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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.
<PAGE>
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,
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