EXHIBIT 10.2
AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT to Loan and Security Agreement (this "Amendment") is
entered into this 12th day of December 2007, by and between Silicon Valley Bank
("Bank") and I/O Magic Corporation, a Nevada corporation and IOM Holdings, Inc.,
a Nevada corporation (jointly and severally, the "Borrower") whose address is 4
Marconi, Irvine, California 92618.
RECITALS
A. Bank and Borrower have entered into that certain Loan and Security
Agreement dated as of January 29, 2007 (as the same may from time to time be
amended, modified, supplemented or restated, the "Loan Agreement").
B. Bank has extended credit to Borrower for the purposes permitted in
the Loan Agreement.
C. Borrower has requested that Bank amend the Loan Agreement, as herein
set forth, and Bank has agreed to the same, but only to the extent, in
accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth herein.
AGREEMENT
Now, THEREFORE, in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, and intending to be legally bound, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Loan Agreement.
2. AMENDMENTS TO LOAN AGREEMENT.
2.1 LIMITED WAIVER REGARDING MINIMUM TANGIBLE NET WORTH
FINANCIAL COVENANT DEFAULT. Borrower has advised Bank that Borrower has failed
to comply with the Minimum Tangible Net Worth Financial Covenant set forth in
Section 6.9(a) of the Loan Agreement for the compliance period ending September
30, 2007 (the "Minimum TNW Covenant Default"). Bank and Borrower agree that the
Borrower's Minimum TNW Covenant Default is hereby waived. It is understood by
the parties hereto, however, that such waiver does not constitute a waiver of
any other provision or term of the Loan Agreement or any related document, nor
an agreement to waive in the future this covenant or any other provision or term
of the Loan Agreement or any related document.
2.2 MODIFIED INTEREST RATE. Section 2.3(a) is amended in its
entirety and replaced with the following:
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(a) INTEREST RATE; ADVANCES. Subject to Section 2.3(b), the
amounts outstanding under the Revolving Line shall accrue
interest at a per annum rate equal to the Prime Rate plus two
and one-half percent (2.50%), which interest shall be payable
monthly in arrears. Notwithstanding the foregoing, after the
Borrower executes a strategic alliance share purchase
agreement ("SASPA"), acceptable to Bank in its good faith
business judgment, and evidence thereof is received by Bank,
then the amounts outstanding under the Revolving Line shall
accrue interest at a per annum rate equal to the Prime Rate
plus two percent (2.00%), which interest shall be payable
monthly in arrears; provided, further, however, that upon
Borrower's receipt of initial funds as provided for under the
SASPA, then the amounts outstanding under the Revolving Line
shill accrue interest at a per annum rate equal to the
Prime Rate plus one percent (1.00%), which interest shall
be payable monthly in arrears.
2.3 MODIFIED AUDITS. The second sentence of Section 6.6 of the
Loan Agreement that currently reads as follows:
The parties contemplate that such audits will be performed no
more frequently than three (3) times per year, but nothing
herein restricts Bank's right to conduct such audits more
frequently if (i) Bank believes that it is advisable to do so
in Bank's good faith business judgment, or (ii) Bank believes
in good faith that a Default or Event of Default has occurred.
is hereby modified to read as follows:
The parties contemplate that such audits will be performed no
more frequently than four (4) times per year, but nothing
herein restricts Bank's right to conduct such audits more
frequently if (1) Bank believes that it is advisable to do so
in Bank's good faith business judgment, or (ii) Bank believes
in good faith that a Default or Event of Default has occurred.
2.4 MODIFIED TANGIBLE NET WORTH FINANCIAL COVENANT. Section
6.9(a) of the Loan Agreement is amended in its entirety and replaced with the
following:
(a) TANGIBLE NET WORTH. A Tangible Net Worth of at least the
following:
For the month ending February 28, 2007 and each month ending
thereafter: $3,500,000 ("MINIMUM TANGIBLE NET WORTH") plus (1)
50% of all consideration received after the date hereof for
equity securities and subordinated debt of the Borrower, plus
(ii) 50% of the Borrower's net income in each fiscal quarter
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ending after the date hereof. Increases in the Minimum
Tangible Net Worth based on consideration received for equity
securities and subordinated debt of the Borrower shall be
effective as of the end of the month in which such
consideration is received, and shall continue effective
thereafter. Increases in the Minimum Tangible Net Worth based
on net income shall be effective on the last day of the fiscal
quarter in which said net income is realized, and shall
continue effective thereafter. In no event shall the Minimum
Tangible Net Worth be decreased.
2.5 SECTION 13 (DEFINITIONS). The following terms and their
respective definitions set forth in SECTION 13.1 are amended in their entirety
and replaced with the following:
"BORROWING BASE" is (a) 60% of Eligible Accounts, plus (b) the
lesser of: (I) 20% of the value of Borrower's Eligible
Inventory (valued at the lower of cost or wholesale fair
market value) or (II) $750,000 (provided that on and after
March 30, 2008, such amount shall be $0.00) or (III) 33% of
the Eligible Accounts, as determined by Bank from Borrower's
most recent Transaction Report; provided, however, that Bank
may decrease the foregoing percentages in its good faith
business judgment based on events, conditions, contingencies,
or risks which, as determined by Bank, may adversely affect
Collateral.
"MAXIMUM DOLLAR AMOUNT" is $7,000,000.
3. LIMITATION OF AMENDMENTS.
3.1 The amendments set forth in SECTION 2, above, are
effective for the purposes set forth herein and shall be limited precisely as
written and shall not be deemed to (a) be a consent to any amendment, waiver or
modification of any other tens or condition of any Loan Document, or (b)
otherwise prejudice any right or remedy which Bank may now have or may have in
the future under or in connection with any Loan Document.
3.2 This Amendment shall be construed in connection with and
as part of the Loan Documents and all terns, conditions, representations,
warranties, covenants and agreements set forth in the Loan Documents, except as
herein amended, are hereby ratified and confirmed and shall remain in full force
and effect.
4. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
Amendment, Borrower hereby represents and warrants to Bank as follows:
4.1 Immediately after giving effect to this Amendment (a) the
representations and warranties contained in the Loan Documents are true,
accurate and complete in all material respects as of the date hereof (except to
the extent such representations and warranties relate to an earlier date, in
which case they are true and correct as of such date), and (b) no Event of
Default has occurred and is continuing;
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4.2 Borrower has the power and authority to execute and
deliver this Amendment and to perform its obligations under the Loan Agreement,
as amended by this Amendment;
4.3 The organizational documents of Borrower delivered to Bank
on the Effective. Date remain true, accurate and complete and have not been
amended, supplemented or restated and are and continue to be in full force and
effect;
4.4 The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its obligations under the Loan Agreement, as
amended by this Amendment, have been duly authorized;
4.5 The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its obligations under the Loan Agreement, as
amended by this Amendment, do not and will not contravene (a) any law or
regulation binding on or affecting Borrower, (b) any contractual restriction
with a Person binding on Borrower, (c) any order, judgment or decree of any
court or other governmental or public body or authority, or subdivision
thereof, binding on Borrower, or (d) the organizational documents of Borrower;
4.6 The execution and delivery by Borrower of this Amendment
and the performance by Borrower of its obligations under the Loan Agreement, as
amended by this Amendment, do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on either Borrower, except as already has been obtained or
made; and
4.7 This Amendment has been duly executed and delivered by
Borrower and is the binding obligation of Borrower, enforceable against Borrower
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
6. EFFECTIVENESS. This Amendment shall be deemed effective upon (a) the
due execution and delivery to Bank of this Amendment by each party hereto and
(b) Borrower's payment of an amendment fee in an amount equal to $20,000.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
BANK BORROWER
Silicon Valley Bank I/O Magic Corporation
By: /s/ Derek R. Brunelle By: /s/ Thomas L. Gruber
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Name: Derek R. Brunelle, Name: Thomas L. Gruber
Title: Vice President Title: CFO
BORROWER
IOM Holdings, Inc.
By: /s/ Tony Shahbaz
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Name: Tony Shahbaz
Title: President
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