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Dated as of March 9, 2005
GENERAL SECURITY AGREEMENT
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(SECURES A GUARANTY)
1. GRANT OF SECURITY INTEREST
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(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
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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
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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.
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(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 Secur
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