EXHIBIT 10.19

 

[United National Bank letterhead]

 

March 18, 2004

 

Mr. Steve Gillings, Chief Financial Officer

I/OMagic Corporation

4 Marconi

Irvine, CA 92618

 

Re: Approval for Waiver for a Financial Covenant by United National Bank

 

Dear Mr. Gillings,

 

As indicated on Business Loan Agreement, one of the financial covenants required
by United National Bank is that Borrower has to be profitable for twelve months
ended 12/31/03. Based on the financial statement as of 12/31/2003 provided by
I/OMagic Corporation, your company has complied with all financial covenants
except for the profitability covenant listed as follows:

 

    

Requirement

By Bank

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  Year End 12/31/03

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   Compliance

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1)      Tangible net worth

   No lower than $10.5MM   $11.6MM    Yes

2)      Debt to Net Worth ratio

   Not to exceed 2.0X   1.45X    Yes

3)      Current ratio

   No lower than 1.25X   1.46X    Yes

4)      Quick ratio

   No lower than 1.0X   1.04X    Yes

5)      Borrower has to be profitable in FYE 12/31/2003

   Yes   No    No          Net loss is $265M
in FYE 12/31/03.     

 

Therefore, effective as of 12/31/2003, United National Bank’s Loan Committee has
amended the financial covenant requiring profitability at 12/31/2003, as
indicated on item # 5) of the above table, to read as follows, “Borrower has to
be profitable for twelve months ended 12/31/2004”. With this amendment to the
Business Loan Agreement effective as of 12/31/2003, I/OMagic Corporation is not
in violation of the financial covenants in FYE 12/31/2003. Next covenant test on
the requirement of the company’s profitability will be conducted at year end
2004.

 

Should you have any questions, please feel free to call the undersigned at
(626)281-5982.

 

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Sincerely,

/s/    Paul Liaw

Paul Liaw

Vice President & Manager

International Department

United National Bank

 

 

Acknowledged by I/OMagic Corporation:

                 

/s/    Tony Shahbaz

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3/26/04                            

Tony Shahbaz

President & CEO

     

Date

/s/    Steve Gillings

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3/26/04                            

Steve Gillings

CFO

     

Date

 

CC: Donald Volkman, Senior Vice President & Loan Administrator

Loan Administration Department