PLEDGE AND SECURITY AGREEMENT
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This Pledge and Security Agreement (the "AGREEMENT") is made as of
March 9, 2005, by I/OMAGIC CORPORATION ("PLEDGOR"), and GMAC Commercial Finance
LLC ("LENDER").
RECITALS
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A. Pledgor is the owner of the following shares of capital stock (the
"STOCK"):
625,000 shares of the stock of IOM Holdings , Inc., a Nevada
corporation ("SUBSIDIARY")
B. Pledgor owns no other stock, shares, options, warrants or rights to
acquire stock or shares of stock in Subsidiary and the shares referenced above
represent 100% of the outstanding capital stock of Subsidiary.
C. Simultaneous with the execution of this Pledge and Security
Agreement, Lender is entering into a Loan and Security Agreement and related
documents (collectively, the "LOAN AGREEMENT") with Pledgor. Capitalized terms
not otherwise defined in this Agreement shall have the meanings given in the
Loan Agreement.
D. Pledgor is executing this Agreement as an inducement to Lender to
grant credit to Pledgor.
THEREFORE, based on the foregoing recitals and for good and valuable
consideration, the receipt and adequacy of which are expressly acknowledged,
Pledgor agrees with Lender as follows:
TERMS AND CONDITIONS
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1. PLEDGOR'S PLEDGE. As security for the payment and performance of the
Obligations, Pledgor hereby pledges and grants to Lender a continuing security
interest in the following (the "COLLATERAL"):
(a) the Stock referenced in Recital A above and all other
types or items of property which may be pledged to Lender in the future and held
as Collateral under this Agreement, and
(b) any Proceeds of the Stock.
For purposes of this Agreement, the term "Proceeds" shall have the meaning
assigned to it under the Michigan Uniform Commercial Code and, in any event,
shall include, but not be limited to, (i) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Pledgor from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to Pledgor from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority, bureau or
agency (or any person acting under color of governmental authority) and (iii)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral, including, without limitation, any and
all interest, cash, instruments, warrants, rights, options and other property
from time to time received, receivable or otherwise distributed in respect or on
account of, or in exchange for, any of the Stock.
2. LENDER'S DUTIES. Subject to Section 9-207 of the Michigan Uniform
Commercial Code ("CODE") to the extent applicable, Lender shall have no duties
with respect to the Collateral beyond reasonable care of the actual certificates
pledged hereunder. Without limiting the generality of the foregoing, Lender
shall be under no obligation to take any steps to preserve rights in the
Collateral against any other parties or to exercise any rights represented
thereby; provided, however, at its option, Lender may do so, and any and all
expenses incurred in connection therewith shall be for the sole account of
Pledgor.
3. PLEDGOR'S REPRESENTATIONS. Pledgor represents, warrants and agrees
that:
(a) Pledgor has the right to pledge and grant a security
interest in or otherwise transfer such Collateral free of any liens or
rights of third parties other than laws affecting the offering and sale
of securities and corporate law generally.
(b) All of the Collateral is and shall remain free from all
liens, claims, encumbrances, and purchase money or other security
interests other than as provided for herein or as permitted by the Loan
Agreement.
(c) This Agreement, together with the delivery of Stock by
Pledgor to Lender pursuant to Section 3(f), creates a valid, perfected,
and first priority security interest in the Stock in favor of Lender
other than Permitted Liens, as defined in the Loan Agreement, and all
actions necessary or desirable to such perfection have been duly taken.
(d) No authorization or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required
either: (i) for the grant by Pledgor of the security interest granted
hereby or for the execution, delivery or performance of this Agreement
by Pledgor, or (ii) for the perfection of, or exercise by Lender of its
rights and remedies hereunder (except as may have been taken by or at
the direction of Pledgor or as may be required in connection with a
disposition of the Stock by laws affecting the offering and sale of
securities and corporate law generally).
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(e) There are no existing agreements with respect to the
Collateral between Pledgor and any other person or entity.
(f) Simultaneous with execution of this Agreement, Pledgor has
delivered to Lender the original certificate(s) for the Stock, together
with executed Assignments Separate From Certificate.
(g) It will not cause Subsidiary to issue any additional or
further shares of capital stock or any rights or options to acquire
shares of capital stock.
4. EVENT OF DEFAULT. It shall be an "Event of Default" under this
Agreement if an Event of Default occurs under the Loan Agreement and any
applicable cure period expires, or (b) Pledgor breaches any terms or conditions
of this Agreement and such breach continues for 10 days after becoming first
known to an executive officer of Pledgor.
5. REMEDIES UPON DEFAULT.
(a) Upon the occurrence and during the continuance of an Event
of Default and after expiration of any applicable grace period, Lender
shall have, in addition to any other rights given by Pledgor hereunder,
all of the rights and remedies of a secured party under the Code,
including, without limitation, the right to vote the Stock and take any
other actions that inure to a holder of the Stock.
(b) In addition, with respect to the Collateral, or any part
thereof, subject to any applicable laws regarding the sale of
securities or corporate law generally, Lender may sell or cause the
same to be sold at any public or private sale, in one or more sales or
lots, at such reasonable price as Lender may deem best, and for cash or
on credit or for future delivery, without assumption of any credit
risk, and the purchaser of any or all of the Collateral so sold shall
thereafter hold the same absolutely free from any claim, encumbrance or
right of any kind whatsoever.
6. RIGHTS PRIOR TO DEFAULT. In the absence of an Event of Default and
expiration of any applicable grace period, Pledgor shall have the right to vote
the Stock.
7. LENDER AS PLEDGOR'S ATTORNEY-IN-FACT. Pledgor hereby irrevocably
appoints Lender as its attorney-in-fact (a) to arrange for the transfer, at any
time after the existence or occurrence and during the continuance of an Event of
Default and the expiration of any applicable grace period, of the Stock or other
Collateral to the name of Lender or to the name of Lender's nominee, and (b)
file any financing statements deemed reasonably necessary by Lender (in its sole
but good faith discretion) to perfect and/or provide notice of Lender's security
interest in the Collateral.
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8. FURTHER ASSURANCES. Pledgor agrees that it will cooperate with
Lender and will execute and deliver, or cause to be executed and delivered, all
such other powers, proxies, instruments, and documents and will take all such
other action as Lender may reasonably request from time to time in order to
carry out the provisions and purposes of this Agreement.
9. INDEMNIFICATION. Pledgor agrees to pay, and to hold Lender harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral other than those
resulting from Lender's gross negligence or willful misconduct.
10. EXPENSES AND ATTORNEYS' FEES. Pledgor shall be responsible for the
payment of all reasonable fees and out-of-pocket disbursements incurred by
Lender in connection with any action taken by Lender to enforce any obligations
of the Pledgor under this Agreement.
11. WAIVER; CUMULATIVE REMEDIES. No delay on the part of Lender in
exercising 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 other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein specified
are cumulative and not exclusive of any rights or remedies which Lender would
otherwise have.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Pledgor and its successors and assigns. Lender, in its sole discretion, may
assign its rights and interests under this Agreement to any other person.
14. SURVIVAL. All agreements, representations and warranties made
herein shall survive the execution of this Agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Michigan.
14. COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if all signatures were upon the same
instrument.
15. PARTIAL INVALIDITY. The unenforceability for any reason of any
provision of this Agreement shall not impair or limit the operation or validity
or any other provisions of this Agreement or any other agreements now or
hereafter existing between Lender and Pledgor or any other person.
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16. IRREPARABLE HARM. Pledgor acknowledges that Lender may incur
irreparable harm if Lender exercises its rights under paragraph 3(d) above and
Pledgor, in any way opposes or interferes with Lender's exercise of its rights
or if there is a delay in Lender's effectuating such rights. Accordingly,
Pledgor waives, to the fullest extent of the law, any right to notice or a
hearing in connection with any proceeding or action taken by Lender to enforce
its rights under paragraph 3(d) above.
17. RETURN OF STOCK. Upon full and final payment of the Obligations,
Lender shall return the Stock to the Pledgor.
18. WAIVER OF JURY TRIAL. PLEDGOR AND LENDER ACKNOWLEDGE THAT THE RIGHT
TO A TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THE RIGHT TO TRIAL BY
JURY MAY BE WAIVED. PLEDGOR AND LENDER EACH KNOWINGLY, VOLUNTARILY, IRREVOCABLY
AND WITHOUT COERCION, WAIVE ALL RIGHTS TO TRIAL BY JURY OF ALL DISPUTES BETWEEN
PLEDGOR AND LENDER. NEITHER PLEDGOR NOR LENDER SHALL BE DEEMED TO HAVE GIVEN UP
THIS WAIVER OF JURY TRIAL UNLESS THE PARTY CLAIMING THAT THIS WAIVER HAS BEEN
RELINQUISHED HAS A WRITTEN INSTRUMENT SIGNED BY THE OTHER PARTY STATING THAT
THIS WAIVER HAS BEEN GIVEN UP.
I/OMAGIC CORPORATION
By: /s/ Tony Shahbaz
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Its: President/CEO
GMAC COMMERCIAL FINANCE LLC
By: /S/ Kathryn Williams
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Its: Sr. Vice President
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