements,   financing
         statements,  continuation statements, instruments of further assurance,
         certificates,  and  other  documents  as may,  in the sole  opinion  of
         Lender,  be necessary or  desirable in order to  effectuate,  complete,
         perfect,  continue,  or preserve (1)  Trustor's  obligations  under the
         Note, this Deed of Trust, and the Related Documents,  and (2) the liens
         and security  interests  created by this Deed of Trust on the Property,
         whether now owned or hereafter  acquired by Trustor.  Unless prohibited
         by law or Lender  agrees to the  contrary  in  writing,  Trustor  shall
         reimburse Lender for all costs and expenses incurred in connection with
         the matters referred to in this paragraph.

         Attorney-in-Fact.  If Trustor fails to do any of the things referred to
         in the  preceding  paragraph,  Lender  may do so for and in the name of
         Trustor and at Trustor's  expense.  For such  purposes,  Trustor hereby
         irrevocably  appoints  Lender  as  Trustor's  attorney-in-fact  for the
         purpose of making, executing,  delivering, filing, recording, and doing
         all other  things as may be necessary or  desirable,  in Lender's  sole
         opinion,  to  accomplish  the  matters  referred  to in  the  preceding
         paragraph.

FULL  PERFORMANCE.  If Trustor pays all the Indebtedness when due, and otherwise
performs all the  obligations  imposed  upon  Trustor  under this Deed of Trust,
Lender shall execute and deliver to Trustee a request for full  reconveyance and
shall execute and deliver to Trustor  suitable  statements of termination of any
financing  statement on file evidencing  Lender's security interest in the Rents
and the Personal Property. Any reconveyance fee required by law shall be paid by
Trustor, if permitted by applicable law.

EVENTS OF DEFAULT.  Each of the following,  at Lender's option, shall constitute
an Event of Default under this Deed of Trust:

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

         Other  Defaults.  Trustor  fails to comply with or to perform any other
         term, obligation, covenant or condition contained in this Deed of Trust
         or in any of the Related  Documents or to comply with or to perform any
         term,  obligation,   covenant  or  condition  contained  in  any  other
         agreement between Lender and Trustor.

         Compliance Default.  Failure to comply with any other term, obligation,
         covenant or  condition  contained in this Deed of Trust, the Note or in
         any of the Related Documents.

         Default on Other Payments.  Failure of Trustor within the time required
         by this Deed of Trust to make any  payment for taxes or  insurance,  or
         any other payment necessary to prevent filing of or to effect discharge
         of any lien.

         False  Statements.  Any warranty,  representation  or statement made or
         furnished to Lender by Trustor or on  Trustor's  behalf under this Deed
         of Trust  or the  Related  Documents  is  false  or  misleading  in any
         material  respect,  either  now or at the  time  made or  furnished  or
         becomes false or misleading at any time thereafter.

         Defective  Collateralization.  This Deed of Trust or any of the Related
         Documents ceases to be in full force and effect  (including  failure of
         any  collateral  document  to  create a valid  and  perfected  security
         interest or lien) at any time and for any reason.

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

         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 Trustor or by any
         governmental  agency  against any property  securing the  Indebtedness.
         This includes a  garnishment  of any of Trustor's  accounts,  including
         deposit accounts, with Lender. However, this Event of Default shall not
         apply if there is a good faith dispute by Trustor as to the validity or

                                       4
<PAGE>

         reasonableness  of the  claim  which is the  basis of the  creditor  or
         forfeiture proceeding and if Trustor gives Lender written notice of the
         creditor or forfeiture  proceeding and deposits with Lender monies or a
         surety bond for the  creditor or  forfeiture  proceeding,  in an amount
         determined  by Lender,  in its sole  discretion,  as being an  adequate
         reserve or bond for the dispute.

         Breach of Other Agreement. Any breach by Trustor under the terms of any
         other agreement  between Trustor and Lender that is not remedied within
         any grace period provided  therein,  including  without  limitation any
         agreement concerning any indebtedness or other obligation of Trustor to
         Lender, whether existing now or later.

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

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

         Insecurity.  Lender in good faith believes itself insecure.

         Right to Cure.  If any  default,  other  than a default  in  payment is
         curable  and if Trustor  has not been given a notice of a breach of the
         same  provision of this Deed of Trust within the preceding  twelve (12)
         months, it may be cured if Trustor, after receiving written notice from
         Lender  demanding  cure of such default:  (1) cures the default  within
         fifteen (15) days;  or (2) if the cure  requires more than fifteen (15)
         days,  immediately  initiates steps which Lender deems in Lender's sole
         discretion  to  be  sufficient  to  cure  the  default  and  thereafter
         continues and completes all reasonable and necessary  steps  sufficient
         to produce compliance as soon as reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Deed of
Trust, at any time thereafter, Trustee or Lender may exercise any one or more of
the following rights and remedies:

         Election of Remedies. 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 Trustor
         under this Deed of Trust, after Trustor's failure to perform, shall not
         affect Lender's right to declare a default and exercise its remedies.

         Accelerate  Indebtedness.  Lender  shall  have the right at its  option
         without   notice  to  Trustor  to  declare   the  entire   Indebtedness
         immediately  due and payable,  including any  prepayment  penalty which
         Trustor would be required to pay.

         Foreclosure.  With respect to all or any part of the Real Property, the
         Trustee  shall  have the right to  foreclose  by notice  and sale,  and
         Lender shall have the right to foreclose  by judicial  foreclosure,  in
         either  case in  accordance  with and to the full  extent  provided  by
         applicable law.

         UCC Remedies. With respect to all or any part of the Personal Property,
         Lender shall have all the rights and remedies of a secured  party under
         the Uniform Commercial Code.

         Collect Rents.  Lender shall have the right,  without notice to Trustor
         to take  possession  of and manage the  Property and collect the Rents,
         including amounts past due and unpaid, and apply the net proceeds, over
         and above Lender's costs,  against the Indebtedness.  In furtherance of
         this right, Lender may require any tenant or other user of the Property
         to make payments of rent or use fees  directly to Lender.  If the Rents
         are collected by Lender, then Trustor irrevocably  designates Lender as
         Trustor's  attorney-in-fact to endorse instruments  received in payment
         thereof in the name of Trustor  and to  negotiate  the same and collect
         the proceeds.  Payments by tenants or other users to Lender in response
         to Lender's demand shall satisfy the obligations for which the payments
         are made,  whether or not any proper  grounds  for the demand  existed.
         Lender may  exercise  its  rights  under  this  subparagraph  either in
         person, by agent, or through a receiver.

         Appoint  Receiver.  Lender  shall  have the  right  to have a  receiver
         appointed to take  possession of all or any part of the Property,  with
         the power to protect and preserve the Property, to operate the Property
         preceding  foreclosure  or sale,  and to  collect  the  Rents  from the
         Property  and  apply  the  proceeds,  over  and  above  the cost of the
         receivership,   against  the  Indebtedness.Trustor  hereby  waives  any
         requirement that the receiver be impartial and  disinterested as to all
         of  the  parties  and  agrees  that  employment  by  Lender  shall  not
         disqualify a person from serving as a receiver.

         Tenancy at Sufferance. If Trustor remains in possession of the Property
         after  the  Property  is sold as  provided  above or  Lender  otherwise
         becomes entitled to possession of the Property upon default of Trustor,
         Trustor  shall become a tenant at sufferance of Lender or the purchaser
         of the  Property  and  shall,  at  Lender's  option,  either  (1) pay a
         reasonable  rental  for  the use of the  Property,  or (2)  vacate  the
         Property immediately upon the demand of Lender.

         Other  Remedies.  Trustee  or  Lender  shall  have any  other  right or
         remedy  provided  in this Deed of Trust or the Note or available at law
         or in equity.

         Notice of Sale. Lender shall give Trustor reasonable notice of the time
         and place of any public  sale of the  Personal  Property or of the time
         after  which any  private  sale or other  intended  disposition  of the
         Personal  Property is to be made.  Reasonable  notice shall mean notice
         given  at  least  ten  (10)  days  before  the  time  of  the  sale  or
         disposition.  Any  sale  of  the  Personal  Property  may  be  made  in
         conjunction with any sale of the Real Property.

         Sale of the  Property.  To the  extent  permitted  by  applicable  law,
         Trustor  hereby  waives  any  and  all  rights  to  have  the  Property
         marshalled.  In  exercising  its rights and  remedies,  the  Trustee or
         Lender shall be free to sell all or any part of the  Property  together
         or  separately,  in one  sale or by  separate  sales.  Lender  shall be
         entitled  to bid at  any  public  sale  on  all or any  portion  of the
         Property.

         Attorneys' Fees;  Expenses.  If Lender institutes any suit or action to
         enforce  any of the  terms  of this  Deed of  Trust,  Lender  shall  be
         entitled  to recover  such sum as the court may adjudge  reasonable  as
         attorneys' fees at trial and upon any appeal.  Whether or not any court
         action is  involved,  and to the  extent  not  prohibited  by law,  all
         reasonable   expenses  Lender  incurs  that  in  Lender's  opinion  are
         necessary  at any  time  for  the  protection  of its  interest  or the
         enforcement  of its  rights  shall  become  a part of the  Indebtedness
         payable  on demand and shall  bear  interest  at the Note rate from the
         date  of  the  expenditure  until  repaid.  Expenses  covered  by  this
         paragraph include,  without  limitation,  however subject to any limits
         under applicable law, Lender's reasonable  attorneys' fees and Lender's
         legal expenses, whether or not there is a lawsuit, including reasonable
         attorneys'  fees and expenses  for  bankruptcy  proceedings  (including
         efforts to modify or vacate any automatic stay or injunction), appeals,
         and any  anticipated  post-judgment  collection  services,  the cost of
         searching  records,  obtaining  title  reports  (including  foreclosure
         reports),  surveyors' reports, and appraisal fees, title insurance, and
         fees for the  Trustee,  to the  extent  permitted  by  applicable  law.
         Trustor  also will pay any court  costs,  in addition to all other sums
         provided by law.

                                       5
<PAGE>

         Rights of Trustee.  Trustee shall  have all of the rights and duties of
         Lender as set forth in this section.

POWERS AND  OBLIGATIONS  OF TRUSTEE.  The following  provisions  relating to the
powers and obligations of Trustee are part of this Deed of Trust:

         Powers of Trustee.  In  addition to all powers of Trustee  arising as a
         matter  of law,  Trustee  shall  have the  power to take the  following
         actions with respect to the Property upon the written request of Lender
         and Trustor: (a) join in preparing and filing a map or plat of the Real
         Property,  including  the  dedication of streets or other rights to the
         public;  (b) join in granting any easement or creating any  restriction
         on the  Real  Property;  and (c)  join in any  subordination  or  other
         agreement  affecting this Deed of Trust or the interest of Lender under
         this Deed of Trust.

         Obligations  to Notify.  Trustee  shall not be  obligated to notify any
         other party of a pending sale under any other trust deed or lien, or of
         any action or proceeding in which Trustor,  Lender, or Trustee shall be
         a party, unless the action or proceeding is brought by Trustee.

         Trustee.  Trustee  shall meet all  qualifications  required for Trustee
         under  applicable law. In addition to the rights and remedies set forth
         above,  with  respect to all or any part of the  Property,  the Trustee
         shall have the right to foreclose by notice and sale,  and Lender shall
         have the right to foreclose by judicial foreclosure,  in either case in
         accordance with and to the full extent provided by applicable law.

         Successor  Trustee.  Lender, at Lender's option,  may from time to time
         appoint a successor Trustee to any Trustee appointed under this Deed of
         Trust by an instrument executed and acknowledged by Lender and recorded
         in the office of the recorder of SALT LAKE County,  State of Utah.  The
         instrument shall contain,  in addition to all other matters required by
         state law, the names of the original Lender,  Trustee, and Trustor, the
         book and page  where this Deed of Trust is  recorded,  and the name and
         address of the successor trustee,  and the instrument shall be executed
         and acknowledged by Lender or its successors in interest. The successor
         trustee,  without conveyance of the Property,  shall succeed to all the
         title,  power,  and duties  conferred  upon the Trustee in this Deed of
         Trust and by applicable law. This procedure for substitution of Trustee
         shall govern to the exclusion of all other provisions for substitution.

NOTICES.  Unless otherwise provided by applicable law, any notice required to be
given under this Deed of Trust or required by law,  including without limitation
any notice of default  and any  notice of sale  shall be given in  writing,  and
shall be effective  when actually  delivered in accordance  with the law or with
this Deed of Trust,  when actually  received by telefacsimile  (unless otherwise
required by law), when deposited with a nationally recognized overnight courier,
or, if  mailed,  when  deposited  in the United  States  mail,  as first  class,
certified or registered  mail postage  prepaid,  directed to the addresses shown
near the beginning of this Deed of Trust.  All copies of notices of  foreclosure
from the holder of any lien which has priority  over this Deed of Trust shall be
sent to Lender's  address,  as shown near the  beginning  of this Deed of Trust.
Notwithstanding  any other  provision of this Deed of Trust,  all notices  given
under Utah Code Ann.  Section  57-1-26 shall be given as required  therein.  Any
party may  change its  address  for  notices  under this Deed of Trust by giving
formal written notice to the other parties,  specifying  that the purpose of the
notice is to change the party's address. For notice purposes,  Trustor agrees to
keep Lender informed at all times of Trustor's current address. Unless otherwise
provided by applicable law, if there is more than one Trustor,  any notice given
by Lender to any Trustor is deemed to be notice given to all Trustors.

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

         Amendments.  This Deed of Trust,  together with any Related  Documents,
         constitutes the entire understanding and agreement of the parties as to
         the  matters  set  forth in this  Deed of Trust.  No  alteration  of or
         amendment  to this Deed of Trust  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.

         Annual  Reports.  If the  Property  is used  for  purposes  other  than
         Trustor's  residence,  Trustor shall furnish to Lender, upon request, a
         certified  statement of net operating income received from the Property
         during Trustor's previous fiscal year in such form and detail as Lender
         shall require. "Net operating income" shall mean all cash receipts from
         the Property less all cash  expenditures  made in  connection  with the
         operation of the Property.

         Arbitration Disclosures.

         1.  ARBITRATION IS FINAL AND BINDING ON THE PARTIES AND SUBJECT TO ONLY
         VERY LIMITED REVIEW BY A COURT.
         2. IN  ARBITRATION  THE PARTIES ARE WAIVING  THEIR RIGHT TO LITIGATE IN
         COURT, INCLUDING THEIR RIGHT TO A JURY TRIAL.
         3. DISCOVERY IN ARBITRATION IS MORE LIMITED THAN DISCOVERY IN COURT.
         4.  ARBITRATORS ARE NOT REQUIRED TO INCLUDE  FACTUAL  FINDINGS OR LEGAL
         REASONING IN THEIR AWARDS.  THE RIGHT TO APPEAL OR SEEK MODIFICATION OF
         ARBITRATORS' RULINGS IS VERY LIMITED.
         5. A PANEL OF  ARBITRATORS  MIGHT INCLUDE AN  ARBITRATOR  WHO IS OR WAS
         AFFILIATED WITH THE BANKING INDUSTRY.
         6. ARBITRATION WILL APPLY TO ALL DISPUTES BETWEEN THE PARTIES, NOT JUST
         THOSE CONCERNING THE AGREEMENT.
         7. IF YOU HAVE QUESTIONS  ABOUT  ARBITRATION,  CONSULT YOUR ATTORNEY OR
         THE  AMERICAN  ARBITRATION  ASSOCIATION.
         (a) Any claim or controversy  ("Dispute")  between or among the parties
         and their employees,  agents, affiliates,  and assigns,  including, but
         not limited to, Disputes  arising out of or relating to this agreement,
         this  arbitration  provision  ("arbitration  clause"),  or any  related
         agreements or  instruments  relating  hereto or delivered in connection
         herewith ("Related Agreements"),  and including,  but not limited to, a
         Dispute based on or arising from an alleged tort,  shall at the request
         of any party be resolved by binding  arbitration in accordance with the
         applicable  arbitration rules of the American  Arbitration  Association
         (the "Administrator").  The provisions of this arbitration clause shall
         survive any termination,  amendment, or expiration of this agreement or
         Related  Agreements.  The provisions of this  arbitration  clause shall
         supersede any prior arbitration agreement between or among the parties.

         (b) The arbitration  proceedings  shall be conducted in a city mutually
         agreed by the parties.  Absent such an agreement,  arbitration  will be
         conducted  in  Salt  Lake  City,  Utah or such  other  place  as may be
         determined   by  the   Administrator.   The   Administrator   and   the
         arbitrator(s)  shall have the  authority to the extent  practicable  to
         take any action to require the  arbitration  proceeding to be completed
         and the  arbitrator(s)'  award issued  within 150 days of the filing of
         the Dispute with the  Administrator.  The arbitrator(s)  shall have the
         authority  to impose  sanctions  on any party that fails to comply with
         time  periods  imposed  by  the  Administrator  or  the  arbitrator(s),
         including the sanction of summarily  dismissing  any Dispute or defense
         with prejudice.  The arbitrator(s)  shall have the authority to resolve
         any Dispute  regarding the terms of this  agreement,  this  arbitration
         clause,  or  Related  Agreements,  including  any claim or  controversy
         regarding the  arbitrability  of any Dispute.  All limitations  periods
         applicable to any Dispute or defense,  whether by statute or agreement,
         shall  apply  to  any   arbitration   proceeding   hereunder   and  the
         arbitrator(s) shall have the authority to decide whether any Dispute or
         defense is barred by a  limitations  period  and,  if so, to  summarily
         enter an award  dismissing  any Dispute or defense on that  basis.  The
         doctrines of  compulsory  counterclaim,  res judicata,  and  collateral
         estoppel shall apply to any arbitration  proceeding hereunder so that a
         party must state as a counterclaim  in the  arbitration  proceeding any
         claim or controversy  which arises out of the transaction or occurrence
         that is the subject matter of the Dispute. The arbitrator(s) may in the
         arbitrator(s)'  discretion  and  at  the  request  of  any  party:  (1)
         consolidate in a single arbitration  proceeding any other claim arising
         out of the same transaction involving another party to that transaction
         that is bound by an arbitration clause with Lender,  such as borrowers,
         guarantors,  sureties, and owners of collateral; and (2) consolidate or
         administer  multiple  arbitration  claims or  controversies  as a class
         action  in  accordance  with  Rule 23 of the  Federal  Rules  of  Civil
         Procedure.

                                       6
<PAGE>

         (c) The arbitrator(s) shall be selected in accordance with the rules of
         the Administrator from panels maintained by the Administrator. A single
         arbitrator  shall have  expertise in the subject matter of the Dispute.
         Where three arbitrators conduct an arbitration proceeding,  the Dispute
         shall be decided by a majority vote of the three arbitrators,  at least
         one of whom must have  expertise  in the subject  matter of the Dispute
         and  at  least  one  of  whom  must  be  a  practicing  attorney.   The
         arbitrator(s) shall award to the prevailing party recovery of all costs
         and   fees   (including   attorneys'   fees  and   costs,   arbitration
         administration   fees  and  costs,   and   arbitrator(s)'   fees).  The
         arbitrator(s), either during the pendency of the arbitration proceeding
         or as part of the  arbitration  award,  also may grant  provisional  or
         ancillary  remedies including but not limited to an award of injunctive
         relief, foreclosure, sequestration,  attachment, replevin, garnishment,
         or the appointment of a receiver.

         (d)  Judgement  upon an  arbitration  award may be entered in any court
         having  jurisdiction,   subject  to  the  following   limitation:   the
         arbitration  award is binding  upon the parties only if the amount does
         not exceed Four Million Dollars  ($4,000,000.00);  if the award exceeds
         that limit,  either party may demand the right to a court trial. Such a
         demand  must be filed with the  Administrator  within  thirty (30) days
         following the date of the  arbitration  award;  if such a demand is not
         made with that time period,  the amount of the arbitration  award shall
         be binding. The computation of the total amount of an arbitration award
         shall  include   amounts   awarded  for  attorneys'   fees  and  costs,
         arbitration administration fees and costs, and arbitrator(s)' fees.

         (e) No provision of this  arbitration  clause,  nor the exercise of any
         rights hereunder, shall limit the right of any party to: (1) judicially
         or  non-judicially  foreclose  against  any real or  personal  property
         collateral  or  other  security;   (2)  exercise  self-help   remedies,
         including but not limited to  repossession  and setoff  rights;  or (3)
         obtain from a court having  jurisdiction  thereover any  provisional or
         ancillary  remedies  including  but not limited to  injunctive  relief,
         foreclosure,  sequestration,  attachment, replevin, garnishment, or the
         appointment  of a receiver.  Such rights can be  exercised at any time,
         before or after initiation of an arbitration proceeding,  except to the
         extent such action is contrary to the arbitration  award.  The exercise
         of such rights shall not constitute a waiver of the right to submit any
         Dispute to  arbitration,  and any claim or  controversy  related to the
         exercise  of such rights  shall be a Dispute to be  resolved  under the
         provisions  of  this  arbitration   clause.   Any  party  may  initiate
         arbitration with the Administrator. If any party desires to arbitrate a
         Dispute  asserted  against  such  party in a  complaint,  counterclaim,
         cross-claim, or third-party complaint thereto, or in an answer or other
         reply to any such pleading,  such party must make an appropriate motion
         to the trial court seeking to compel arbitration,  which motion must be
         filed  with the court  within 45 days of service  of the  pleading,  or
         amendment  thereto,  setting  forth such  Dispute.  If  arbitration  is
         compelled  after  commencement  of litigation  of a Dispute,  the party
         obtaining an order compelling  arbitration  shall commence  arbitration
         and pay the  Administrator's  filing  fees and costs  within 45 days of
         entry of such order.  Failure to do so shall constitute an agreement to
         proceed with  litigation  and waiver of the right to arbitrate.  In any
         arbitration  commenced  by a consumer  regarding  a  consumer  Dispute,
         Lender  shall pay one half of the  Administrator's  filing  fee,  up to
         $250.

         (f)  Notwithstanding  the  applicability  of  any  other  law  to  this
         agreement,  the arbitration  clause, or Related  Agreements  between or
         among the parties,  the Federal Arbitration Act, 9 U.S.C.  Section 1 et
         seq.,  shall  apply  to the  construction  and  interpretation  of this
         arbitration  clause. If any provision of this arbitration clause should
         be  determined  to be  unenforceable,  all  other  provisions  of  this
         arbitration clause shall remain in full force and effect.

         Caption  Headings.  Caption  headings  in this  Deed of  Trust  are for
         convenience purposes only and are not to be used to interpret or define
         the provisions of this Deed of Trust.

         Merger.  There shall be no merger of the interest or estate  created by
         this Deed of Trust with any other interest or estate in the Property at
         any time held by or for the benefit of Lender in any capacity,  without
         the written consent of Lender.

         Governing  Law.  This Deed of Trust will be  governed  by  federal  law
         applicable  to Lender and, to the extent not  preempted by federal law,
         the laws of the State of Utah  without  regard to its  conflicts of law
         provisions. This Deed of Trust has been accepted by Lender in the State
         of Utah.

         Choice of Venue.  If there is a lawsuit,  Trustor  agrees upon Lender's
         request  to  submit  to the  jurisdiction  of the  courts  of SALT LAKE
         County, State of Utah.

         No Waiver by  Lender.  Lender  shall not be deemed to have  waived  any
         rights  under this Deed of Trust 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 Deed of Trust
         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 Deed of Trust.  No prior  waiver by  Lender,  nor any course of
         dealing between Lender and Trustor, shall constitute a waiver of any of
         Lender's  rights or of any of  Trustor's  obligations  as to any future
         transactions.  Whenever  the consent of Lender is  required  under this
         Deed of Trust,  the  granting of such consent by Lender in any instance
         shall not constitute  continuing consent to subsequent  instances where
         such  consent is required  and in all cases such consent may be granted
         or withheld in the sole discretion of Lender.

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

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

         Time is of the Essence.  Time is of the essence in the  performance  of
         this Deed of Trust.

         Waiver of Homestead  Exemption.  Trustor hereby releases and waives all
         rights and  benefits of the  homestead  exemption  laws of the State of
         Utah as to all Indebtedness secured by this Deed of Trust.

                                       7
<PAGE>

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings  when  used in this Deed of Trust.  Unless  specifically  stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the  plural,  and the plural  shall  include  the  singular,  as the context may
require.  Words and terms not otherwise defined in this Deed of Trust shall have
the meanings attributed to such terms in the Uniform Commercial Code:

         Beneficiary.  The word  "Beneficiary"  means ZIONS FIRST NATIONAL BANK,
         and its successors and assigns.

         Borrower.  The  word  "Borrower"  means  DYNATRONICS   CORPORATION  and
         includes all  co-signers  and co-makers  signing the Note and all their
         successors and assigns.

         Deed of Trust.  The words "Deed of Trust" mean this Deed of Trust among
         Trustor,  Lender,  and Trustee,  and includes  without  limitation  all
         assignment and security  interest  provisions  relating to the Personal
         Property and Rents.

         Default. The word "Default" means the Default set forth in this Deed of
         Trust in the section titled "Default".

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

         Event of Default.  The words "Event of Default"  mean any of the events
         of  default  set forth in this Deed of Trust in the  events of  default
         section of this Deed of Trust.

         Existing  Indebtedness.  The  words  "Existing  Indebtedness"  mean the
         indebtedness  described in the Existing Liens provision of this Deed of
         Trust.

         Guaranty.  The word  "Guaranty"  means  the  guaranty  from  guarantor,
         endorser,  surety, or accommodation party to Lender,  including without
         limitation a guaranty of all or part of the Note.

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

         Improvements.  The word  "Improvements"  means all  existing and future
         improvements,  buildings,  structures, mobile homes affixed on the Real
         Property, facilities, additions, replacements and other construction on
         the Real Property.

         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  ZIONS  FIRST  NATIONAL  BANK,  its
         successors and assigns.

         Note. The word "Note" means the promissory note dated June 26, 2007, in
         the original  principal amount of $1,500,000.00 from Trustor to Lender,
         together  with  all  renewals  of,  extensions  of,  modifications  of,
         refinancings  of,   consolidations   of,  and   substitutions  for  the
         promissory  note or agreement.  NOTICE TO TRUSTOR:  THE NOTE CONTAINS A
         VARIABLE INTEREST RATE.

         Personal  Property.  The words "Personal  Property" mean all equipment,
         fixtures,  and other  articles of personal  property  now or  hereafter
         owned by Trustor,  and now or hereafter attached or affixed to the Real
         Property;  together with all accessions,  parts,  and additions to, all
         replacements of, and all substitutions  for, any of such property;  and
         together with all proceeds  (including without limitation all insurance
         proceeds and refunds of premiums) from any sale or other disposition of
         the Property.

         Property.  The word "Property" means collectively the Real Property and
         the Personal Property.

         Real  Property.  The  words  "Real  Property"  mean the real  property,
         interests and rights, as further described in this Deed of Trust.

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

         Rents.  The word "Rents" means all present and future rents,  revenues,
         income, issues, royalties, profits, and other benefits derived from the
         Property.

         Trustee.  The word "Trustee"  means ZIONS FIRST  NATIONAL  BANK,  whose
         address is 2460 SOUTH 3270 WEST,  WEST  VALLEY  CITY,  UT 84119 and any
         substitute or successor trustees.

         Trustor.  The word "Trustor" means DYNATRONICS CORPORATION.

                                       8
<PAGE>

TRUSTOR  ACKNOWLEDGES  HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND
TRUSTOR AGREES TO ITS TERMS.

     TRUSTOR:

     DYNATRONICS CORPORATION

     By: /s/  KELVYN CULLIMORE, JR.
     ------------------------------------
     KELVYN CULLIMORE, JR.,  President of
     DYNATRONICS CORPORATION

     -----------------------------------------------------------------
                            CORPORATE ACKNOWLEDGMENT

     STATE OF ___________________________________                   )

                                                                    ) SS

     COUNTY OF ___________________________________                  )

     On  this  _____________________  day  of  ____________________________,  20
     _______,  before me, the  undersigned  Notary Public,  personally  appeared
     KELVYN CULLIMORE,  JR., President of DYNATRONICS CORPORATION,  and known to
     me to be an authorized  agent of the corporation  that executed the Deed of
     Trust and  acknowledged  the Deed of Trust to be the free and voluntary act
     and deed of the corporation, by authority of its Bylaws or by resolution of
     its board of directors, for the uses and purposes therein mentioned, and on
     oath stated that he or she is  authorized to execute this Deed of Trust and
     in fact executed the Deed of Trust on behalf of the corporation.

     By_____________________________     Residing at____________________________

     Notary Public in and for the        My commission expires__________________
     State of_______________________

     -----------------------------------------------------------------
                          REQUEST FOR FULL RECONVEYANCE
            (To be used only when obligations have been paid in full)

     To: _____________________________________________, Trustee

     The undersigned is the legal owner and holder of all  Indebtedness  secured
     by this Deed of Trust.  All sums  secured  by this Deed of Trust  have been
     fully paid and satisfied.  You are hereby directed,  upon payment to you of
     any sums owing to you under the terms of this Deed of Trust or  pursuant to
     any  applicable  statute,  to cancel the Note secured by this Deed of Trust
     (which is  delivered  to you  together  with this  Deed of  Trust),  and to
     reconvey,  without warranty, to the parties designated by the terms of this
     Deed of Trust, the estate now held by you under this Deed of Trust.  Please
     mail the reconveyance and Related Documents to:

     --------------------------------------------------------------------------.

     Date: ____________________    Beneficiary: ______________________________

                                           By: ____________________________

                                           Its: ____________________________

                    LASER PRO Lending, Ver. 5.36.00.004 Copr.
                  Harland Financial Solutions, Inc. 1997, 2007.
                           All Rights Reserved. - UT
                  C:\COMML\CFI\LPL\G01.FC TR-68318 PR-ZSLR (M)

                                       9
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