Joint Venture Agreement

JOINT VENTURE AGREEMENT


THIS JOINT VENTURE AGREEMENT (the "Agreement") is dated as of June 10, 1997 (the "Effective Date") among Quantum Magnetics, Inc., a California corporation ("QM"), Biomagnetic Technologies, Inc., a California corporation ("BTI"), and Mark S. DiIorio, Ph.D. ("DiIorio").


WHEREAS QM and BTI have entered into that certain non-binding letter of
intent dated March 27, 1997, a copy of which is attached hereto as Exhibit
1 (the "Letter of Intent"); and


WHEREAS the Letter of Intent contemplates the formation of a new
corporation, referred to herein as Magnesensors, Inc. ("MSI"), and that
DiIorio will serve as President and Chief Executive Officer of MSI pursuant
to an employment contract generally outlined in the Letter of Intent; and


WHEREAS the Letter of Intent contemplates that its terms will be
implemented by various agreements; and


WHEREAS this Agreement is intended by QM, BTI, DiIorio and MSI to serve
as the coordinating agreement for the implementation of the Letter of
Intent, it being understood that after this Agreement is signed, the
terms of this Agreement shall supersede the Letter of Intent in each and
every particular;


NOW THEREFORE the parties signing below agree as follows:


1. ENTIRE AGREEMENT. This Agreement and the Exhibits attached hereto shall
constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and supersede all prior agreements,
understandings, offers and negotiations, including the Letter of Intent.


2. FORMATION OF MAGNESENSORS, INC. The Articles of Incorporation, attached
hereto as Exhibit 2, were executed by Mark S. DiIorio as the sole
incorporator of MSI who caused them to be filed with the California
Secretary of State on June 5, 1997.


3. WRITTEN CONSENT ACTION OF SOLE INCORPORATOR. Immediately upon execution of
this Agreement, DiIorio shall execute the form of Action by Written Consent
of Sole Incorporator attached hereto as Exhibit 3 electing the following
persons to the Board of Directors of MSI: D. Scott Buchanan and Herman
Bergman (designated by BTI), Dale Sheets and Lowell Burnett (designated by
QM), and Mark S. DiIorio.


4. UNANIMOUS WRITTEN CONSENT ACTION OF DIRECTORS. Each of QM, BTI and DiIorio
shall use its or his best efforts to cause the five directors of MSI's
Board of Directors to execute the form of Written Consent Action of
Directors attached hereto as Exhibit 4.


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5. UNANIMOUS WRITTEN CONSENT ACTION OF SHAREHOLDERS. Each of QM, BTI and
DiIorio shall execute the Unanimous Written Consent Action of Shareholders
attached hereto as Exhibit 5.


6. AGREEMENT TO ELECT DIRECTORS DESIGNATED BY QM AND BTI. So long as the
parties to this Agreement own stock of MSI, they shall each use their
respective best efforts to assure the election to the Board of MSI: (a) two
individuals designated by BTI, (b) two individuals designated by QM, and,
(c) so long as he remains the CEO of MSI, pursuant to the Employment
Agreement attached hereto as Exhibit 8, DiIorio.


7. LOAN GUARANTY. Each of QM and BTI hereby agrees to guarantee for three
years one-half of a $200,000 working capital line of credit from Silicon
Valley Bank, or a comparable financial institution acceptable to the Board
of Directors of MSI. The liability of QM and BTI is to be several as to
one-half of the aggregate amount of the line of credit, and not joint and
several. If MSI has not pursued such line of credit and caused to be
presented to each of QM and BTI the requisite documents to guarantee such
line of credit by December 31, 1997, then neither of QM nor BTI shall have
an obligation to guarantee any such line of credit. Each of QM and BTI
hereby agrees to provide such financial statements and other information as
is reasonably required by the financial institution to facilitate the
issuance of such a line of credit to MSI.


8. BYLAWS OF MSI. The bylaws attached hereto as Exhibit 6 shall be the bylaws
of MSI.


9. BUY-SELL AGREEMENT. QM, BTI, DiIorio and MSI shall execute the Buy-Sell
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