Document:

<PAGE>

                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
  Principal     Loan Date   Maturity   Loan No    Call    Collateral     Account    Officer     Initials
---------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>         <C>        <C>     <C>           <C>        <C>          <C>
$6,000,000.00              07/15/2001   11620                019                      501
---------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
---------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL U.S.A., INC.          LENDER: U.S. Bank National Association
          6740 COBRA WAY                         Corporate Lending - Kearny Mesa
          SAN DIEGO, CA 92121                    9005 Complex Drive
                                                 San Diego, CA 92123
================================================================================

LOAN TYPE. This is a Variable Rate (at Wall Street Journal Prime Rate as
published in the Money Rates section. When a range of rates is shown, the higher
rate will be used, making an initial rate of 9.000%), Revolving Line of Credit
Loan to a Corporation for $6,000,000.00 due on July 15, 2001.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

  [ ]  Personal, Family, or Household Purposes or Personal Investment.
  [X]  Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: INCREASE LINE OF CREDIT
AND EXTEND MATURITY DATE.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $6,000,000.00 as follows:

           AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF:        $6,000,000.00
           $158,911.73 L/C No. 4034
           $150,000.00 ACH HOLD
           $5,691,088.27 UNDISBURSED
                                                              -------------
           NOTE PRINCIPAL:                                    $6,000,000.00

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:

           PREPAID FINANCE CHARGES PAID IN CASH:                    $250.00
               $250.00 DOCUMENTATION FEE

           OTHER CHARGES PAID IN CASH:                               $70.10
               $70.10 UCC FEES
                                                              -------------

           TOTAL CHARGES PAID IN CASH:                              $320.10

LOAN ADVANCE AGREEMENT CONDITION. UNDISBURSED FUNDS TO BE DISBURSED PER LOAN
ADVANCE AGREEMENT.

FINANCIAL STATEMENT CERTIFICATION. The undersigned, on behalf of the above
entities, for the purpose of procuring and establishing credit from time to time
with U.S. Bank and to induce U.S. Bank to permit the undersigned to become
indebted to U.S. Bank on notes, endorsements, guarantees, overdrafts or
otherwise, furnish all current and future statements as being a true statement
of the financial condition of the undersigned and agrees to notify U.S. Bank
immediately of the extent and character of any material change in said financial
condition. If any of the representations in all current and future statements,
prove to be untrue, or if the undersigned fails to notify U.S. Bank of any
material change as above agreed, then and in such case, at U.S. Bank option, all
of the obligations of the undersigned to U.S. Bank, or held by U.S. Bank shall
immediately become due and payable, without demand or notice.

The undersigned does further agree that any spaces in all current and future
statements under "Liabilities" or "Contingent Liabilities", which have been or
may be left blank, shall be construed by U.S. Bank, the same as though the word
"none" were written in each of such spaces.

All current and future statements shall also be construed by U.S. Bank to be a
continuing statement of the condition of the undersigned, and a new and original
statement of all assets and liabilities upon each and every transaction in and
by which the undersigned hereafter becomes indebted to U.S. Bank, until the
undersigned advises in writing to the contrary.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JANUARY 22, 2001.

<PAGE>
BORROWER:

FOTOBALL U.S.A., INC.

By: /s/  MICHAEL FAVISH
    ----------------------------------------
    MICHAEL FAVISH, President/CEO
================================================================================
Variable Rate. Line of Credit.
LASER PRO Reg. U.S. Pat. & T.M. Off., Ver. 3.29a (C)Concentrex 2001
All rights reserved. [CA-120 E3.29 F3.29 11620LOC.LN C1.OVL)

<PAGE>

                           CHANGE IN TERMS AGREEMENT

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
  Principal     Loan Date   Maturity   Loan No    Call    Collateral     Account    Officer     Initials
---------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>         <C>        <C>     <C>           <C>        <C>          <C>
$6,000,000.00              07/15/2001   11620                019                      501
---------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
---------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL U.S.A., INC.          LENDER: U.S. Bank National Association
          6740 COBRA WAY                         Corporate Lending - Kearny Mesa
          SAN DIEGO, CA 92121                    9005 Complex Drive
                                                 San Diego, CA 92123
================================================================================

PRINCIPAL AMOUNT: $6,000,000.00              DATE OF AGREEMENT: JANUARY 22, 2001

DESCRIPTION OF EXISTING INDEBTEDNESS.
AS EVIDENCED BY:
PROMISSORY NOTE DATED DECEMBER 20, 1995 IN THE AMOUNT OF $1,000,000.00.
CHANGE IN TERMS AGREEMENT DATED NOVEMBER 13, 1996 IN THE AMOUNT OF
$2,000,000.00.
CHANGE IN TERMS AGREEMENT DATED FEBRUARY 19, 1998 IN THE AMOUNT OF
$1,500,000.00.
CHANGE IN TERMS AGREEMENT DATED AUGUST 20, 1998 IN THE AMOUNT OF $2,000,000.00.
CHANGE IN TERMS AGREEMENT DATED DECEMBER 28, 1998 IN THE AMOUNT OF $3,500,000.00
CHANGE IN TERMS AGREEMENT DATED APRIL 6, 2000 IN THE AMOUNT OF $4,000,000.00.

DESCRIPTION OF COLLATERAL.
AS DESCRIBED IN:
COMMERCIAL SECURITY AGREEMENT DATED DECEMBER 20,1995.

DESCRIPTION OF CHANGE IN TERMS.
LOAN AGREEMENT DATED JANUARY 22,2001 SUPERCEDES ALL PRIOR LOAN AGREEMENTS.
LINE OF CREDIT IS INCREASED TO $6,000,000.00 FROM $4,000,000.00
EXTEND MATURITY DATE TO JULY 15, 2001.

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.

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

BORROWER:

FOTOBALL U.S.A., INC.

By: /s/  MICHAEL FAVISH
    ----------------------------------------
    MICHAEL FAVISH, President/CEO

================================================================================
Variable Rate. Line of Credit.
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29a (C)Concentrex 2001
All rights reserved. [CA-D20 E3.29 11620LOC.LN C1.OVL)

<PAGE>

                                 LOAN AGREEMENT
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------
  Principal     Loan Date   Maturity   Loan No    Call    Collateral     Account    Officer     Initials
---------------------------------------------------------------------------------------------------------------
<S>             <C>        <C>         <C>        <C>     <C>           <C>        <C>          <C>
$6,000,000.00              07/15/2001   11620                019                      501
---------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
---------------------------------------------------------------------------------------------------------------
</TABLE>

BORROWER: FOTOBALL U.S.A., INC.          LENDER: U.S. Bank National Association
          6740 COBRA WAY                         Corporate Lending - Kearny Mesa
          SAN DIEGO, CA 92121                    9005 Complex Drive
                                                 San Diego, CA 92123
================================================================================

THIS LOAN AGREEMENT between FOT0BALL U.S.A., INC. ("Borrower") and U.S. Bank
National Association ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.

TERM. This Agreement shall be effective as of January 22, 2001, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed In full and the parties terminate this Agreement in writing.

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

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

     ACCOUNT. The word "Account" means a trade account, account 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 under this
     Agreement.

     BORROWER. The word "Borrower" means FOTOBALL U.S.A., INC.. The word
     "Borrower" also includes, as applicable, all subsidiaries and affiliates of
     Borrower as provided below in the paragraph tided "Subsidiaries and
     Affiliates."

     BORROWING BASE. The words "Borrowing Base" mean BORROWING BASE
     CERTIFICATE/COLLATERAL SCHEDULE.

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

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

     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:

          (a) Accounts with respect to which the Account Debtor is an officer,
          an employee or agent of Borrower.

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

          (c) 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.

          (d) Accounts with respect to which the Account Debtor is not a
          resident of the United States, except to the extent such Accounts are
          supported by insurance, bonds or other assurances satisfactory to
          Lender.

          (e) 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 Borrow.

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

          (g) Accounts with respect to which the goods have not been shipped or
          delivered, or the services have not been rendered, to the Account
          Debtor.

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

          (i) 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.

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

          (k) Accounts which have not been paid in full within 60 DAYS FROM THE
          INVOICE DUE DATE from the invoice date.

          (I) MINUS ALL FOREIGN, CONTRA AND BANKRUPT COMPANY ACCOUNTS

          (m) AND ACCOUNTS AS FURTHER EXCLUDED PER THE LOAN AGREEMENT COVENANT &
          CONDITIONS ADDENDUM

          (n) MINUS THE ENTIRE ACCOUNT BALANCE OF ANY ACCOUNT WHICH HAS BEEN
          EXTENDED TERMS IN EXCESS OF NET 60.

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

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

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

          (c) 15% OF FINISHED GOODS/RAW MATERIALS INVENTORY TO A CAP OF
          $500,000.00.

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

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

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

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

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

     INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
     all Loans, together with all other obligations, debts and liabilities of
     Borrower to Lender, or any one or more of them, as well as 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

<PAGE>

01-22-2001                       LOAN AGREEMENT                           Page 2
Loan No 11620                      (Continued)
================================================================================

     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 U.S. Bank National Association, its
     successors and assigns.

     LINE OF CREDIT. The words "Line of Credit" mean the credit facility
     described in the Section titled "LINE OF CREDIT" below.

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

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

     RELATED DOCUMENTS. The words "Related Documents" mean and include without
     limitation all promissory notes, credit agreements, loan agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.

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

     SECURITY INTEREST. The words "Security Interest" mean and include without
     limitation any type of collateral security, whether in the form of a lien,
     charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
     chattel trust, factor's lien, equipment trust, conditional sale, trust
     receipt, lien or title retention contract, lease or consignment intended as
     a security device, or any other security or lien interest whatsoever,
     whether created by law, contract, or otherwise.

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

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:

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

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

          (c) 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.

          (d) All guaranties required by Lender for the Line of Credit shall
          have been executed by each Guarantor, delivered to Lender, and be in
          full force and effect.

          (e) 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 reasonably satisfied as to their
          condition.

          (f) 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.

          (g) 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 Certificate."

     MAKING LOAN ADVANCES. Advances under the Line of Credit may be requested
     either 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 (a) when credited to any deposit account of
     Borrower maintained with Lender or (b) 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 wrttten 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 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 Line of Credit 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 (the "Collateral"), including without limitation
Borrower's present and future Accounts, general intangibles, and Inventory.
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 such financing
     statements and to take whatever other actions are reasonably 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 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 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 of any change in
     Borrower's name including any change to the assumed business names of
     Borrower. Borrower also promptly will notify Lender of 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
     reasonably require, including without limitation information concerning
     Eligible Accounts and Account balances and agings. With respect to the
     inventory, Borrower agrees to keep and maintain such records as Lender may
     reasonably 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.

     COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
     Agreement, Borrower shall execute and deliver to Lender schedules of
     Acconts and Inventory and Eligible Accounts and Eligible Inventory, in form
     and substance reasonably satisfactory to the Lender. Thereafter and at such
     frequency as Lender shall reasonably require, Borrower shall execute and
     deliver to Lender such supplemental schedules of Eligible Accounts and
     Eligible Inventory and such other matters and information relating to the
     Accounts and Inventory as Lender may reasonably request.

     REPRESENTATION AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
     Accounts, Borrower represnts and warrants to Lender: (a) 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; (b) All Account information listed on schedules delivered to
     Lender will be true and correct, subject to immaterial variance; and (c)
     Lender, it 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: (a) All Inventory
     represented by Borrower to be Eligible Inventory for purposes of this
     Agreement conforms to the requirements of the definition of Eligible
     Inventory; (b) All Inventory values listed on schedules delivered to Lender
     will be true and correct, sibject to immaterial variance; (c) The value of

<PAGE>

01-22-2001                       LOAN AGREEMENT                           Page 3
Loan No 11620                      (Continued)
================================================================================

     the Inventory will be determined on a consistent accounting basis; (d)
     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; (e) 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; (f) 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's name evidencing the storage of
     Inventory; and (g) 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.

     NOTIFICATION BASIS. Borrower agrees and understands that this Loan shall be
     on a notification basis pursuant to which Lender shall directly collect and
     receive all proceeds and payments from the Accounts in which Lender has a
     security interest. In order to facilitate the foregoing, Borrower agrees to
     deliver to Lender, upon demand, any and all of Borrower's records, ledger
     sheets, payment cards, and other documentation, in the form requested by
     Lender, with regard to the Accounts. Borrower further agrees that Lender
     shall have the right to notify each Account Debtor, pay such proceeds and
     payments directly to Lender, and to do any and all other things as Lender
     may deem to be necessary and appropriate, within its sole discretion, to
     carry out the terms and intent of this Agreement. Lender shall have the
     further right, where appropriate and within Lender's sole discretion, to
     file suit, either in its own name or in the name of Borrower, to collect
     any and all such Accounts. Borrower further agrees that Lender may take
     such other actions, either in Borrower's name or Lender's name, as Lender
     may deem appropriate within its sole judgment, with regard to collection
     and payment of the Accounts, without affecting the liability of Borrower
     under this Agreement or on the Indebtedness.

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

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

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

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

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

     PROPERTIES. Except for Permitted Liens, Borrower owns and has good title to
     all of Borrower's properties free and clear of all Security Interests, and
     has not executed any security documents or financing statements relating to
     such properties. All of Borrower's properties are titled in Borrower's
     legal name, and Borrower has not used, or filed a financing statement
     under, any other name for at least the last five (5) years.

     HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same meanings as set forth in the "CERCLA," "SARA," the
     Hazardous Materials Transportation Act 49 U.S.C. Section 1801, et seq., the
     Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
     Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
     Code, Section 25100, et seq., or other applicable state or Federal laws,
     rules, or regulations adopted pursuant to any of the foregoing. Except as
     disclosed to and acknowledged by Lender in writing, Borrower represents and
     warrants that: (a) During the period of Borrower's ownership of the
     properties, there has been no use, generation, manufacture, storage,
     treatment, disposal, release or threatened release of any hazardous waste
     or substance by any person on, under, about or from any of the properties.
     (b) Borrower has no knowledge of, or reason to believe that there has been
     (i) any use, generation, manufacture, storage, treatment, disposal,
     release, or threatened release of any hazardous waste or substance on,
     under, about or from the properties by any prior owners or occupants of any
     of the properties, or (ii) any actual or threatened litigation or claims of
     any kind by any person relating to such matters. (c) Neither Borrower nor
     any tenant, contractor, agent or other authorized user of any of the
     properties shall use, generate, manufacture, store, treat, dispose of, or
     release any hazardous waste or substance on, under, about or from any of
     the properties; and any such activity shall be conducted in compliance with
     all applicable federal, state, and local laws, regulations, and ordinances,
     including without limitation those laws, regulations and ordinances
     described above. Borrower authorizes Lender and its agents to enter upon
     the properties to make such inspections and tests as Lender may deem
     appropriate to determine compliance of the properties with this section of
     the Agreement. Any inspections or tests made by Lender shall be at
     Borrower's expense and for Lender's purposes only and shall not be
     construed to create any responsibility or liability on the part of Lender
     to Borrower or to any other person. The representations and warranties
     contained herein are based on Borrower's due diligence in investigating the
     properties for hazardous waste and hazardous substances. Borrower hereby
     (a) releases and waives any future claims against Lender for indemnity or
     contribution in the event Borrower becomes liable for cleanup or other
     costs under any such laws, and (b) agrees to indemnify and hold harmless
     Lender against any and all claims, losses, liabilities, damages, penalties,
     and expenses which Lender may directly or indirectly sustain or suffer
     resulting from a breach of this section of the Agreement or as a
     consequence of any use, generation, manufacture, storage, disposal, release
     or threatened release of a hazardous waste or substance on the properties.
     The provisions of this section of the Agreement, including the obligation
     to indemnify, shall survive the payment of the Indebtedness and the
     termination or expiration of this Agreement and shall not be affected by
     Lender's acquisition of any interest in any of the properties, whether by
     foreclosure or otherwise.

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

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

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

     BINDING EFFECT. This Agreement, the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related Documents are binding upon Borrower as well as upon Borrower's
     successors, representatives and assigns, and are legally enforceable in
     accordance with their respective terms.

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

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

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

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

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

     LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business,
     or Borrower's Chief executive office, if Borrower has more than one place
     of business, is located at 6740 COBRA WAY, SAN DIEGO, CA 92121. Unless
     Borrower has designated otherwise in writing this location is also the
     office or offices where Borrower keeps its records concerning the
     Collateral.

     INFORMATION. All information heretofore or contemporaneously herewith
     furnished by Borrower to Lender for the purposes of or in connection with
     this Agreement or any transaction contemplated hereby is, and all
     information hereafter furnished by or on behalf of Borrower to Lender will
     be, true and accurate in every material respect on the date as of which
     such information is dated or certified; and none of such information is or
     will be

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01-22-2001                       LOAN AGREEMENT                           Page 4
Loan No 11620                      (Continued)
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     incomplete by omitting to state any material fact necessary to make such
     information not misleading.

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

     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
     that Lender, without independent investigation, is relying upon the above
     representations and warranties in extending Loan Advances to Borrower.
     Borrower further agrees that the foregoing representations and warranties
     shall be continuing in nature and shall remain in full force and effect
     until such time as Borrower's Indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above, whichever
     is the last to occur.

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

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

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

     ADDITIONAL INFORMATION. Furnish such additional information and statements,
     lists of assets and liabilities, agings of receivables and payables,
     inventory schedules, budgets, forecasts, tax returns, and other reports
     with respect to Borrower's financial condition and business operations as
     Lender may request from time to time.

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

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

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

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

     TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
     indebtedness and obligations, including without limitation all assessments,
     taxes, governmental charges, levies and liens, of every kind and nature,
     imposed upon Borrower or its properties, income, or profits, prior to the
     date on which penalties would attach, and all lawful claims that, if
     unpaid, might become a lien or charge upon any of Borrower's properties,
     income, or profits. Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the legality of the same shall be contested in good faith by
     appropriate proceedings, and (b) Borrower shall have established on its
     books adequate reserves with respect to such contested assessment, tax,
     charge, levy, lien, or claim in accordance with generally accepted
     accounting practices. Borrower, upon demand of Lender, will furnish to
     Lender evidence of payment of the assessments, taxes, charges, levies,
     liens and claims and will authorize the appropriate governmental official
     to deliver to Lender at any time a written statement of any assessments,
     taxes, charges, levies, liens and claims against Borrower's properties,
     income, or profits.

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

     OPERATIONS. Maintain executive and management personnel with substantially
     the same qualifications and experience as the present executive and
     management personnel; provide written notice to Lender of any change in
     executive and management personnel; conduct its business affairs in a
     reasonable and prudent manner and in compliance in all material respects
     with all applicable federal, state and municipal laws, ordinances, rules
     and regulations respecting its properties, charters, businesses and
     operations, including without limitation, compliance with the Americans
     With Disabilities Act and with all minimum funding standards and other
     requirements of ERISA and other laws applicable to Borrower's employee
     benefit plans.

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

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

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

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

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

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

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

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

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse

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01-22-2001                       LOAN AGREEMENT                           Page 5
Loan No 11620                      (Continued)
================================================================================

change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; (d) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.

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

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

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

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

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

     DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Loans or perform their respective
     obligations under this Agreement or any of the Related Documents.

     FALSE STATEMENTS. Any warranty, representation or statement made or
     furnished to Lender by or on behalf of Borrower or any Grantor under this
     Agreement or the Related Documents is false or misleading in any material
     respect at the time made or furnished, or becomes false or misleading at
     any time thereafter.

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

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

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

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

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

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

     INSECURITY. Lender, in good faith, deems itself insecure.

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

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

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

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

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

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

     MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under
     this Agreement shall be joint and several, and all references to Borrower
     shall mean each and every Borrower. This means that each of the persons
     signing below is responsible for ALL obligations in this Agreement.

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

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

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

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

<PAGE>

01-22-2001                       LOAN AGREEMENT                           Page 6
Loan No 11620                      (Continued)
================================================================================

     Lender is entitled to rely on any failure to give such notice.

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

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

     COSTS AND EXPENSES. Borrower agrees to pay upon demand all of
     Lender's reasonable expenses, including without limitation reasonable
     attorneys' fees, incurred in connection with the preparation, execution,
     enforcement, modification and collection of this Agreement or in connection
     with the Loans made pursuant to this Agreement. Lender may pay someone else
     to help collect the Loans and to enforce this Agreement, and Borrower will
     pay that amount. This includes, subject to any limits under applicable law,
     Lender's reasonable attorney's fees and Lender's reasonable legal
     expenses, whether or not there is a lawsuit, including attorneys' fees for
     bankruptcy proceedings (including efforts to modify or vacate any automatic
     stay or injunction), appeals, and any anticipated post-judgment collection
     services. Borrower also will pay any court costs, in addition to all other
     sums provided by law.

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

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

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

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

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

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

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JANUARY 22,2001.

BORROWER:

FOTOBALL U.S.A., INC.

By: /s/ MICHAEL FAVISH
    ------------------------------------------
    MICHAEL FAVISH, President/CEO

LENDER:

U.S. BANK NATIONAL ASSOCIATION

By: /s/ DARLA CLARK
    ------------------------------------------
    AUTHORIZED OFFICER

================================================================================
LASER PRO Reg. U.S. Pat. & T.M. Off., Ver. 3.29a (C)Concentrex 2001
All rights reserved. [CA-C40 E3.29 F3.2911620LOC.LN C1.OVL)<PAGE>   1
                                                                     EXHIBIT 4.6

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, NOR UNDER ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
SAID ACT OR SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER

                      WARRANT TO PURCHASE SHARES OF COMMON
                     STOCK OF AMPERSAND MEDICAL CORPORATION

WARRANT NO.  1 -- R.D.                                        DATED:____________

     This certifies that Richard D. Doermer (the "HOLDER") for value received,
is entitled, subject to the terms set forth below to purchase from AMPERSAND
MEDICAL CORPORATION, a Delaware corporation (the "COMPANY"), ninety-six thousand
two hundred and fifty (96,250) fully paid and nonassessable shares (the "WARRANT
SHARES") of the Company's Common Stock, par value $0.001 per share (the "STOCK")
at a price of sixteen cents ($0.16) per share (the "STOCK PURCHASE PRICE") at
any time but not earlier than the Commencement Date (as defined below) or later
than 5:00 pm (New York Time) on the Expiration Date (as defined below), upon
surrender to the Company at its principal office at 414 N. Orleans St.. Suite
510, Chicago, Illinois 60610, Attention: President (or at such other location as
the Company may advise Holder in writing) of this Warrant properly endorsed with
the form of Exercise Notice attached hereto duly completed and signed upon
payment in cash or cashier's check of the aggregate Stock Purchase Price for the
number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and the number
of Warrant Shares purchasable hereunder are subject to adjustment as provided in
Section 3 of this Warrant. This Warrant and all rights hereunder to the extent
not exercised in the manner set forth herein shall terminate and become null and
void on the Expiration Date (as defined below). "COMMENCEMENT DATE" shall mean
the date of this Warrant. Expiration date shall mean the third anniversary of
the Commencement Date.

     This Warrant is subject to the following terms and conditions:

     1.   EXERCISE; ISSUANCE OF CERTIFICATES PAYMENT FOR WARRANT SHARES

          (a) This Warrant is exercisable by payment of the Stock Purchase Price
by cash payment, certified check or wire transfer, in the manner set forth above
at the option of Holder at any time but not earlier than the Commencement Date
or later than 5:00 p.m. (New York Time) on the Expiration Date for all or a
portion of the shares of Stock subject to this Warrant. The Company agrees that
the Warrant Shares purchased under this Warrant shall be and are deemed to be
issued to Holder as the record owner of such shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment made
for such shares (unless the Conversion Right is exercised). Subject to the
provisions of Section 2, certificates for the Warrant Shares so purchased shall
be delivered to holder by the Company's transfer agent at the Company's

                                       1
<PAGE>   2

expense within a reasonable time after the rights represented by this Warrant
have been exercised. The stock certificate(s) so delivered shall be in such
denominations of Stock requested by Holder and shall be registered in the name
of the Holder or such other name as shall be designated by the Holder, subject
to the limitations contained in Section 2. If, upon exercise of this Warrant,
fewer than all of the shares of Stock evidenced by this Warrant are purchased
prior to the Expiration Date of this Warrant, one or more new warrants
substantially in the form of, and on the terms of, this Warrant will be issued
for the remaining number of shares of Stock not purchased upon exercise of this
Warrant.

          (b) In lieu of the payment of the Stock Purchase Price, the Holder may
require the Company to convert this Warrant into shares of Stock (the
"CONVERSION RIGHT") as provided for in this SECTION 1(b). Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Stock Purchase Price) that number of shares of Stock
equal to the quotient obtained by dividing (x) the value of the Warrant at the
time the Conversion Right is exercised (determined by subtracting the aggregate
Stock Purchase Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate Market Value (as defined in SECTION 1(d)
below), for the Warrant Shares immediately prior to the exercise of the
Conversion Right) by (y) the Market Value.

          (c) The Conversion Right may be exercised by the Holder by delivering
the Warrant Certificate with a duly executed Exercise Notice in the form
attached hereto with the conversion section completed to the Company.

          (d) For the sole purpose of determining the number of Warrant Shares
which shall be delivered to the Holder by the Company pursuant to the Conversion
Right as set forth in SECTION 1(b) above, "Market Value") shall mean the average
daily closing price of a share of the Stock as listed on the exchange or
quotation system of which the Stock may then be listed for the ten (10)
consecutive days of trading ending on the third business day immediately
preceding the date of exercise of such Conversion Right, or in the event the
Stock is not then publicly traded, the Market Value shall be determined in good
faith by the Company and the Holder.

     2.   SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that the Warrant Shares will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any stockholder and free of all taxes (other than income taxes, which may be
applicable to Holder, liens and charges with respect to the issue thereof. The
Company covenants that it will reserve and keep available a sufficient number of
shares of its authorized but unissued Stock for such exercise. The Company will
take all such reasonable action as may be necessary to assure that such shares
of Stock may be issued as provided herein without violation of any applicable
law or regulation, or of any requirements of any domestic securities exchange or
automated quotation system upon which the Stock may be listed.

     3.   ADJUSTMENT OF STOCK PURCHASE PRICE PAID NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this

                                       2
<PAGE>   3

SECTION 3.

     3.1   SUBDIVISION OR CONTINUATION OF STOCK AND STOCK DIVIDEND. In case the
Company shall at any time subdivide its outstanding shares of Stock into a
greater number of shares or declare a dividend upon its Stock payable solely in
shares of Stock, the Stock Purchase Price in effect immediately prior to such
subdivision or declaration shall be proportionately reduced, and the number of
shares issuable upon exercise of the Warrant shall be proportionately increased.
Conversely, in case the outstanding shares of Stock of the Company shall be
combined into a smaller number of shares the Stock Purchase Price in effect
immediately prior to such combination shall he proportionately increased and the
number of shares issuable upon exercise of the Warrant shall be proportionately
reduced.

     3.2   NOTICE OF ADJUSTMENT. Promptly after adjustment of the Stock Purchase
Price or any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant, the Company shall give written notice thereof: by
first class mail, postage prepaid, addressed to the Holder at the address of the
Holder as shown on the books of the Company (the notice shall be signed by an
authorized officer of the Company and shall state the effective date of the
adjustment and the Stock Purchase Price resulting from such adjustment and the
increase or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.

     3.3   CHANGES IN STOCK. In case at any time prior to the Expiration Date,
the Company shall be a party to any transaction (including, without limitation,
a merger, consolidation, sale of all or substantially all of the Company's
assets or recapitalization of the Stock) in which the previously outstanding
Stock shall be changed into or exchanged for different securities of the Company
or common stock or other securities of another corporation or interests in a
noncorporate entity or other property (including cash) or the Company shall make
a distribution on its shares, other than regular cash dividends on its
outstanding stock, or any combination of any of the foregoing (each such
transaction being herein called the "TRANSACTION" and the date of consummation
of the Transaction being herein called the "CONSUMMATION DATE"), then, as a
condition of the consummation of the Transaction, lawful and adequate provisions
shall be made so that each Holder, upon the exercise hereof at any time on or
after the Consummation Date, shall be entitled to receive, and this Warrant
shall thereafter represent the right to receive, in lieu of the Stock issuable
upon such exercise prior to the Consummation Date, the highest amount of
securities or other property to which the Holder would actually have been
entitled as a stockholder upon the consummation of the Transaction if the Holder
had exercised such Warrant immediately prior thereto. The provisions of this
SECTION 3.3 shall similarly apply to successive Transactions.

     4-   INVESTMENT REPRESENTATIONS.

          By receipt of this Warrant, and by its execution the Holder represents
to the Company the following:

          (a) the Holder understands that this Warrant and any Stock purchased
upon its exercise are securities, the issuance of which requires compliance with
Federal and state

                                       3
<PAGE>   4

securities laws, and

          (h) the Holder is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire this Warrant; and

          (c) the Holder is acquiring this Warrant for investment for the
Holder's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "ACT"), and

          (c) the Holder acknowledges and understands that the securities
constitute "restricted securities" under the Act and must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is available.

     5.   ISSUE TAX. The issuance of certificates for shares of Stock upon the
exercise of the Warrant shall be made without charge to the holder of the
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may he payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then holder of the Warrant being exercised.

     6.   NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the Company
or any other matters or any rights whatsoever as a stockholder of the Company in
addition if the Holder of the Warrant does not exercise this Warrant or convert
this Warrant pursuant to SECTION 1(b) above prior to the occurrence of an event
described above, except as provided in SECTION 3.1 AND 3.5, the Holder shall not
be entitled to receive the benefits accruing to existing holders of the Stock
pursuant to such event. No dividends or interest shall be payable or accrued in
respect of this Warrant or the interest represented hereby or the shares
purchasable hereunder until, and only to the extent that, this Warrant shall
have been exercised. No provisions hereof in the absence of affirmative action
by the Holder to purchase shares of Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof shall give rise to any liability of
the Holder for the Stock Purchase Price or as a stockholder of the Company
whether such liability is asserted by the Company or by its creditors.

     7.   RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH
SECURITIES ACT; REGISTRATION RIGHTS.

     7.1   RESTRICTIONS ON TRANSFERABILITY. This Warrant and the Warrant Shares
shall not be transferable in the absence of the effectiveness of a registration
statement with respect to such securities under the Act, or an exemption
therefrom. This Warrant and the Warrant Shares may be transferred in any manner
in compliance with applicable law.

     7.2   RESTRICTIVE LEGEND. In the absence of the effectiveness of
registration under the Act or an exemption therefrom as contemplated by SECTION
7.1, each certificate representing the

                                       4
<PAGE>   5

Warrant Shares or any other securities issued in respect to the Warrant Shares
upon any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend
substantially IN the following form (in addition to any legend required under
applicable state securities laws):

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
          SECURITIES ACT OF 1933, AS AMENDED ("ACT"), NOR UNDER ANY STATE
          SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
          MAY BE TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
          REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR SUCH LAWS AND
          THE RULES AND REGULATIONS THEREUNDER.

     7.3  REGISTRATION RIGHTS. Should a Holder exercise his rights, in whole or
in part, to purchase Warrant Shares, and provided that more than one year has
elapsed from the date of issuance of this Warrant then the Company shall honor a
request to register such Warrant Shares pursuant to a filing under the Act, to
the extent requisite to permit the sale by such holder of such Warrant Shares.
The Company shall make such filing in timely fashion, but in no case more than
30 days from the time of such request. Any expenses relating to such filing
shall be paid by the Company. Should the Company fail to make such filing within
a 30 day period from the time of such request, the Company shall be obligated to
purchase such Warrant Shares for a cash payment per Warrant Share equal to the
difference between the Exercise Price and average closing price of the Common
Stock during the 30 calendar days immediately following Holder's request to
register the Warrant Shares.

     8.   MODIFICATION AND WAIVER. Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.

     9.   NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified or registered mail postage prepaid, to each the
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefore in the first paragraph of this Warrant.

     10   DESCRIPTIVE HEADINGS AND GOVERNING LAW. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by the laws of the State of Illinois without reference to the
principles of conflicts of laws.

                                       5
<PAGE>   6

     11.   LOST WARRANTS OF STOCK CERTIFICATES. The Company represents and
warrants to the Holder that upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Warrant or
stock certificate representing the Warrant Shares and in the case of any such
loss, theft, destruction or mutilation, upon receipt of an indemnity and, if
requested, bond reasonably satisfactory to the Company, or in the case of any
such mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company at its expense will make and deliver a new Warrant or
stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.

     12.   FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share pay
the holder entitled to such fraction a sum in cash equal to the fair market
value of any such fractional interest as it shall appear on the public market,
or if there is no public market for such shares, then as shall be reasonably
determined by the Company.

                                  * * * * * * *

     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer, thereunto duly authorized as of the date first written above.

                                     AMPERSAND MEDICAL CORPORATION

                                     By: ____________________________________
                                         Name:
                                         Title:

                                       6
<PAGE>   7

                             FORM OF EXERCISE NOTICE

                           (To be signed and delivered
                            upon exercise of Warrant)

AMPERSAND MEDICAL CORPORATION
414 N Orleans St., Suite 510
Chicago, Illinois 60610

     The undersigned, the holder of the within Warrant (Warrant Certificate
Number 1 -- R.D.), hereby irrevocably elects to exercise the purchase right
represented by such Warrant for, and to purchase thereunder, ______________
shares of Common Stock, par value $0.001 per share (the "STOCK"), of AMPERSAND
MEDICAL CORPORATION (the "COMPANY"), and subject to the following paragraph,
herewith makes payment of ______________ Dollars ($______) therefor and requests
that the certificates for such shares be issued in the name of, and delivered
to, ___________________________whose address is________________________________.

     The undersigned does/does not (circle one) request the exercise of the
within Warrant pursuant to the "Conversion Right" set forth in SECTION 1(b) of
the Warrant.

DATED:___________________

                                 _______________________________________________

                                 (Signature must conform in all respects to name
                                 of holder as specified on the face of the
                                 Warrant)

                                 _______________________________________________

                                 _______________________________________________
                                 (Address)

                                       7

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