Document:

acqusition

CLOSING AGREEMENT FOR STOCK PURCHASE 

THIS CLOSING AGREEMENT FOR STOCK PURCHASE (the “Agreement”) is made and entered into as of this 1 st day of July, 2003, by and among Las Vegas Gaming, Inc., a Nevada corporation (“Buyer”), Imagineering Systems, Inc. a Nevada corporation (the “Company”), Ron Mach and Alicia Mach (collectively, the “Machs”) and Bill Williams (“Williams,” and collectively with the Machs, the “Stockholders”). 

 

RECITALS 

WHEREAS, the parties entered into that certain Stock Purchase Agreement dated June ___ 2002 (“Stock Purchase Agreement”); and 

WHEREAS, the Parties now with to close said deal, all conditions of the Stock Purchase Agreement having been satisfied and all documents, other than those waived herein, having been provided; 

NOW THEREFORE, in consideration of the mutual covenants, consideration and agreements set forth herein and in the Stock Purchase Agreement, the parties agree to consummate the Stock Purchase Agreement by transferring the shares and other consideration as provided therein, effective July 1, 2003, the following items representing the full satisfaction of the terms and conditions remaining to be met by the parties under the Stock Purchase Agreement: 

Section 1.01.    Termination and Release by Williams. Williams hereby releases Buyer from that certain Memoranda of Understanding (collectively, the “MOA”) between himself and Buyer, dated August 13-August 16, 1999, and said document shall be considered as terminated in full. 

Section 1.02.    Termination and Release by Stockholders. Stockholders hereby release any and all claims, monetary or otherwise, that they may have against Buyer or the Company. 

 

Section 1.03.    Release of the Stockholders . Stockholders hereby release and relinquish any and all right, title and interest which the Stockholders now have or may ever have had in the Shares and the Company. Stockholders on behalf of themselves, past, present or future successors, assigns, predecessors, attorneys, and their respective successors and assigns, and all other persons and entities who may ever claim, by, through, or under the Stockholders, hereby fully, finally and forever settle, waive, acquit, relinquish, release and discharge the Company and Buyer, and their past, present or future affiliates, successors, assigns, partners, stockholders, members, officers, directors, agents, employees, attorneys and predecessors and their respective successors and assigns (collectively, the “Releasees”), of and from any and all manner of action or actions, cause or causes of action, at law or in equity, suits, proceedings, investigations, charges, complaints, claims, demands, commitments, debts, liens, contracts, agreements, promises, obligations, liabilities, damages, losses, costs and expenses, of any kind and nature whatsoever, contingent or absolute, asserted or unasserted, known or unknown (collectively, the “Claims”), which the Stockholders and their heirs, executors, administrators, successors or assigns ever had, now have or, to the extent arising from or in connection with any act, omission or state of facts taken or existing on or prior to Closing, may hereafter have, against the Releasees. Notwithstanding the foregoing, the release set forth in this Section shall in no way release any liabilities or obligations of the Releasees created by this Agreement or any other document executed and delivered in connection with the closing of the transactions contemplated hereby (collectively, the “Excluded Claims”). The Stockholders hereby acknowledge that their settlement, waiver, acquittal, relinquishment, release and discharge of the Releasees from any and all 

 

	 
	 	 	 
	

	 

 

Claims, except for the Excluded Claims, constitutes a release in all of such Stockholders capacities, including but not limited to, the Stockholder’s role as an employee, stockholder, agent, officer and director of the Company, if applicable. 

Section 1.04.    Closing . The consummation of the transactions contemplated by the Stock Purchase Agreement shall be considered effective as of July 1, 2003 (“Closing Date”), notwithstanding the fact that all documents have not been signed by all parties by that time. 

Section 1.05.    Closing Deliveries . The Parties hereby acknowledge that all Closing deliveries required by the Stock Purchase Agreement have been satisfied or waived as provided herein and nothing further need be provided to close the Stock Purchase Agreement. 

Section 1.06.    Representations and Warranties . The Parties hereby acknowledge that all representations and warranties and any and all schedules and exhibits contained in the Stock Purchase Agreement, remain in all material respects true and correct as of the Closing Date, and that the Company has performed and satisfied all covenants and conditions required to be performed by it. 

Section 1.07.    Opinion of Counsel .     Buyer hereby waives the requirement that the Company furnished to Buyer the opinion of its counsel, dated as of the Closing Date. 

Section 1.08.    Terms . All miscellaneous terms of the Stock Purchase Agreement shall be applied to this Agreement as if provided herein. 

Section 1.09. Stock Distribution. The common stock of Buyer shall be distributed as consideration as follows: 

1. Alicia G. Mach                             20,000 

2. Ron Mach                           20,000 

5. Bill R. Williams                 132,800 

6. Charles F. Hohman                         7,000 

7. Lawrence P. Hohman                               3,000 

8. Touch Bet USA                    7,200 

9. Richard Blower                     4,000 

This Section shall modify the Stock Purchase Agreement section dealing with such consideration only in the respects provided herein. 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first set forth above. 

IMAGINEERING SYSTEMS, INC. 

a Nevada corporation 

 

/s/ Billy R. Williams

By:______________________________ 

Billy R. Williams 

Its: President 

	 
	 	 	 
	

	 

 

THE STOCKHOLDERS 

/s/ Ron Mach

__________________________________ 

Ron Mach 

/s/ Alicia Mach

__________________________________ 

Alicia Mach 

/s/ Billy R. Williams

_______________________________ 

Billy R. Williams 

LAS VEGAS GAMING, INC. 

a Nevada corporation 

 

/s/ Russell R. Roth

By: ______________________________ 

Russell R. Roth 

Its: President 

ADDENDUM A 

In the event that the Company and/or LVGI receives in connection with the Company’s suit against American Wagering, Inc. an amount in excess of the aggregate of $150,000 plus the legal fees expended by the Company and/or LVGI, then Williams shall be entitled to such portion of the excess that his unpaid portion of unreimbursed expenses and his loan to the Company bears to the aggregate amount of unreimbursed expenses and unpaid loans made by Williams and Carl Conti, said payment not to be in excess of Williams’s unpaid portion of the unreimbursed expenses and the loan.FORBEARANCE AGREEMENT AND RELEASE

     This Forbearance Agreement and Release ("Agreement") is made and entered
into as of the 16th day of June 2003, by CHINATRUST BANK (U.S.A.), a California
banking corporation ("Lender"), on the one hand, and I/OMAGIC CORPORATION, a
Nevada corporation, ("Borrower"), on the other hand, with reference to the
following facts:

                                    RECITALS

A.     Borrower and Lender executed that certain Business Loan Agreement
dated December 31, 2002 (together with any modifications thereof or amendments
thereto, the "Loan Agreement"), pursuant to which, among other things, Lender
agreed to make loans (individually and collectively, the "Loan") to Borrower in
the aggregate maximum principal sum of $9,000,000.00.

B.     The Loan is further evidenced by a promissory note dated April 9,
2001, executed by Borrower in favor of Lender, in the principal sum of
$8,000,000.00 (together with any modifications, extensions or renewals thereof
or amendments thereto, the "Note").

C.     The obligations under the Loan are secured by all of Borrower's right,
title, and interest in and to the personal property of Borrower ("Collateral")
pursuant to a Commercial Security Agreement dated April 9, 2001, executed by
Borrower in favor of Lender (together with any modifications thereof or
amendments thereto, the "Security Agreement").

D.     Hereinafter, the Loan Agreement, Note, Security Agreement and the
documents and instruments executed in connection therewith or otherwise in
connection with the Loan shall be referred to individually and collectively as
the "Loan Documents."

E.     Without limitation, the following Events of Default (the "Specified
Defaults") have occurred under the Loan Agreement:

     1.     Borrower's debt to equity ratio has exceeded the maximum of2.0
to 1.0; and

2.     Borrower has failed to maintain an effective tangible net worth of
at least $16,000,000.00 as of December 31,2002.

F.     Lender has notified Borrower of the Specified Defaults.

G.     By reason of the Specified Defaults, Lender has the right to
immediately commence enforcement of the terms of the Loan Documents. However,
Borrower has requested Lender to forbear for a limited period of rime from
enforcing the terms of the Loan Documents in order to provide Borrower
additional time to repay the outstanding

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obligations of Borrower to Lender under the Loan Documents. Lender has agreed to
do so, subject to the terms and conditions of this Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

                                    AGREEMENT

     1.     RecitaIs. Recitals A through G are incorporated herein by this
reference as are all exhibits and schedules, and the parties agree that the
information recited above is true and correct. Except as specified herein, all
of the terms and conditions of the Loan Documents, and each of them, shall
remain in full force and effect. In the event of any conflict or inconsistency
between the terms, conditions and provisions of this greement and the Loan
Documents, the terms, conditions and provisions of this Agreement shall prevail.

2.     Acknowledgement
       ---------------

a.     Borrower acknowledges that as of June 13, 2003, the Loan has an
unpaid principal balance of $2,605,827.45 plus fees and costs, including, but
not limited to, attorneys' fees incurred by Lender ("Loan Balance").

b.     Borrower acknowledges that the total obligations and indebtedness
of Borrower to Lender under the Loan Documents are immediately due and payable
in full, and in consideration of the financial accommodations set forth herein,
Borrower specifically, expressly and forever waives any and all offsets or
defenses to the total indebtedness of Borrower to Lender under the Loan
Documents, and Borrower expressly, specifically and forever waives any and all
claim or claims against Lender and, therefore, Borrower specifically, expressly
and forever waives any and all rights or theories on which to invoke or obtain
legal or equitable relief, whether injunctive relief or otherwise, in order to
abate, postpone or terminate enforcement by Lender of repayment of the
obligations of Borrower under the Loan Documents, and specifically and forever
waives and relinquishes any such right to legal or equitable relief to cause any
such abatement, postponement or termination of enforcement proceedings.

c.     Borrower acknowledges that even if Borrower remedies the Specified
Defaults subsequent to this Agreement, Borrower is still obligated to pay off
the Loan balance prior to the conclusion of the Forbearance Period because
Borrower did not remedy the Specified Defaults during the applicable cure
periods.

3.     Reaffirmation. This Agreement is, in part, a reaffirmation of the
obligations  and  indebtedness  of  Borrower  to Lender as evidenced by the Loan
Documents. Therefore, Borrower represents and warrants and covenants and agrees,
that  except  as  specified  herein, all of the terms and conditions of the Loan
Documents  are  in  full force and effect, without waiver or modification of any
kind  whatsoever.

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                                                                          /s/ TS

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4.     Forbearance.
       -----------

a.     At the request of Borrower, and subject to section 4.b. below and
satisfaction of all conditions set forth in this Agreement, and so long as no
Event of Default (as defined in section 11 herein) has occurred, Lender agrees
to forbear, for the period commencing on the date of this Agreement and
extending through and including October 15, 2003 (the "Forbearance Period"),
from enforcing it rights and remedies under the terms of the Loan Documents by
reason of the Specific Defaults. IT IS UNDERSTOOD AND AGREED THAT
NOTWITHSTANDING (i) LENDER'S ACCEPTANCE OF ANY PAYMENTS PROVIDED FOR UNDER THIS
AGREEMENT OR UNDER ANY OF THE LOAN DOCUMENTS, AND (ii) ANY OTHER ACTIONS
CONTEMPLATED BY THIS AGREEMENT: (a) LENDER DOES NOT WAIVE ITS RIGHT TO COLLECT
ALL AMOUNTS OWING TO LENDER UNDER THE NOTE, THE LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS, NOR WAIVE BORROWER'S DEFAULT(S) UNDER THE LOAN DOCUMENTS, NOR
WAIVE LENDER'S RIGHT TO ENFORCE THE PAYMENT AND OTHER TERMS OF THE LOAN
DOCUMENTS AS WRITTEN, AND ALL OF LENDER'S RIGHTS AND REMEDIES AT LAW OR IN
EQUITY, INCLUDING, BUT NOT LIMITED TO, THE RIGHTS OF FORECLOSURE. ACCELERATION
OR OTHERWISE, (b) LENDER DOES NOT RESCIND THE SECURITY AGREEMENT, BY ACCEPTANCE
OF ANY PAYMENTS, AND (c) LENDER DOES NOT EXTEND OR MODIFY, NOR INTEND TO EXTEND
OR MODIFY, THE TERMS AND CONDITIONS OF ANY OF THE LOAN DOCUMENTS.

b.     In addition to any other conditions set forth in this Agreement,
Lender is willing to forbear during the Forbearance Period if and only if:

(1)     Such forbearance is without waiver of any term,
covenant, or condition to be performed or satisfied by Borrower pursuant to the
Loan Documents;

(2)     Borrower makes full, timely, and punctual performance of each of the
matters hereinafter set forth and does not do or fail to do anything that would
constitute a breach of this Agreement or the documents and instruments executed
in connection with this Agreement, a further Event of Default under the Loan
Agreement, or a further breach of any of the Loan Documents; and

(3)     All conditions precedent provided for herein are first satisfied.

c.     Borrower acknowledges and agrees that but for Lender entering into this
Agreement with Borrower, Lender would diligently pursue all of its rights and
remedies under the Loan Documents, at law and in equity, against Borrower and/or
the Collateral.

d.     If an Event of Default occurs under any term, condition, or
performance of this Agreement, the amount of the Loan Balance, plus accrued and

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unpaid interest on the Note, plus any fees and costs, including, but not limited
to attorneys' fees incurred subsequent to the effective date of this Agreement,
will be immediately due and payable.

e.     The obligations of Borrower to Lender shall continue to be secured
by the Security Agreement.

f.     Borrower shall make monthly payments of accrued interest on the
unpaid principal balance of the Loan on the first (1st) day of each month.,
commencing June 1, 2003.

g.     Borrower shall pay the entire principal balance of the Loan, plus
any and all accrued and unpaid interest thereon, plus any and all fees and costs
owed by Borrower to Lender on or before October 15, 2003.

5.     Conditions to Forbearance.  Lender's forbearance as set forth in section
4 above is conditioned upon the complete and timely satisfaction by Borrower of
each of the following conditions:

a.     Borrower's delivery to Lender of this Agreement, fully executed
by JULY 14, 2003.

b.     Borrower shall deliver to Lender any additional documents, assignments,
agreements, reports, approvals, instruments, consents and/or financial
statements that Lender may require, in its sole and absolute discretion, opinion
and judgment, from time to time including, but not limited to, any memoranda to
be recorded with respect to the forbearance provided herein.

c.     Borrower has not filed a petition seeking reorganization of its debts
to, or arrangements with, creditors or shall take advantage of any bankruptcy or
insolvency laws, or shall become the subject of any bankruptcy, reorganization,
receivership, custodianship or similar proceeding, and no court of competent
jurisdiction has entered an order, order for relief or judgment approving a
petition seeking reorganization, bankruptcy or liquidation or appointing a
receiver, custodian, trustee or liquidator.

d.     The Collateral shall not be further encumbered, conveyed,
transferred or assigned, except as otherwise permitted pursuant to the Loan
Documents.

e.     Reimbursement to Lender by Borrower for the fees and costs,
including reasonable attorneys' fees, title insurance costs, and recording fees,
in the negotiation and preparation of this Agreement and the consummation of the
transactions contemplated hereby.

                                                                          /s/ GM
                                                                          /s/ TS

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6.     Amendment of Loan Documents.
       ----------------------------

     Any and all references in any of the Loan Documents to the effect that
Borrower is a California corporation or a corporation organized, existing and/or
in good standing under the laws of the State of California are hereby amended to
provide that Borrower is a Nevada corporation and is organized, existing and in
good standing under the laws of the State of Nevada.

7.     Revival of Obligation
       ---------------------

a.     Borrower acknowledges and agrees that in the event that the
payment of money, this Agreement, or the grant of collateral should for any
reason subsequently be declared to be "fraudulent" within the meaning of any
state, federa1 or foreign law relating to fraudulent conveyances, preferential
or otherwise voidable or recoverable, in whole or in part, for any reason, under
the United States Bankruptcy Code or any other federal, foreign or state law
(collectively referred to herein as "Voidable Transfer"), and Lender is required
to pay or restore any such Voidable Transfer; or any portion thereof, then as to
that which is repaid or restored pursuant to any such Voidable Transfer
(including all costs, expenses and attorneys' fees of Lender related thereto,
including without limitation, relief from stay or similar proceedings), the
liability of Borrower shall automatically be revived, reinstated and restored to
the extent thereof, and shall exist as though such Voidable Transfer had never
been made to Lender.

b.     Nothing set forth herein is an admission that such Voidable
Transfer has occurred. Borrower expressly acknowledges that Lender may rely upon
advice of counsel, and if so advised by counsel, may, in the exercise of
Lender's sole opinion and judgment, settle, without defending, any action to
void any alleged Voidable Transfer, and that upon such settlement, Borrower
shall again be liable for any deficiency resulting from such settlement as
provided in this Agreement.

8.     Further Acknowledgement
       -----------------------

     Borrower acknowledges and agrees that but for Lender entering into this
Agreement with Borrower, Lender would have diligently pursued all of its rights
and remedies under the Loan Documents, at law and in equity, against Borrower.
As an additional inducement to and material consideration for Lender agreeing to
the modifications and extension provided in this Agreement, Borrower agrees that
in the event a Bankruptcy or Judicial Action (as hereinafter defined in this
section 8) is commenced which subjects Lender to any stay in the exercise of
Lender's rights and remedies under the Loan Documents including, but not limited
to, the automatic stay imposed by section 362 of the United States Bankruptcy
Code (individually and collectively, "Stay"), then Borrower irrevocably consents
and agrees that such Stay shall automatically be lifted and released against
Lender, and Lender shall thereafter be entitled to exercise all of its rights
and remedies against Borrower under the Loan Documents. Borrower acknowledges
that Borrower is knowingly, voluntarily, and intentionally waiving Borrower's
rights to any Stay and agrees that the benefits provided

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to Borrower under the terms of this Agreement are valuable consideration for
such waiver. As used in this section 8, the term "Bankruptcy or Judicial Action"
shall mean any voluntary or involuntary case filed by or against Borrower under
the United States Bankruptcy Code, or any voluntary or involuntary petition in
composition, readjustment, liquidation, or dissolution, or any state and federal
bankruptcy law action filed by or against Borrower, any action where Borrower is
adjudicated as bankrupt or insolvent, any action for dissolution of Borrower, or
any action in furtherance of any of the foregoing, or any other action, case, or
proceeding that has the effect of staying (or in which a stay is being obtained
against) the enforcement by Lender of its rights and remedies under the Loan
Documents. Borrower further acknowledges and agrees that:

a.     The recital of facts contained in this Agreement is true and
correct;

b.     Borrower possesses the Collateral and the Collateral described in
the Loan Documents is subject to Lender's perfected security interests and liens
therein;

     c.     Borrower is in default and is continuing in default under the Loan
Documents;

     d.     Lender's agreement to forbear on the terms and conditions of this
Agreement and to accept and apply the payments required hereunder or under any
of the Loan Documents shall not constitute a cure or waiver of any default
hereunder or under the Loan Documents or a waiver or impairment of any of
Lender's rights hereunder or under the Loan Documents, and Lender shall not, by
any action, inaction, or by this Agreement, be deemed to have waived Borrower's
obligation to cure any of Borrower's defaults under the Loan Documents;

e.     The execution, delivery and performance of this Agreement shall
not constitute an amendment or modification of any of the Loan Documents or,
except as specifically provided in this Agreement, an extension of the maturity
of the Note, but shall instead merely set forth the terms and conditions
pursuant to which Lender shall forbear from enforcing its rights under the Loan
Documents;

f.     Neither Lender's acceptance nor application of any payment made
by Borrower pursuant to this Agreement or any of the Loan Documents shall
constitute a cure or waiver of Borrower's defaults under the Loan Documents;

g.     Lender expressly reserves its rights to pursue its remedies under
the Loan Documents (without notice to Borrower, other than as required under
applicable law or the terms of the Loan Documents);

h.     Notwithstanding Lender's acceptance of the payments provided for
in this Agreement or under the Loan Documents, Lender has not and does not waive
its right to collect the full balance of the Note from Borrower, nor waive
Borrower's defaults under the Loan Documents, nor waive Lender's rights to
enforce, at such time as the Forbearance Period has terminated, the payment and
other terms of the Loan Documents

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as written, and all of Lender's rights and remedies at law or in equity,
including, but not limited to, the right of foreclosure, acceleration or
otherwise; and

i.     Borrower hereby expressly acknowledges and agrees that the Loan Documents
are valid, binding and enforceable and of continuing effect, and Borrower hereby
waives and relinquishes any right to challenge the validity or legally binding
effect of the Loan Documents, including, but not limited to the Security
Agreement, whether in a civil action or in a Bankruptcy or Judicial Action.

9.     Representations and Warranties. Borrower represents and warrants to
Lender, and Lender is relying thereon, as follows:

a.     This Agreement and the documents and instruments executed in connection
with this Agreement constitute legal, valid, and binding obligations of
Borrower to Lender;

b.     There are no actions, suits, or proceedings pending or, to the
knowledge of Borrower, threatened against or affecting Borrower in relation to
its obligations to Lender, or involving the validity or enforceability of this
Agreement or the Loan Documents, the ability of Borrower to perform its
obligations to Lender under the Loan Documents, or the priority of any liens
thereof, at law or in equity, or before or by any governmental entity;

c.     This Agreement and the releases contained herein are intended to
be fina1 and binding among the parties hereto, and Lender may expressly rely on
the finality of this Agreement as a substantial, material factor inducing that
party's execution of this Agreement;

d.     Except as acknowledged by Borrower herein, no event has
occurred or is continuing that constitutes a default of this Agreement or a
further default under the Loan Documents or that would constitute a default but
for the requirement that notice be given or time elapse, or both;

e.     Borrower is a Nevada corporation, in good standing and duly
organized and existing under the laws of the State of Nevada. Each person
executing this Agreement and the documents and instruments executed in
connection with the Agreement in a representative capacity has been duly
authorized to execute said documents and instruments by all appropriate action
and is empowered to do so;

f.     Lender's security interest in all of the security for the
obligations evidenced by the Loan Documents are valid, perfected and are not
subject to avoidance, elimination or reduction in any manner whatsoever;

g.     The representations, warranties and agreements set forth herein
shall be cumulative and in addition to any and all other representations,
warranties and

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agreements which Borrower gives or causes to be given to Lender, either now or
hereafter.

10.     Reservation of Rights.
        ----------------------

     Except as provided in this Agreement, Lender specifically reserves all of
its rights, interests and remedies at law or in equity or otherwise with respect
to, in connection with or relating to the Loan Documents and any other
agreements, instruments, facts or matters relating to any of the foregoing. This
reservation of rights is not intended and shall not be construed as exclusive.

11.     Events of Default. In addition to any further default under the Loan
Documents, each of the following shall be deemed an Event of Default hereunder:

a.     Failure of Borrower to pay when due any payment required to be
made by Borrower pursuant to this Agreement or the documents and instruments
executed in connection with this Agreement;

b.     Default by Borrower in the performance of any term, condition,
covenant, or agreement contained in this Agreement;

c.     Default by Borrower in the performance of any term, condition,
covenant or agreement contained in any of the Loan Documents;

d.     Any representation or warranty made by Borrower hereunder or
under the Loan Documents or the documents and instruments executed in connection
with this Agreement, shall prove to be at any time incorrect in any respect;

e.     Failure of Borrower to provide Lender with any reports,
information, financial statements, documents or instruments required under this
Agreement, the Loan Documents or the documents or instruments executed in
connection with this Agreement;

f.     The filing of any lawsuit or other legal action by or against
Borrower challenging: (i) the existence or priority of Lender's security
interests; or (ii) the enforceability or validity of this Agreement or any of
the Loan Documents; or

g.     If Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct any material part of its business
affairs.

12.     Remedies on Default.
        --------------------

a.     If an Event of Default occurs which is not cured (if curable) within
five (5) calendar days after the date Lender gives written notice to Borrower
specifying such Event of Default, then, at the option of Lender, in the sole and
absolute discretion, opinion and judgment of Lender, the Forbearance Period
shall be immediately terminated

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and the entire unpaid obligations and indebtedness of Borrower to Lender in the
amount of the Loan Balance, plus all accrued interest unpaid thereon, at the
default rate of interest, if any, provided in the Note, and all other amounts
payable thereunder, shall be immediately due and payable, without presentment,
demand, protest or notice of any kind whatsoever, all of which are expressly
waived by Borrower. Lender may immediately enforce payment of all obligations
and indebtedness of Borrower to Lender and exercise all remedies granted to
Lender under the Loan Documents, this Agreement and/or as otherwise available to
Lender, at law or in equity.

b.     The rights and remedies of Lender hereunder are cumulative and
not exclusive. Any waiver, permit, consent or approval of any kind by Lender of
any breach or default hereunder, or waiver of any provisions or conditions
hereof, must be in writing and shall be effective only to the extent set forth
in writing.

12.     No Joint Venture, Management and Control.  Notwithstanding any
provision of this Agreement and/or of the Loan Documents:

a.     Lender is not and shall not be construed to be a partner, joint
venturer, alter ego, manager, controlling person or other business associate or
participant of any kind of Borrower or any other person;

b.     Lender shall not be deemed responsible to perform or participate in
any acts, omissions, or decisions of Borrower; and

c.     Borrower does not have any claims, causes of action or defenses to
its obligations to Lender based on any allegations of management or control
exercised by Lender. Borrower acknowledges and agrees that Lender does not
manage or control Borrower in any way.

14.     Release of Lender.
        ------------------

a.     Except for the obligations of Lender under this Agreement,
Borrower (for purposes of this section 14 only. "Releasor"), for itself, and
Releasor's successors and assigns, and each of them, shall and does hereby
forever relieve, release and discharge Lender, and its successors, assigns, past
and present attorneys, accountants, representatives, affiliates, parents,
partners, officers, directors, employees and stockholders, jointly and
severally, from any and all claims, debts. liabilities, demands, obligations,
promises, acts, agreements, costs and expenses (including, but not limited to,
attorneys' fees), damages, injuries, actions and causes of actions, of whatever
kind or nature, whether legal or equitable, known or unknown, suspected or
unsuspected, contingent or fixed, from the beginning of time through the date of
this Agreement, including, without limitation, those based upon, arising out of,
appertaining to, or in connection with any of the matters or facts alleged or
set forth in Recitals A through G, inclusive, the lending relationship between
Lender and Releasor, and any and all real and personal property collateral,
jointly and severally.
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b.     As to the matters released herein, Releasor expressly waives any
and all rights under section 1542 of the Civil Code of the State of California,
which provides as follows:

A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with
the debtor.

c.     Releasor expressly waives and releases any right or benefit which
it has or may have under section 1542 of the Civil Code of the State of
California, and any similar statute, code, law and/or regulation of the United
States, or any state thereof, to the full extent that it may waive all such
rights and benefits pertaining to the matters released herein. In connection
with such waiver and relinquishment, Releasor acknowledges that it is aware that
it may hereafter discover claims presently unknown or unsuspected, or facts in
addition to or different from those which it now knows or believes to be true.
Nevertheless, it is the intention of Releasor to fully, finally and forever
release all such matters, and all claims relative thereto, which now exist, may
exist, or heretofore have existed. In furtherance of such intention, the
releases herein given shall be and remain in effect as a full and complete
release of such matters notwithstanding the discovery or existence of any such
additional or different claims or facts relative thereto.

d.     In entering into the release provided for in this Agreement,
Releasor recognizes that no facts or representations are ever absolutely
certain; accordingly, Releasor assumes the risk of any mistake, and if it should
subsequently discover that any understanding of the facts or of the law was
incorrect, Releasor shall not be entitled to set aside this release by reason
thereof, regardless of any mistake of fact or law.

e.     Releasor is the sole and lawful owner of all right, title and interest
in and to every claim and other matter which it purports to release herein, and
it has not assigned or transferred, or purported to assign or transfer to any
person or entity any claims or other matters herein released. Releasor shall and
hereby does indemnify, defend and hold Lender harmless from and against any
claims, liabilities, actions, causes of action, demands, injuries, damages,
costs, and expenses (including, but not limited to, attorneys' fees), based upon
or arising in connection with any such prior assignment or transfer, or any such
purported assignment or transfer, or any claims or other matters released
herein.

15.     Miscellaneous.
        --------------

a.     This Agreement is not a novation, nor is it to be construed as a
release or modification of any of the terms, conditions, warranties, waivers, or
rights set forth in the Loan Documents, except as set forth herein.

                                                                          /s/ GM
                                                                          /s/ TS

                                       10
<PAGE>

b.     The execution and delivery by Borrower of this Agreement and the
performance by Borrower of all of its obligations hereunder have been duly
authorized by all necessary action and do not and will not:

(1)     Requjre any consent or approval not heretofore obtained of
any other person holding any interest or entitled to receive any interest issued
or to be issued by Borrower, or otherwise;

(2)     Result in or require the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest, claim, charge, right
of others or any encumbrance of any nature (other than under this Agreement or
the Loan Documents) upon or with respect to any property now owned or leased or
hereafter acquired by Borrower;

(3)     Violate any provision of any laws, or of any order, writ, judgment,
injunction, decree, determination or award; and

(4)     Result in a breach of or constitute a default under, cause or
permit the acceleration of any obligation owed under, or require any consent
under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which Borrower is a party or by which any of its property is bound
or affected.

c.     Borrower further represents and warrants as follows:

(1)     Borrower has received, or has had the opportunity to
receive, independent legal advice from attorneys of its choice with respect to
the advisability of executing this Agreement and prior to the execution of this
Agreement by Borrower, its attorneys reviewed this Agreement and discussed the
Agreement with Borrower and have made all desired changes;

(2)     Except as expressly stated in this Agreement, neither
Lender nor any other person or entity has made any statement or representation
to Borrower regarding facts relied upon by Borrower;

(3)     Borrower does not rely upon any statement, representation
or promise of Lender or any other person or entity in executing this Agreement
except as expressly stated in this Agreement;

(4)     The terms of this Agreement are contractual and not a mere recital;

(5)     This Agreement has been carefully read by, the contents
hereof are known and understood by, and it is signed freely by Borrower; and

(6)     This agreement and the releases contained herein are intended to be
final and binding against Borrower, and Borrower acknowledges that
                                                                         /s/ GM
                                                                         /s/ TS

                                       11
<PAGE>

Lender is expressly relying on the finality of this Agreement as a substantial,
material factor inducing Lender's execution of this Agreement. Borrower has the
full right and authority to enter into this Agreement, and the officer, agent or
other representative executing this Agreement on behalf of Borrower bas the full
right and authority to fully commit and bind it to this Agreement.

d.     All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement.

e.     No failure or delay on the part of Lender in the exercise of any
right, power, or privilege hereunder or under the documents or instruments
referred to herein shall operate as a waiver thereof, and no single or partial
exercise of any such power, right, or privilege shall preclude a further
exercise of any right, power, or privilege.

f.     This Agreement and the Loan Documents and the rights and
obligations of the parties hereto shall be governed by and construed in
accordance with the laws of the State of California. Borrower hereby submits to
the jurisdiction of the courts of Los Angeles County, California, whether state
or federal.

g.     This Agreement shall be binding upon and inure to the benefit of
Lender and Borrower and their respective successors and assigns, except that
Borrower's rights hereunder are not assignable without the prior written consent
of Lender, which consent Lender may give or withhold in its sole and absolute
opinion and judgment.

h.     Expenses and Fees.

(1)     Borrower shall reimburse Lender for Lender's fees, costs,
and expenses including, without limitation, reasonable attorneys' fees, in
connection with the negotiation, preparation, and administration of this
Agreement and the Loan Documents.

(2)     In the event that Lender employs attorneys to remedy,
prevent, or obtain relief from a breach or default of this Agreement or the Loan
Documents, arising out of a breach or default of this Agreement or the Loan
Documents or in connection with or contesting the validity of this Agreement or
the Loan Documents, any of the terms, covenants, provisions, and all conditions
hereof or thereof, or any of the matters referred to herein or therein or in
connection with any Bankruptcy or Judicial Action, Lender shall be entitled to
be reimbursed for all of its reasonable attorneys' fees, whether or not suit is
filed and including, without limitation, those incurred in each and every
action, suit, or proceeding, including any and all appeals and petitions
therefrom and all fees and costs incurred by Lender.

i.     This Agreement may be modified or amended only by written
agreement duly executed by the parties to this Agreement.

                                                                          /s/ GM
                                                                          /s/ TS

                                       12
<PAGE>

j.     This Agreement and the Loan Documents constitute a single,
integrated written contract expressing the entire agreement of the parties
hereto relative to the subject matter hereof. No covenants, agreements,
representations, or warranties of any kind whatsoever have been made by any
party hereto with respect to the subject matter hereof, except as specifically
set forth in this Agreement or the Loan Documents.

k.     If any provision of this Agreement is found to be illegal, invalid, or
unenforceable under present or future laws effective during the term of this
Agreement, such provisions shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
never comprised a part of this Agreement; and the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by severance from this
Agreement.

1.     The parties represent and warrant that all of the waivers,
warranties, and promises set forth in this Agreement are made after an
opportunity to consult with legal counsel of their choosing and with an
understanding of their significance and consequence and that they are
reasonable.

m.     The parties hereto expressly acknowledge and agree that time is of
the essence and that all deadlines and time periods provided for under this
Agreement are ABSOLUTE AND FINAL.

n.     This Agreement may be executed and delivered in two or more
counterparts, each of which, when so executed and delivered, shall be an
original, and such counterparts together shall constitute but one and the same
instrument and agreement, and the Agreement shall not be binding on any party
until all parties have executed it.

o.     To the extent that any term, provision or condition of any of the
Loan Documents conflict with this Agreement, the term, provision or condition of
this Agreement shall control.

p.     Any notice required to be given hereunder shall be given at the
address or facsimile telephone number set forth across from the signature of
each party hereto. Any notice given by U.S. mail shall be deemed given no later
than three (3) days after placed in the U.S. mail; any notice given by
facsimile, messenger or hand delivery, when sent; and any notice by overnight
mail service such as Federal Express, the following day.

                      [This Space Intentionally Left Blank]

                                                                          /s/ GM
                                                                          /s/ TS

                                       13
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have approved and executed this
Agreement as of the date and year first written above.

CHINATRUST BANK (U.S.A.),                 Address:
A California banking corporation          22939 Hawthorne Boulevard
                                          Torrance, California 90505
                                          Attn: Glenn Murakami
By:  /s/ Glenn Murakami                   Telephone No.: (310) 791-2828
Name: Glenn Murakami                      Facsimile No.: (310) 791-8398
Title: Vice President

I/OMAGIC CORPORATION                      Address:
A Nevada corporation                      1300 Wakeham Avenue
                                          Santa Ana, California 92705
                                          Attn: Tony Shahbaz
By:  /s/ Tony Shahbaz                     Telephone No.: (714) 953-3000
Name: Tony Shahbaz                        Facsimile No.: (714) 648-0111
Title: President

                                       14
<PAGE>

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