Document:

Dated as of March 9, 2005

                           GENERAL SECURITY AGREEMENT
                           --------------------------
                              (SECURES A GUARANTY)

                          1. GRANT OF SECURITY INTEREST
                             --------------------------

         (a) In consideration of the extensions of credit and other financial
accommodations made by GMAC COMMERCIAL FINANCE LLC ("SECURED PARTY") to I/OMagic
Corporation (the "BORROWER") and other valuable consideration, IOM HOLDINGS,
INC. ("DEBTOR") hereby grants Secured Party a lien and security interest in the
"Collateral" to secure the "OBLIGATIONS".

         (b) For purposes of this Agreement, the term "COLLATERAL" means all of
Debtor's right, title and interest in and to personal property, including
without limitation, accounts, chattel paper (both tangible and electronic),
goods, inventory, equipment, fixtures, payment intangibles, general intangibles
(including tax refunds and intellectual property), software, instruments,
letters of credit, letter or credit rights, money, documents, deposit accounts,
commercial tort claims (including all of Debtor's rights and claims arising
under, in connection with or related to the lawsuit styled IOM HOLDINGS, INC.
AND I/OMAGIC CORPORATION V. LAWRENCE W. HOROWITZ, GREGORY B. BEAM, LAWRENCE M.
CRON, HORWITZ & CRON, KEVIN J. SENN, SENN PALUMBO MEULMANS LLP ET AL, Case
Number 03CC07383, Orange County California Superior Court, and the claims on
which such lawsuit is based, and the matter of arbitration styled, IOM HOLDINGS,
INC. V. DEVELOPMENT SPECIALISTS, INC., REF. NUMBER 73 Y 181 00168 04 LOPE,
AMERICAN ARBITRATION ASSOCIATION, and the claims on which the arbitration matter
is based), investment property, commodity contracts, commodity accounts, timber
to be cut, oil, gas and other minerals prior to extraction, as-extracted
collateral vehicles, and supporting obligations, and all additions and
accessions to, all spare and repair parts, special tools, dies, equipment and
replacements for, all returned or repossessed goods, the sale of which gave rise
to, and all proceeds (including proceeds of insurance and condemnation awards)
and products of the foregoing, wherever located, whether now existing or
hereafter acquired.

         (c) For purposes of this Agreement, the term "OBLIGATIONS" means (i)
all amounts now or in the future owing by Debtor to Secured Party, however and
whenever arising, including, without limitation, under the Guaranty of even
date, pursuant to which Debtor guaranteed all of Borrowers' obligations to
Secured Party (the "GUARANTY"), (ii) all of Debtor's obligations under this
Agreement and (iii) reasonable attorneys' fees and costs incurred by Secured
Party in enforcing its rights under this Agreement or as called for by any other
agreement or instrument to which Secured Party and Debtor are parties.

                             2. DEBTOR'S WARRANTIES
                                -------------------

         Debtor warrants that while any of the Obligations are unpaid:

<PAGE>

         (a) OWNERSHIP. Debtor is the owner of the Collateral free of all
encumbrances and security interests other than security interests of record as
of the date hereof and Secured Party's security interests, free from all other
encumbrances and security interests.

         (b) AUTHORITY TO CONTRACT. The execution and delivery of this Agreement
and any instruments evidencing the Obligations will not violate or constitute a
breach of Debtor's Articles of Incorporation, Code of Regulations or any
agreement or restriction to which Debtor is a party or is subject, which has not
been waived.

         (c) STATE OF FORMATION; NAME. The Debtor is a corporation organized
under the laws of the State of Nevada. The Debtor's name as it appears in this
agreement is identical to the name of the Debtor appearing in the Debtor's
organizational documents, as amended.

         (d) ADDRESSES. The address of Debtor's place of business, or if Debtor
has more than one place of business, then the address of Debtor's chief
executive office, is as set forth below. Such location shall not be changed
without the prior written consent of Secured Party, but the Collateral, wherever
located, is covered by this Agreement.

         (e) CHANGE OF NAME OR ADDRESS. Debtor shall immediately advise Secured
Party in writing of any change in its name or address.

         (f) TAYPAYER I.D. NO. AND ORGANIZATION NO.. Debtor's taxpayer
identification number and state organization number, if any, shown below are
correct.

         (g) SALES OR TRANSFERS OF COLLATERAL. Debtor shall not sell or transfer
any of the Collateral except in the ordinary course of Debtor's business.

         (h) BENEFIT. Debtor and Borrowers are part of a integrated business
operation and Debtor will benefit in a direct and substantial way from loans and
financial accommodations being made by Secured Party to Borrowers.

                              3. DEBTOR'S COVENANTS
                              ---------------------

         Debtor covenants and agrees:

         (a) MAINTENANCE OF COLLATERAL. Debtor shall: maintain the Collateral in
good condition and repair and not permit its value to be impaired, ordinary wear
and tear excepted, keep it free from all liens, encumbrances and security
interests (other than the security interests noted above); defend it against all
claims and legal proceedings by persons other than secured creditors of record
as of the date of this Agreement; pay and discharge when due all taxes, license
fees, levies and other charges upon it; not sell, lease or otherwise dispose of
it or permit it to become a fixture or an accession to other goods, except for
sales as provided in paragraph 2(g) of this Agreement, not permit it to be used
in violation of any applicable law, regulation or policy of insurance; and, as
to Collateral consisting of instruments and chattel paper, preserve rights in it
against prior parties. Loss of or damage to the Collateral shall not release
Debtor from any of the Obligations.

                                      -2-
<PAGE>

         (b) INSURANCE ON COLLATERAL. At its own expense, Debtor will maintain
comprehensive casualty insurance on all tangible Collateral against such risks,
in such amounts, with such deductibles and with such companies as may be
satisfactory to Secured Party, and provide Secured Party with proof of insurance
acceptable to Secured Party. Each insurance policy shall contain a lender's loss
payable endorsement satisfactory to Secured Party and a prohibition against
cancellation or amendment of the policy or removal of Secured Party as loss
payee without at least 30 days prior written notice to Secured Party.

         (c) MAINTENANCE OF SECURITY INTEREST. Debtor shall pay all expenses,
and, upon request, take any action reasonably deemed advisable by Secured Party
to preserve the Collateral or to establish, determine priority of, perfect,
continue perfection, terminate and/or enforce Secured Party's interest in it or
rights under this Agreement, including, but not limited to, executing financing
statements. Debtor authorizes Secured Party to prepare and file financing
statements to perfect Secured Party's security interest in the Collateral.

         (d) INSPECTION OF COLLATERAL. At reasonable times and with prior
notice, Secured Party may examine the Collateral and Debtor's records pertaining
to it, wherever located, and make copies of records. Debtor shall assist Secured
Party in so doing.

         (e) INFORMATION. Upon request, Debtor shall provide Secured Party with
such financial information as Secured Party may request.

                           4. RIGHTS OF SECURED PARTY
                              -----------------------

         (a) AUTHORITY TO PERFORM FOR DEBTOR. Upon the occurrence of an event of
default by Borrower under any agreements with Secured Party or if Debtor fails
to perform any of Debtor's duties set forth in this Agreement or in the
Guaranty, Secured Party is authorized, in Debtor's name or otherwise, to take
any such action permitted by applicable law, including, without limitation,
paying any amount so required, and the cost shall be part of the Obligations
secured by this Agreement and shall be payable by Debtor upon demand.

         (b) SETOFF/RECOUPMENT. As further security for the Obligations, Debtor
grants Secured Party a security interest and lien in any credit balance or
accounts payable and other money now or hereafter owing Debtor by Secured Party
or any assignee or affiliate of Secured Party. Further, Debtor agrees that
Secured Party may, without prior notice or demand, setoff against and recoup the
Obligations from any such credit balance or accounts payable balance or other
money in the possession of Secured Party or any assignee or affiliate of Secured
Party, regardless of whether or not such amounts are then due.

         (c) NON-LIABILITY OF SECURED PARTY. Secured Party has no duty to
protect, insure, collect or realize upon the Collateral or preserve rights in it
against prior parties.

                                      -3-
<PAGE>

                              5. EVENTS OF DEFAULT
                                 -----------------

          All of the Obligations shall, at the option of Secured Party and
without any notice or demand, become immediately payable upon the occurrence of
any one or more of the following ("EVENTS OF DEFAULT"):

         (a) NONPERFORMANCE. Subject to any applicable cure periods, if Debtor
fails to pay when due any of the Obligations or to perform, or rectify breach
of, any warranty or other undertaking by Debtor in this Agreement, the Guaranty
or in any evidence of the Obligations;

         (b) INABILITY TO PERFORM. If (i) Debtor ceases to exist, or (ii) Debtor
becomes insolvent (unable to pay its debts as they come due or has liabilities
in excess of its assets) or the subject of bankruptcy or insolvency proceedings,
or any proceedings for the reorganization or rehabilitation of Debtor which are
not dismissed or stayed pending an appeal within 30 days; or

         (c) DEFAULT BY BORROWERS. Subject to any applicable cure periods, if an
event of default occurs under any agreements between Secured Party and
Borrowers.

                                   6. REMEDIES
                                      --------

         Upon the occurrence of an Event of Default, Secured Party shall have
all rights and remedies for default provided by the Uniform Commercial Code as
adopted in Michigan, as well as any other applicable law and any evidence of or
document or agreement relating to the Obligations. With respect to such rights
and remedies:

         (a) REPOSSESSION. Secured Party may, without notice or hearing, which
Debtor waives, take immediate possession of Collateral.

         (b) ASSEMBLING COLLATERAL. Secured Party may require Debtor to assemble
the Collateral and to make it available to Secured Party at any convenient place
designated by Secured Party.

         (c) NOTICE OF DISPOSITION. Written notice, when required by law, sent
to any address of Debtor, shown as provided for in this Agreement, at least
twenty-one (21) business days (counting the day of sending) before the date of a
proposed disposition of the Collateral is reasonable notice.

         (d) EXPENSES AND APPLICATION OF PROCEEDS. Debtor shall reimburse
Secured Party for any expense incurred by Secured Party in protecting or
enforcing its rights under this Agreement, including, without limitation,
reasonable attorneys' fees and court costs, and all expenses of taking
possession, holding, preparing for disposition and disposing of the Collateral;
provided, however, in any litigation or similar proceeding, Debtor shall not be
required to reimburse Secured Party for legal fees and costs incurred in such
litigation or proceeding unless Lender substantially prevails. After deduction
of such expenses, Secured Party may apply the proceeds of disposition to the
Obligations in such order and amounts as it elects.

                                      -4-
<PAGE>

         (e) WAIVER. Secured Party may permit Debtor to remedy any default
without waiving the default so remedied, and Secured Party may waive any default
without waiving any other subsequent or prior default by Debtor.

                                7. PERSONS BOUND
                                   -------------

         This Agreement benefits Secured Party, its successors and assigns, and
binds the Debtor and its successors and assigns.

                                8. INTERPRETATION
                                   --------------

         Except to the extent that perfection of Secured Party's security
interest may be governed by the laws of another state, the validity,
construction and enforcement of this Agreement shall be determined and governed
by the internal laws of Michigan. All terms not otherwise defined have the
meanings assigned to them by the Michigan Uniform Commercial Code. Invalidity of
any provision of this Agreement shall not affect the validity of any other
provision.

                              9. COURT PROCEEDINGS
                                 -----------------

         UNLESS OTHERWISE SPECIFICALLY STATED TO THE CONTRARY HEREIN OR IN ANY
INSTRUMENT OR AGREEMENT EVIDENCING THE OBLIGATIONS, DEBTOR ACKNOWLEDGES THAT ALL
OBLIGATIONS HAVE BEEN OR WILL BE INCURRED FOR A BUSINESS PURPOSE, AND THAT
SECURED PARTY WILL SUFFER IRREPARABLE HARM AND INJURY IF DISPUTES UNDER THIS
AGREEMENT MUST BE SUBJECT OF A HEARING AFTER SECURED PARTY DEMANDS IMMEDIATE
POSSESSION OF THE COLLATERAL. AFTER HAVING CONSULTED WITH COUNSEL OF ITS CHOICE
(OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH SUCH COUNSEL) AS TO THE EFFECT OF
THIS PROVISION, DEBTOR KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ALL
CONSTITUTIONAL, STATUTORY AND OTHER RIGHTS FOR A HEARING BEFORE SECURED PARTY
MAY TAKE POSSESSION OF THE COLLATERAL, ALL RIGHTS GRANTED UNDER THE STATUTES OR
COURT RULES REGARDING REPLEVIN.

                                    10. VENUE
                                        -----

         THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION AND
ENFORCEMENT AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
MICHIGAN WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. DEBTOR AGREES THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE
LITIGATED ONLY IN THE FEDERAL COURTS LOCATED IN DETROIT, MICHIGAN, STATE COURTS
IN OAKLAND COUNTY, MICHIGAN OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY
OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. DEBTOR WAIVES, TO
THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE RIGHT TO A TRIAL BY JURY AND ANY
RIGHT DEBTOR MAY HAVE TO ASSERT THE DOCTRINE OF "FORUM NON CONVENIENS" OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 10.

                                      -5-
<PAGE>

                              11. JURY TRIAL WAIVER
                                  -----------------

         DEBTOR ON THE ONE HAND, AND SECURED PARTY ON THE OTHER HAND,
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT
MAY BE WAIVED. SECURED PARTY AND DEBTOR, AFTER CONSULTING WITH COUNSEL OF THEIR
CHOICE, EACH HEREBY KNOWINGLY AND VOLUNTARILY, WITHOUT COERCION, WAIVE ALL
RIGHTS TO TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM. NEITHER DEBTOR NOR SECURED
PARTY SHALL BE DEEMED TO HAVE GIVEN UP THIS WAIVER OF JURY TRIAL UNLESS SUCH
RELINQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO CHARGED.

                                                "DEBTOR"

                                                IOM HOLDINGS, INC.

                                                By:/S/ Tony Shahbaz
                                                   ----------------

                                                      Title: President/CEO
                                                             -------------

                                                Addresses for notice purposes:

                                                4 Marconi
                                                Irvine, CA 92618

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                      -6-
<PAGE>

[SIGNATURES CONTINUED FROM PRIOR PAGE]

ACCEPTED ON THE DATE WRITTEN ABOVE:

"SECURED PARTY"

GMAC COMMERCIAL FINANCE  LLC

By: /S/ Kathryn Williams
    --------------------
         Its:________________________

                                      -7-INTELLECTUAL PROPERTY SECURITY
                       AGREEMENT AND COLLATERAL ASSIGNMENT
                       -----------------------------------

         GMAC COMMERCIAL FINANCE LLC, 3000 Town Center, Suite 280, Southfield,
Michigan 48075 ("LENDER") and I/OMagic Corporation, a Nevada corporation, with a
principal place of business at 4 Marconi, Irvine, California 92618 ("BORROWER")
enter into this Agreement on March 9, 2005.

         Borrower has entered into a Loan and Security Agreement (the "LOAN
AGREEMENT") with Lender under which Lender has agreed to make certain loans
available to Borrower. The Lender is willing to make such loans under the Loan
Agreement upon the condition, among others, that Borrower execute and deliver
this Agreement.

         In consideration of the above and of the mutual covenants in this
Agreement and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:

         1. INCORPORATION OF LOAN AGREEMENT. The Loan Agreement (and all
agreements referred to or incorporated in the Agreement) is incorporated by this
reference. All capitalized terms not otherwise defined in this Agreement, shall
have the meanings specified in the Loan Agreement.

         2. COLLATERAL ASSIGNMENT OF TRADEMARKS, COPYRIGHTS AND PATENTS. To
secure the prompt payment and performance of all of Borrower's present and
future indebtedness and Obligations to Lender (collectively, the "DEBT")
Borrower hereby grants to Lender a continuing security interest in, and, to the
extent provided in SECTION 4 hereof, shall assign, transfer and convey, to the
Lender all right, title and interest, in the United States and throughout the
world, in, to and under the following (all of which are collectively called the
"COLLATERAL") whether now existing or hereafter created or acquired:

                  (a) all United States and foreign trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, trademark registrations and applications for
registration, now owned or hereafter acquired by Borrower (including, without
limitation, those listed on SCHEDULE 1 attached hereto and made a part hereof)
and all licenses thereof, together with the goodwill of the business connected
with the use of, and symbolized by, the foregoing, and (i) the registration
renewals thereof, (ii) all Borrower's rights to income, royalties, damages and
payments now and hereafter due or payable under and with respect thereto
including, without limitation, payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
thereof, and (iii) all rights corresponding thereto throughout the world, (all
of the foregoing sometimes hereinafter individually or collectively referred to
as the "TRADEMARKS");

                                       1
<PAGE>

                  (b) all United States and foreign copyrights, registered or
unregistered, in to all copyrightable works including all registrations and
applications therefor and all licenses thereof and (i) any renewals or
extensions of the registrations therefor that may be secured under the laws now
or hereafter in effect in the United States or any other country or countries,
(ii) all Borrower's rights to income, royalties, damages and payments now and
hereafter due or payable under and with respect thereto, including, without
limitation, payments under all licenses entered into in connection therewith and
damages and payments for past or future infringements thereof, and (iii) all
rights corresponding thereto throughout the world (sometimes individually or
collectively referred to as the "COPYRIGHTS");

                  (c) all United States and foreign patents and patent
applications, now owned or hereafter acquired by Borrower, including, without
limitation, the inventions and improvements described and claimed therein, and
those patents and patent applications listed on SCHEDULE 1 attached hereto and
made a part hereof, all licenses thereof and (i) the reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof, (ii) all
Borrower's rights to income, royalties, damages and payments now and hereafter
due or payable under and with respect thereto, including, without limitation,
payments under all licenses entered into in connection therewith and damages and
payments for past or future infringements thereof, and (iii) all rights
corresponding thereto throughout the world (all of the foregoing being sometimes
hereinafter individually or collectively referred to as the "PATENTS"); and

                  (d) all other intellectual property rights, now owned or
hereafter acquired by Borrower, including, without limitation, the intellectual
property listed on SCHEDULE 1, including, without limitation, trade secrets,
know-how and confidential business information, computer software, computer
programs, source code, data and documentation (including electronic media) and
licenses thereof, and (i) all Borrower's rights to income, royalties, damages
and payments now and hereafter due or payable under and with respect thereto,
including, without limitation, payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
thereof, and (ii) all rights corresponding thereto throughout the world
(collectively referred to as "INTELLECTUAL PROPERTY RIGHTS").

         3. CONTINUING LIABILITY. Borrower expressly agrees that,
notwithstanding anything to the contrary in this Agreement, it shall remain
liable under each license, interest and obligation assigned to the Lender under
this Agreement to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant to
the terms and provisions applicable to Borrower and shall retain the right to
sue and recover for past, present and future infringements thereof. The Lender
shall have no obligation or liability under any such license, interest or
obligation by reason of or arising out of this Agreement or the assignment
thereof to the Lender or the receipt by the Lender of any payment relating to
any such license, interest or obligation pursuant hereto, nor shall the Lender
be required or obligated in any manner to perform or fulfill any of the
obligations of Borrower thereunder or pursuant thereto, or to make any payment,
or to make any inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any party under any such
license, interest or obligation, or to present or file any claim, or to take any
action to collect or enforce any performance of the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.

                                       2
<PAGE>

         4. EFFECT OF COLLATERAL ASSIGNMENT AND REMEDIES. Borrower agrees that
upon the occurrence of an Event of Default (after any applicable grace or cure
periods) under the Loan Agreement, the Lender, without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Borrower or any
other person (all and each of which demands, advertisements or notices are
hereby expressly waived), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, or may forthwith sell, lease,
assign, give option or options to purchase, or sell or otherwise dispose of and
deliver said Collateral (or contract to do so), or any part thereof, in one or
more public or private sale or sales, at any exchange, broker's board or at any
of the Lender's offices or elsewhere at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk,
and the Lender shall apply the net proceeds (after expenses) of any such sale,
lease, assignment or other disposition against the Obligations in such order as
the Lender in its sole discretion shall determine, Borrower remaining liable for
any deficiency therein. The Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity or redemption in Borrower, which right or equity is hereby
expressly waived and released. To the extent permitted by applicable law,
Borrower waives all the claims, damages and demand against the Lender arising
out of the repossession, retention or sale of the Collateral. Borrower agrees
that the Lender need not give more than 10 days' notice of the time and place of
any public sale or of the time after which a private sale may take place and
that such notice is reasonable notification of such matter.

         5. REFILING. If, before the Debt is paid in full, Borrower obtains any
rights in or to any new or additional Intellectual Property Rights, the
provisions of this Agreement shall apply thereto and Lender is hereby authorized
to amend Schedule 1 and re-file this Agreement as appropriate.

         6. POWER OF ATTORNEY. Borrower hereby authorizes the Lender to make,
constitute and appoint any officer or agent of the Lender as the Lender may
select, in the Lender's sole discretion, as Borrower's true and lawful
attorney-in-fact, with power (I) to endorse Borrower's name on all applications,
documents, papers and instruments necessary or desirable for the Lender in the
perfection of a security interest in the Collateral, (ii) from and after the
occurrence of any Event of Default (after any applicable grace or cure periods)
in accordance with this Agreement and applicable law, to assign, pledge, convey
or otherwise transfer title in or dispose of the Collateral to anyone. Borrower
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue of this Assignment. This power of attorney shall be irrevocable until all
of the Debt has been paid in full and all of the financing arrangements between
Borrower and the Lender have been terminated and Lender has no further
obligation to make loans to Borrower.

                                       3
<PAGE>

         7. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. Borrower agrees that, in
addition to all other rights and remedies granted to Lender in this Agreement,
the Loan Agreement and any other collateral security document, Lender shall be
entitled to specific performance and injunctive and other equitable relief, and
Borrower further agrees to waive any requirement for the securing or posting of
any bond or other security in connection with the obtaining of any such specific
performance and injunctive or other equitable relief.

         8. GRANT OF LICENSE TO USE INTANGIBLES. In addition to and for the
purpose of enabling the Lender to exercise rights and remedies under SECTIONS 4
and 5 hereof, Borrower shall permit Lender reasonable access to all media in
which any of the Collateral may be recorded or stored and to all computer
programs used for the compilation or printout thereof. In addition, upon an
Event of Default (after any applicable grace or cure periods), Lender, and its
assigns, shall have a non-exclusive license throughout the world in all
Trademarks, Patents, Copyrights, and Intellectual Property Rights for the
manufacture, sale and distribution of inventory or other goods of Borrower and
for the sale and use of any assets of Borrower in which Lender has a security
interest (whether now or in the future), unless Borrower is contractually or
legally prohibited from granting such license to Lender.

         9. REPRESENTATION AND WARRANTIES. Borrower represents and warrants that
Schedule 1 contains a complete and correct list of all the trademark
registrations and trademark applications, copyright registrations and copyright
applications and patents and patent applications, respectively, if any, (i)
owned by the Borrower or (ii) licensed to or by Borrower. Borrower additionally
represents and warrants to the best of its knowledge that except as set forth in
SCHEDULE 1, there is no currently pending patent application on which any agent
or employee of Borrower is listed as an inventor. Except as set forth in
SCHEDULE 1, Borrower owns free and clear of all liens all right, title and
interest in, or has full right and authority to use, all Collateral necessary or
desirable for the conduct of their businesses as currently conducted, as
previously conducted or as currently proposed to be conducted. Except as set
forth in SCHEDULE 1, no claim by any other person or entity ("PERSON")
contesting the validity or ownership of any Collateral has been made, is
currently outstanding or is threatened and neither Borrower nor any executive
thereof has received any notice of, or is aware of any fact which would indicate
a likelihood of, any infringement or misappropriation upon, or conflict with,
any other Person's intellectual property. Except as set forth in the SCHEDULE 1,
none of the Collateral infringes or misappropriates upon, or conflicts with, any
intellectual property of any Person, and no infringement, misappropriation or
conflict will occur as a result of the continued operation of the businesses as

                                       4
<PAGE>

now conducted as currently proposed to be conducted. The transactions
contemplated by this Agreement will have no adverse effect on any of Borrower's
rights in and to the Collateral. Borrower further agrees that it will at its
expense, at the Lender's request, defend the Lender's and Borrower's respective
interests in the Collateral from any and all claims and demands of any other
person and that it will not grant, create or permit to exist any lien upon or
security interest in the Collateral in favor of any other person except liens
permitted by the Loan Agreement; provided, however, that prior to the occurrence
of an Event of Default and until the expiration of any applicable grace or cure
period, nothing contained in this Agreement shall affect Borrower's right to
grant non-exclusive licenses to third parties to use any portion of the
Collateral.

         10. RESTRICTIONS ON FUTURE AGREEMENTS. Borrower agrees that until all
of the Obligations have been satisfied in full and the Loan Agreement has been
terminated and Lender has no further obligation to make loans to Borrower, it
will not, without Lender's prior written consent, enter into any agreement,
including, without limitation, any license agreement, which is materially
inconsistent with Borrower's obligations under this Agreement and Borrower
further agrees that it will not take any action or permit any action to be taken
by others subject to its control, including licensees, or fail to take any
action, which would materially affect the validity or enforcement of any of the
rights transferred to Lender under this Agreement.

         11. COVENANTS REGARDING COLLATERAL.

                  (a) Except as to Collateral which Borrower in its judgment
determines to be in its best interests to abandon or not to enforce or protect,
Borrower (either itself or through licensees) shall (i) continue to use each
Trademark on each and every trademark class of goods applicable to its current
line as reflected in its current catalogs, brochures and price lists in order to
maintain each Trademark in full force free from any claim of abandonment for
non-use, (ii) employ each Trademark, Copyright and Patent with the appropriate
notice of application or registration on applicable products or services, (iii)
not (and not permit any licensee or sublicensee thereof to) do any act or
knowingly omit to do any act whereby any Patent may become invalidated or
unenforceable, any Trademark right may become abandoned or unenforceable, any
Copyright right may become unenforceable, or any Intellectual Property Right may
become unenforceable, (iv) prosecute diligently any trademark application,
copyright application or any patent application which is pending as of the date
of this Agreement or thereafter, until the Obligations shall have been paid in
full, and (v) preserve and maintain all rights in and to the Collateral.

                  (b) Except as set forth in SCHEDULE 1, Borrower shall notify
the Lender reasonably promptly if it knows, or has reason to know, that any
application or registration relating to any of the Collateral may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and Trademark Office,
the United States Copyright Office or any court) regarding Borrower's ownership
of any of the Collateral, its right to register the same, or to keep and
maintain the same, except for such abandonment, determination or dedication
which is permitted under subparagraph (a) above.

                  (c) Borrower (either itself or through licensees) will take
all necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office or
any similar office or agency in any other country or any political subdivision
thereof, to maintain and pursue each application (and to obtain the relevant

                                       5
<PAGE>

registration) and to maintain each registration of the Collateral, including,
without limitation, filing of applications for renewal, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings (except to the extent that dedication, abandonment or invalidation
is permitted under subparagraphs (a) and (b) above) or as set forth in SCHEDULE
1.

                  (d) In the event that any of the Collateral is infringed,
misappropriated or diluted by a third party, Borrower shall provide reasonably
prompt notice to Lender and take such action as Borrower shall reasonably deem
appropriate under the circumstances, which may include suit for infringement,
misappropriation or dilution and to recover any and all damages for such
infringement, misappropriation or dilution to protect such Collateral.

                  (e) At its option, Lender may discharge taxes, liens or
security interests or other encumbrances at any time levied or placed on the
Collateral, may place and pay for insurance on the Collateral upon failure by
Borrower to provide insurance satisfactory to the Lender. Borrower agrees to
reimburse Lender on demand for any payment reasonably made in any expense
incurred by Lender pursuant to the foregoing authorization. Subject to Lender's
rights under the License Agreement, until an Event of Default occurs and after
expiration of any applicable grace or cure period and an acceleration of the
loans, Borrower may have possession of the Collateral and use it in any lawful
manner not inconsistent with this Agreement.

         12. NOTICE. All notices or other communications hereunder shall be
given in the manner and to the addresses determined under the Loan Agreement.

         13. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall not invalidate the remaining
provisions hereof, any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

         14. NO WAIVER; CUMULATIVE REMEDIES. The Lender shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Lender, and then only to the extent therein set forth. A waiver by the
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Lender would otherwise have
had on any future occasion. No failure to exercise nor any delay in exercising
on the part of the Lender any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other right, power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law or in the License Agreement or any other agreements between the
parties.

                                       6
<PAGE>

         15. WAIVERS; AMENDMENTS. None of the terms and provisions of this
Agreement may be waived, altered, modified or amended except by an instrument in
writing executed by the parties hereto.

         16. LIMITATIONS BY LAW. All rights, remedies and powers provided in
this Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law which may be controlling and
are limited to the extent necessary so that they will not render this Agreement
invalid, unenforceable in whole or in part or not entitled to be recorded,
registered or filed under the provisions of any applicable law.

         17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and nothing herein or in the Loan Agreement or any other collateral
security document is intended or shall be construed to give any other person any
right, remedy or claim under, to or in respect of this Agreement, the Loan
Agreements or any other collateral security document. This Agreement may be
signed in separate counterparts.

         18. TERMINATION AND REASSIGNMENT. The Lender agrees that upon the
termination or expiration of the Loan Agreement and termination of any
obligations of Lender to make loans to Borrower and the payment and performance
in full of all the Obligations, the Lender will promptly execute documents
releasing the security interests created hereby and to reassign Lender's
interest in the collateral to Borrower, without warranty, representation or
guaranty of any nature or kind.

         19. APPLICABLE LAW. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the internal laws (and not the
laws of conflict) of the State of Michigan.

         20. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the parties relating to the subject matter of this Agreement,
and may only be amended or modified in writing signed by all parties.

         21. WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN
ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATED
INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER OR AL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. NEITHER THE LENDER NOR THE BORROWER
SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR

                                       7
<PAGE>

RELINQUISHED BY EITHER THE LENDER OR THE BORROWER EXCEPT BY A WRITTEN INSTRUMENT
EXECUTED BY BOTH OF THEM.

                                            I/OMAGIC CORPORATION, a Nevada
                                            corporation

                                            By:/S/ Tony Shahbaz
                                               ----------------

                                                Name: Tony Shahbaz

                                                   Title: President/CEO
                                                          -------------

                                            GMAC COMMERCIAL FINANCE LLC

                                            By:/S/ Kathryn Williams
                                               --------------------

                                                Name: Kathryn Williams
                                                      ----------------

                                                   Title: Sr. Vice President
                                                          ------------------

Schedule 1:  List of Patents, Copyrights and Trademarks

                                       8
<PAGE>

                                   SCHEDULE 1

         TRADEMARKS
         ----------

         TRADEMARK                  REGISTRATION NUMBER
         ---------                  -------------------
         I/O MAGIC,                  2,623,403

         COPYRIGHTS
         ----------

         None.

         PATENTS
         -------

         None.

<TABLE>
<CAPTION>

                  OTHER INTELLECTUAL PROPERTY RIGHTS (LICENSES)
                  ---------------------------------------------

TRADEMARK                          REGISTRATION NUMBER         OWNER
---------                          -------------------         -----
<S>                                <C>                         <C>
DIGITAL RESEARCH TECHNOLOGIES      2254252                     IOM Holdings, Inc.
                                                               (licensed for use by
                                                               I/OMagic Corporation)

DIGITAL RESEARCH TECHNOLOGIES      2257795                     IOM Holdings, Inc.
and Design                                                     (licensed for use by
                                                               I/OMagic Corporation)

HI-VAL                             2119204                     IOM Holdings, Inc.
                                                               (licensed for use by
                                                               I/OMagic Corporation)

</TABLE>

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