EXHIBIT 10.1
OMNIBUS AMENDMENT
     This OMNIBUS AMENDMENT (this “Amendment”), dated as of March 14, 2008, is
entered into by and between SILICON MOUNTAIN HOLDINGS, INC., a Colorado
corporation (the “Parent”), SILICON MOUNTAIN MEMORY, INCORPORATED, a Colorado
corporation (“SMH”), VCI SYSTEMS, INC. a Colorado corporation (“VCI” and
together with Parent and SMH, the “Companies” and, each a “Company”) LAURUS
MASTER FUND, LTD., a Cayman Islands company (“Laurus”), VALENS OFFSHORE SPV I,
LTD., a Cayman Islands company (“Valens Offshore”), VALENS U.S. SPV I, LLC, a
Delaware limited liability company (“Valens U.S.”) and PSOURCE STRUCTURED DEBT
LIMITED, a Guernsey company (“Psource” and together with Laurus, Valens
Offshore, and Valens U.S., the “Holders” and each a “Holder”) for the purpose of
amending certain terms of (i) that certain Secured Revolving Note, dated as of
September 25, 2006 issued by the Company to Laurus in the original principal
amount of Three Million Five Hundred Thousand Dollars ($3,500,000) (as amended,
restated, modified and/or supplemented from time to time, the “Revolving Note”);
(ii) that certain Amended and Restated Secured Convertible Term Note, dated as
of September 25, 2006, and amended and restated as of August 28, 2007, issued by
the Company to Laurus in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000) (as amended and restated, further amended,
restated, modified and/or supplemented from time to time, the “Convertible Term
Note”), a portion of which was subsequently assigned to Valens Offshore and
Valens U.S.; (iii) the Secured Term Note, dated as of September 25, 2006 issued
by the Company to Laurus in the original principal amount of Two Million Five
Hundred Thousand Dollars ($2,500,000) (as amended, restated, modified and/or
supplemented from time to time, the “Term Note” and together with the Revolving
Note and Convertible Term Note, the “Notes”), a portion which was subsequently
assigned to Valens Offshore, Valens U.S. and PSource. Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in each
of the respective Notes and the Security and Purchase Agreement dated
September 25, 2006 by and between the Companies and Laurus, as applicable (as
amended, modified or supplemented from time to time, the “Security Agreement”
and, together with the Ancillary Agreements (including, without limitation, the
Notes), each as may be amended, modified or supplemented from time to time, the
“Documents”).
     WHEREAS, the Company and Holders, as applicable have agreed to make certain
changes to the Notes as set forth herein.
     NOW, THEREFORE, in consideration of the above, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
AMENDMENTS TO THE REVOLVING NOTE
     1. Section 1.1 of the Revolving Note is hereby amended by (a) deleting the
first sentence appearing therein in its entirety and inserting the following new
sentence in lieu thereof:
“(a) Subject to Sections 2.2 and 3.10, interest payable on the outstanding
principal amount of this Note (the “Principal Amount”) shall accrue at a rate
per annum equal to the “prime rate” published in The Wall Street Journal from
time to time (the “Prime

 

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Rate”), plus (i) during the period commencing on the initial issuance date of
this Note through and including March 31, 2008, two percent (2%) and (ii) on and
after April 1, 2008, five percent (5%) (collectively, the “Contract Rate”).”
     ; and (b) inserting the following clauses (b) and (c) immediately following
the last sentence of said Section 1.1 of the Revolving Note:
“(b) Payment of Interest in Common Stock and/or Cash. Subject to the
restrictions set forth in clause (c) of this Section 1.1, the Companies may
elect in respect of the interest payment due on any given scheduled payment date
(each such date, an “Interest Payment Date”) to make such payment in cash or
Common Stock, or a combination of both; provided that, notwithstanding the
foregoing, no more than that portion of the interest payment due on any Interest
Payment Date attributable to three percent (3%) of the then applicable Contract
Rate may be paid by way of issuance by the Parent of its Common Stock (each, a
“Permitted Common Stock Interest Amount”). The Parent shall give irrevocable
written notice to each Holder of its election in respect of the Permitted Common
Stock Interest Amount then due on a given Interest Payment Date (each, an
“Interest Payment Election Notice”), which notice shall be received by each
Holder no later than three (3) business days prior to such Interest Payment Date
(the date of such notice being hereinafter referred to as the “Interest Payment
Notice Date”). If such Interest Payment Election Notice is not delivered within
the prescribed period set-forth in the preceding sentence, then the payment of
the Permitted Common Stock Interest Amount shall be made, together with the
remainder of the interest payment then due, entirely in cash on or prior to the
applicable Interest Payment Date. If the Permitted Common Stock Interest Amount
(or a portion of such Permitted Common Stock Interest Amount if not all of the
Permitted Common Stock Interest Amount) is elected by the Parent pursuant to a
duly delivered Interest Payment Election Notice (subject to the volume
restrictions set forth in clause (c) of Section 1.1 below to be paid in shares
of Common Stock), the number of such shares to be issued by the Parent to each
Holder on such Interest Payment Date shall be the number determined by dividing
(x) all or the portion of the Permitted Common Stock Interest Amount converted
into shares of Common Stock, by (y) the average closing price of the Common
Stock as reported by Bloomberg, L.P. on the Principal Market for ten
(10) trading days immediately prior to the applicable Interest Payment Date.
Common Stock issued in repayment of all or a portion of a Permitted Common Stock
Interest Amount shall be issued and delivered to each Holder on or prior to the
Interest Payment Date on which repayment of such Permitted Common Stock Interest
Amount is due.”
“(c) Conversion Limitation. Notwithstanding anything herein to the contrary, in
no event shall the Companies be entitled to issue Common Stock to any Holder in
respect of the Permitted Common Stock Interest Amount if such issuance would
result in beneficial ownership by the Holder and its Affiliates of any amount
greater than 9.99% of the then outstanding shares of Common Stock (whether or
not, at the time of such conversion, the Holder and its Affiliates beneficially
own more than 9.99% of the then outstanding shares of Common Stock). As used
herein, the term “Affiliate” means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is

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under common control with a person or entity, as such terms are used in and
construed under Rule 144 under the Securities Act. For purposes of the second
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
sentence. For any reason at any time, upon written or oral request of the
Holder, the Parent shall within one (1) business day confirm orally and in
writing to the Holder the number of shares of Common Stock outstanding as of any
given date.”
     2. (a) The Company has requested and Laurus has agreed to exercise its
discretion and to make a Loan to the Company in excess of the Formula Amount in
an aggregate principal amount of $300,000 (the “Overadvance”), the terms which
are outlined in the Overadvance Letter dated as of the date hereof by and among
the Companies and Laurus. The Parent hereby agrees that it shall, on the date
hereof, issue a warrant (the “Additional Warrant”) to Laurus to purchase 105,000
shares of the common stock of the Parent with an exercise price of $0.01 per
share, such Additional Warrant to be in the form and substance acceptable to
Laurus in its sole discretion.
     (b) Laurus and the Parent hereto agree that the fair market value of the
Additional Warrant (as reasonably determined by the parties) received in
consideration of the Overadvance is hereby designated as interest and,
accordingly, shall be treated, on a pro rata basis, as a reduction of the
remaining stated principal amount (which reduced principal amount shall be
treated as the issue price) of the Revolving Note for U.S. federal income tax
purposes under and pursuant to Treasury Regulation Sections 1.1001-3(e)(2)(iii),
1.1273-2(g)(2)(ii) and 1.1274-2(b)(1). The parties further agree to file all
applicable tax returns in accordance with such characterization and shall not
take a position on any tax return or in any judicial or administrative
proceeding that is inconsistent with such characterization. Notwithstanding the
foregoing, nothing contained in this paragraph shall or shall be deemed to
modify or impair in any manner whatsoever each Company’s obligations from time
to time owing to the Holders under the Documents.
AMENDMENTS TO THE CONVERTIBLE TERM NOTE
     3. Section 1.1 of the Convertible Note is hereby amended by (a) deleting
the first sentence appearing therein in its entirety and inserting the following
new sentence in lieu thereof:
“(a) Subject to Sections 4.2 and 5.10, interest payable on the outstanding
principal amount of this Note (the “Principal Amount”) shall accrue at a rate
per annum equal to the “prime rate” published in The Wall Street Journal from
time to time (the “Prime Rate”), plus (i) during the period commencing on the
initial issuance date of this Note through and including March 31, 2008, three
percent (3%) and (ii) on and after April 1, 2008, five percent (5%)
(collectively, the “Contract Rate”).”
     ; and (b) inserting the following clauses (b) immediately following the
last sentence of said Section 1.1 of the Convertible Note:

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“(b) Payment of Interest in Common Stock and/or Cash. Subject to the
restrictions set forth in Sections 2.1 and 3.2 of this Note, the Companies may
elect in respect of the interest payment due on any Amortization Date (as
defined below) to make such payment in cash or Common Stock, or a combination of
both; provided that, notwithstanding the foregoing, no more than that portion of
the interest payment due on any Interest Payment Date attributable to two
percent (2%) of the then applicable Contract Rate may be paid by way of issuance
by the Parent of its Common Stock (each, a “Permitted Common Stock Interest
Amount”). The Parent shall give irrevocable written notice to each Holder of its
election in respect of the Permitted Common Stock Interest Amount then due on a
given Amortization Date (each, an “Interest Payment Election Notice”), which
notice shall be received by each Holder no later than three (3) business days
prior to such Amortization Date (the date of such notice being hereinafter
referred to as the “Interest Payment Notice Date”). If such Interest Payment
Election Notice is not delivered within the prescribed period set-forth in the
preceding sentence, then the payment of the Permitted Common Stock Interest
Amount shall be made, together with the remainder of the interest payment then
due, entirely in cash on or prior to the applicable Amortization Date. If the
Permitted Common Stock Interest Amount (or a portion of such Permitted Common
Stock Interest Amount if not all of the Permitted Common Stock Interest Amount)
is elected by the Parent pursuant to a duly delivered Interest Payment Election
Notice (subject to the volume restrictions set forth in Section 2.1 and 3.2
below to be paid in shares of Common Stock), the number of such shares to be
issued by the Parent to each Holder on such Amortization Date shall be the
number determined by dividing (x) all or the portion of the Permitted Common
Stock Interest Amount converted into shares of Common Stock, by (y) the lesser
of (i) the applicable Fixed Conversion Price and (ii) the average closing price
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for
ten (10) trading days immediately prior to the applicable Amortization Date.
Common Stock issued in repayment of all or a portion of a Permitted Common Stock
Interest Amount shall be issued and delivered to each Holder on or prior to that
Amortization Date on which repayment of such Permitted Common Stock Interest
Amount is due.”
     4. Section 3.1 of the Convertible Note is hereby amended by deleting the
last sentence appearing therein in its entirety and inserting the following new
sentence in lieu thereof:
“For purposes of this Note, subject to Section 3.6 hereof, the initial “Fixed
Conversion Price” means (x) with respect to the first $200,000 of the Principal
Amount converted hereunder on or after March 14, 2007, $1.00 and (y) all other
amounts converted hereunder, subject to Section 1.1(b), $ 3.69.”
     5. (a) Each Company and each Holder of the Convertible Note hereby agree
that $25,000 of the Principal Amount portion of the Monthly Amount due on each
Amortization Date occurring in the months of August 2008, September 2008,
October 2008, November 2008 and December 2008 is hereby deferred until the
Maturity Date. Notwithstanding the foregoing, from and after the date hereof,
the Monthly Amount shall otherwise be determined (and shall be due

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and payable) in accordance with the applicable terms of the Convertible Note
after giving effect to the deferral set forth above.
     (b) The Holders hereby each agree to immediately upon effectiveness of this
Amendment issue to the Companies a Notice of Conversion to convert $200,000 in
the aggregate for all such Holders of the Principal Amount outstanding under the
Convertible Note at the “Fixed Conversion Price” of $1.00. Upon receipt by the
Holders of the Common Stock issuable in respect of the foregoing referenced
conversion, the Principal Amount portion only of each Monthly Amount due under
the Convertibe Note on each Amortization Date occurring in April 2008, May 2008,
June 2008 and July 2008 shall be deemed to be paid and satisfied.
AMENDMENTS TO THE TERM NOTE
     6. Section 1.1 of the Term Note is hereby amended by (a) deleting the first
sentence appearing therein in its entirety and inserting the following new
sentence in lieu thereof:
“(a) Subject to Sections 3.2 and 4.10, interest payable on the outstanding
principal amount of this Note (the “Principal Amount”) shall accrue at a rate
per annum equal to the “prime rate” published in The Wall Street Journal from
time to time (the “Prime Rate”), plus (i) during the period commencing on the
initial issuance date of this Note through and including March 31, 2008, three
percent (3%) and (ii) on and after April 1, 2008, five percent (5%)
(collectively, the “Contract Rate”).”
     ; and (b) inserting the following clauses (b) and (c) immediately following
the last sentence of said Section 1.1 of the Term Note:
“(b) Payment of Interest in Common Stock and/or Cash. Subject to the
restrictions set forth in clause (c) of this Section 1.1, the Companies may
elect in respect of the interest payment due on any Amortization Date to make
such payment in cash or Common Stock, or a combination of both; provided that,
notwithstanding the foregoing, no more than that portion of the interest payment
due on any Amortization Date attributable to two percent (2%) of the then
applicable Contract Rate may be paid by way of issuance by the Parent of its
Common Stock (each, a “Permitted Common Stock Interest Amount”). The Parent
shall give irrevocable written notice to each Holder of its election in respect
of the Permitted Common Stock Interest Amount then due on a given Amortization
Date (each, an “Interest Payment Election Notice”), which notice shall be
received by each Holder no later than three (3) business days prior to such
Interest Payment Date (the date of such notice being hereinafter referred to as
the “Interest Payment Notice Date”). If such Interest Payment Election Notice is
not delivered within the prescribed period set-forth in the preceding sentence,
then the payment of the Permitted Common Stock Interest Amount shall be made,
together with the remainder of the interest payment then due, entirely in cash
on or prior to the applicable Interest Payment Date. If the Permitted Common
Stock Interest Amount (or a portion of such Permitted Common Stock Interest
Amount if not all of the Permitted Common Stock Interest Amount) is elected by
the

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Parent pursuant to a duly delivered Interest Payment Election Notice (subject to
the volume restrictions set forth in clause (c) of Section 1.1 below to be paid
in shares of Common Stock), the number of such shares to be issued by the Parent
to each Holder on such Amortization Date shall be the number determined by
dividing (x) all or the portion of the Permitted Common Stock Interest Amount
converted into shares of Common Stock, by (y) the average closing price of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market for ten
(10) trading days immediately prior to the applicable Amortization Date. Common
Stock issued in repayment of all or a portion of a Permitted Common Stock
Interest Amount shall be issued and delivered to each Holder on or prior to that
Amortization Date on which repayment of such Permitted Common Stock Interest
Amount is due.”
“(c) Conversion Limitation. Notwithstanding anything herein to the contrary, in
no event shall the Companies be entitled to issue Common Stock to any Holder in
respect of the Permitted Common Stock Interest Amount if such issuance would
result in beneficial ownership by the Holder and its Affiliates of any amount
greater than 9.99% of the then outstanding shares of Common Stock (whether or
not, at the time of such conversion, the Holder and its Affiliates beneficially
own more than 9.99% of the then outstanding shares of Common Stock). As used
herein, the term “Affiliate” means any person or entity that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a person or entity, as such terms are used in and
construed under Rule 144 under the Securities Act. For purposes of the second
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
sentence. For any reason at any time, upon written or oral request of the
Holder, the Parent shall within one (1) business day confirm orally and in
writing to the Holder the number of shares of Common Stock outstanding as of any
given date.”
     7. Each Company and each Holder of the Term Note hereby agree that (i) the
Principal Amount portion of the Monthly Amount due on each Amortization Date
occurring in the months of April 2008, May 2008, June 2008 and July 2008 is
hereby deferred until the Maturity Date, and (ii) $25,000 of the Principal
Amount portion of the Monthly Amount due on each Amortization Date occurring in
the months of August 2008, September 2008, October 2008, November 2008 and
December 2008 is hereby deferred until the Maturity Date. Notwithstanding the
foregoing, from and after the date hereof, the Monthly Amount shall otherwise be
determined (and shall be due and payable) in accordance with the applicable
terms of the Term Note after giving effect to the respective deferrals set forth
above, as applicable.
     8. (a) The Companies have requested, and the Holders of the Term Note have
agreed to, the amendments set forth in Section 5 and 6 above, and in
consideration thereof, the Parent hereby agrees that it shall, by no later than
March 17, 2008, issue a warrant to each Holder (each, a “Further Additional
Warrant”) to purchase (i) in respect of Laurus, 101 shares of the Common Stock
of the Parent, (ii) in respect of Valens Offshore, 8,636 shares of the Common
Stock of the Parent with an exercise price of $0.01 per share, (iii) in respect
of Valens U.S., 5,587 shares of the Common Stock of the Parent and (iv) in
respect of PSource, 55,677 shares of

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the Common Stock of the Parent. Each Further Additional Warrant shall have an
exercise price of $0.01 and otherwise be in the form and substance acceptable to
the respective Holder thereof in its sole discretion.
     (b) (i) Laurus and the Parent hereto agree that the fair market value of
the Further Additional Warrant (as reasonably determined by the parties)
received by Laurus in consideration of the amendments herein made by Laurus
hereunder is hereby designated as interest and, accordingly, shall be treated,
on a pro rata basis, as a reduction of the remaining stated principal amount
(which reduced principal amount shall be treated as the issue price) of the Term
Note for U.S. federal income tax purposes under and pursuant to Treasury
Regulation Sections 1.1001-3(e)(2)(iii), 1.1273-2(g)(2)(ii) and 1.1274-2(b)(1).
PSource and the Parent hereto agree that the fair market value of the Further
Additional Warrant (as reasonably determined by the parties) received by PSource
in consideration of the amendments herein made by PSource hereunder shall be
treated for U.S. federal income tax purposes as a payment of additional
interest. Laurus, PSource and the Parent further agree to file all applicable
tax returns in accordance with the characterizations set forth above and shall
not take a position on any tax return or in any judicial or administrative
proceeding that is inconsistent with such characterization. Notwithstanding the
foregoing, nothing contained in this paragraph shall or shall be deemed to
modify or impair in any manner whatsoever each Company’s obligations from time
to time owing to the Holders under the Documents.
MISCELLANEOUS

  9.   Each Company hereby covenants and agrees with the Holders as follows:    
(i)   The Parent shall have completed its relocation to the facility located at
to                                          (the “New Facility”) by no later
than May 31, 2008;     (ii)   the Parent shall have obtained and delivered to
the Holders on or prior to March 25, 2008, a duly executed landlord wavier for
the benefit of the Holders and their administrative and collateral agent, LV
Administrative Services, Inc. (the “Agent”), in form and substance satisfactory
to the Agent, with respect to the New Facility; and     (iii)   the Parent shall
have provided to the Holders by no later than the close of business on March 14,
2008, evidence reasonably satisfactory to the Holders demonstrating that the
Parent has received no less than $300,000 of additional equity contributions
from parties and on terms reasonably acceptable to the Holders.

     10. The Companies hereby acknowledge and agree that no grace period shall
be applicable for failure to comply with any of the covenants set forth in
Section 9 above, and upon any such failure by the Companies to comply with any
such covenants, an Event of Default (as defined in the Security Agreement) shall
immediately arise.

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     11. The amendments set forth above shall be effective as of the date first
above written (the “Amendment Effective Date”) on the date when each Company and
each Holder shall have executed and each Company shall have delivered to the
Holders its respective counterpart to this Amendment.
     12. Except as specifically set forth in this Amendment, there are no other
amendments, modifications or waivers to the Documents, and all of the other
related forms, and the terms and provisions of the Documents and other related
forms shall remain in full force and effect.
     13. From and after the date first written above, all references to the
Documents shall be deemed to be references to the Documents as modified hereby.
     14. The Parent understands that it has an affirmative obligation to make
prompt public disclosure of material agreements and material amendments to such
agreements. It is the Parent’s determination that this Amendment is material.
The Parent agrees to file an 8-K within 4 business days following the date
hereof and in the form otherwise prescribed by the SEC.
     15. Each Company hereby represents and warrants to the Holders that other
than as contemplated by this Amendment (i) no Event of Default (as defined in
the Security Agreement) exists on the date hereof, (ii) on the date hereof, all
representations, warranties and covenants made by each Company under the
Documents are true, correct and complete, and (iii) on the date hereof, each
Company’s and its respective Subsidiaries’ covenant requirements have been met
under the Documents. The Parent hereby represents and warrants that it has the
requisite power and authority to (i) issue the shares of Common Stock issuable
upon conversion of the Permitted Common Stock Interest Amount (as defined in
each of the Revolving Note, Convertible Note and Term Note) and (ii) issue the
Additional Warrant and each Further Additional Warrant and the shares of Common
Stock issuable upon exercise of such warrants.
     16. This Amendment shall be binding upon the parties hereto and their
respective successors and permitted assigns and shall inure to the benefit of
and be enforceable by each of the parties hereto and their respective successors
and permitted assigns. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. This Amendment
may be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
[Signature Page Follows]

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     IN WITNESS WHEREOF, each Company and each Holder has caused this Amendment
to be signed in its name effective as of this 14th day of March 2008.

                  SILICON MOUNTAIN HOLDINGS, INC.    
 
           
 
  By:        
 
                Name: Rudolph (Tré) A. Cates III         Title: President and
Chief Executive Officer    
 
                SILICON MOUNTAIN MEMORY, INCORPORATED    
 
           
 
  By:        
 
                Name: Rudolph (Tré) A. Cates III         Title: President and
Chief Executive Officer    
 
                VCI SYSTEMS, INC.    
 
           
 
  By:        
 
                Name: Rudolph (Tré) A. Cates III         Title: President and
Chief Executive Officer    
 
                LAURUS MASTER FUND, LTD.
By: Laurus Capital Management, LLC, its investment
manager    
 
           
 
  By:        
 
                Name:         Title:    

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                  VALENS OFFSHORE SPV I, LTD.         By: Valens Capital
Management, LLC, its
investment manager    
 
           
 
  By:        
 
                Name:         Title:    
 
                VALENS U.S. SPV I, LLC.         By: Valens Capital Management,
LLC, its
investment manager    
 
           
 
  By:        
 
                Name:         Title:    
 
                PSOURCE STRUCTURED DEBT LIMITED         By: Laurus Capital
Management, LLC, its
investment manager    
 
           
 
  By:        
 
                Name:         Title:    

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