RIDER TO BUSINESS LOAN AGREEMENT
(UNCOLLECTED FUNDS AGREEMENT)
This Rider to Business Loan Agreement ("Rider") is attached to and made a
part of that certain Business Loan Agreement ("Agreement") executed by I/OMAGIC
CORPORATION ("Borrower") in favor of Chinatrust Bank (U.S.A.) ("Lender") in
connection with certain credit facilities granted by Lender to Borrower in the
principal sum of $9,000,00.00 evidenced, in part, by a Change In Terms Agreement
dated 12-31-2002 executed by Borrower in favor of Lender in the principal sum of
$9,000,000.00 ("Note"). Borrower has requested Lender to provide Uncollected
Funds utilization credit to Borrower for certain deposits made by Borrower in
its deposit account(s) with Lender. Lender is willing to provide such
Uncollected Funds utilization credit subject to the terms and conditions
hereinafter set forth. Capitalized terms not defined herein shall have the
meaning ascribed to it in the Agreement. In consideration for the credit
facilities extended by Lender to or at the request of Borrower, Borrower agrees
as follows:
1. Additional Definitions. 1n addition to any other term defined in the
Agreement, the following words shall have the following meanings when used in
this Rider.
a. "Account Agreement" shall mean the Account Agreement and Disclosure of
Lender, Business Checking-Analyzed Schedule, Signature Card, and other documents
as may be amended, substituted or replaced from time to time, with respect to
any deposit account Borrower has with Lender.
b. "Advance" or "Advances" shall mean any advances or disbursement of loan
proceeds by Lender pursuant to the Agreement and this Rider.
c. "Advance Rate" shall mean the variable rate of interest per annum based
on a 365/360 day year equal to 0.75% over Wall Street Journal prime rate. Under
no circumstances will the interest rate be less than 5.50% per annum.
d. "Overdraft Protection Facility" shall mean the credit availability under
which the Borrower can request cash Advances to cover any accounts with Lender
which are overdrawn.
e. "Uncollected Funds" shall mean any and all items, including, but not
limited to, checks, drafts, and other items and instruments deposited by
Borrower, payable by a third party to Borrower, in Borrower's deposit account #
22606270 maintained with Lender which items have not yet been paid by the payer
of said items as a result of the Bank having to put a hold on the funds pursuant
to the Account Agreement, any Banking Regulation or because of the time
necessary for an item to be paid by the payer when submitted through normal
banking channels. The term "Uncollected Funds" does not include those checks,
drafts and other items and instruments drawn on or payable by Lender or
presented for direct collection by Lender or transferred through an electronic
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funds transfer system or through an automated clearing house, or any other funds
which Lender determines, in its sole discretion and judgment, to exclude for
purposes of making an Uncollected Funds Advance.
f. "Uncollected Funds Obligations" shall mean any and all obligations owing
from Borrower to Lender, from time to time, arising from any and all Uncollected
Funds Advances.
g. "Uncollected Funds Line of Credit" shall mean the Line of Credit granted
to Borrower pursuant to this Rider for the purpose of covering all items
deposited into Borrower's deposit accounts with Lender which are Uncollected
Funds.
h. "Uncollected Funds Limit" shall mean Advances made on Uncollected Funds
not to exceed the sum of $1,000,000.00.
i. "Uncollected Funds Line of Credit Rate" shall mean the variable rate of
interest per annum equal to 5% over Wall Street Journal prime rate based on a
365/365day year.
2. Uncollected Funds Facility. (If no Overdraft Protection Facility is
granted)
a. Fees on Uncollected Funds Advances shall accrue on the date such
Advances are made and calculated based on the Uncollected Funds Line of Credit
Rate.
b. The aggregate amount of Uncollected Funds Advances in all of Borrower's
deposit accounts with Lender shall not exceed the Uncollected Funds Limit.
c. Borrower agrees not to permit the outstanding balance of the Uncollected
Funds Obligations to exceed the amount set forth in Paragraph 2b above.
d. Until the Maturity Date (as defined in the Note), unless sooner
terminated as provide in the Agreement, Borrower may use the Uncollected Funds
Line of Credit in accordance with the terms and conditions of this Rider.
e. Lender shall assess a monthly usage fee on Borrower's Uncollected Funds
Line of Credit as set forth in this Rider and the Account Agreement. 1f not
specifically stated in the Account Agreement, the monthly usage fee shall be
calculated on a daily basis by using the Uncollected Funds Line of Credit rate
based on a 365/365 year.
3. Uncollected Funds/Overdraft Protection Facility.
a. The aggregate usage of Uncollected Funds in all of Borrower's deposit
accounts with Lender and the outstanding balance of Advance drawn under
Overdraft Protection Facility shall not exceed $ N/A.
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b. A usage fee on Uncollected Funds Line of Credit shall accrue on the date
such usage is made of the Uncollected Funds and is calculated by using
Uncollected Funds Line of Credit Rate.
c. Interest on outstanding balance of Advances drawn under the Overdraft
Protection Facility shall be calculated daily by using the Advance Rate based on
a 365/360 year.
d. Borrower agrees not to permit the aggregate amount of outstanding
balance of the Uncollected Funds Obligations and outstanding balance of Advances
under the Overdraft Protection Facility to exceed the amount set forth in
Paragraph 3a above.
e. Until the Maturity Date (as defined in the Note), unless sooner
terminated as provided in the Agreement, Borrower may use the Uncollected Funds
Line of Credit and Overdraft Protection Facility in accordance with the terms
and conditions of this Rider.
f. Lender shall assess a monthly usage fee on Borrower's Uncollected Fund
Facility and Overdraft Protection Facility and Borrower shall pay interest
monthly on any Advances made by Lender as set forth in this Rider and the
Account Agreement. If not specifically stated in the Account Agreement, the
usage fee to be paid monthly is the interest due on the Uncollected Funds Line
of Credit.
4. Usage Against Uncollected Funds. Borrower acknowledges and agrees that
any Uncollected Funds Advance is a loan from Lender to Borrower under the
Agreement and constitutes a separate, independent obligation of Borrower to
Lender under the Agreement. Borrower further acknowledges and agrees that the
terms set forth in the Agreement and in this Rider are in addition to any term,
provision and condition in the Account Agreement, including, but not limited to,
any and all fees, costs, interest due on uncollected Funds for which an
Uncollected Funds Advance is not made under the Agreement and fees for returned
items and overdrafts and do not act as a waiver, amendment, substitution or
release of any of Borrower's obligation to Lender under the Account Agreement.
5. Security Interest. Borrower hereby grants, assigns, pledges and
hypothecates to Lender all of Borrower's right, title and interest in and to all
deposit accounts maintained by Borrower with Lender as security for each and all
of the obligations of Borrower to Lender under the Agreement and the Related
Documents.
6. Indemnification. Borrower shall indemnify, defend and hold Lender
harmless from and against any and all claims, demands, liabilities, damages,
costs, expenses of any kind whatsoever, arising out of any advances made by
Lender hereunder or Lender's refusal or failure to make any Advances hereunder.
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7. Terms of the Business Loan Agreements. All terms, conditions and
covenants set forth in the Agreement are incorporated herein by this reference.
In the event of any conflict in the terms, conditions and covenants in the
Agreement and this Rider, the terms of this Rider shall control.
8. Termination of Lender's Obligation to Advance. Lender's obligation to
make any Advances on either the Uncollected Funds Line of Credit and/or the
Overdraft Protection Facility shall cease on the Maturity Date of the Note and
in the event that Borrower (1) fails to make any payment due to Lender pursuant
to the Agreement, the Rider, the Account Agreement, the Related Documents or
with respect to any obligation of any kind with Lender, (2) exceeds the amount
of usage under the Uncollected Funds Line of Credit or Overdraft Protection
Facility, (3) breaches any term, condition or covenant of the Agreement, Rider,
Account Agreement, the Related Documents or any other document evidencing
obligations due to Lender, (4) if Lender in good faith believes that Borrower
will be unable to pay any and all sums due to Lender, (5) if Borrower is in
default of any obligation of any kind or nature to Lender or to any other
person, (6) a Petition pursuant to any Chapter of the Bankruptcy Code or any
other insolvency statute or law is filed by or against Borrower, or (7) if a
Receiver is appointed over Borrower's assets.
9. Failure to Make Payments. In the event that Borrower fails to pay any
sums due pursuant to this Rider, Borrower shall be liable to pay a late charge
for any payment due to Lender in the sum of five percent of payment due or
$5.00, whichever is greater, Additionally, in the event Borrower fails to pay
any sum due pursuant to this Rider, the Advance Rate and/or the Uncollected
Funds Line of Credit Rate shall be increased by an additional 5%.
BORROWER
I/OMAGIC CORPORATION
/s/ TONY SHAHBAZ
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By: Tony Shahbaz, President/Secretary
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