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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 14, 1997
QUARTERDECK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-19207 95-4320650
(STATE OR OTHER (COMMISSION FILE (I.R.S. EMPLOYER
JURISDICTION OF NUMBER) IDENTIFICATION NO.)
INCORPORATION)
13160 Mindanao Way, Marina del Rey, California 90292
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 309-3700
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ITEM 5. OTHER EVENTS.
On April 14, 1997, Quarterdeck Corporation announced that it has entered
into a new $12 million lending facility with Greyrock Business Credit, a
division of NationsBank. The new line of credit replaces the prior line it had
with Bank of America, N.T. and S.A. A copy of the press release dated April
14, 1997 with respect to the new line of credit is filed herewith as exhibit
99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
The following are filed as exhibits to this Current Report
on Form 8-K:
99.1 Press Release dated April 14, 1997.
99.2 Loan and Security Agreement dated April 1, 1997 between
Quarterdeck Corporation as Borrower and Greyrock
Business Credit as Lender
99.3 Schedule to Loan and Security Agreement dated April 1,
1997 between Quarterdeck Corporation as Borrower and
Greyrock Business Credit as Lender
99.4 Form of Continuing Guaranty dated April 1, 1997 between
certain Quarterdeck Corporation Subsidiaries and
Greyrock Business Credit
99.5 Form of Security Agreement dated April 1, 1997 between
certain Quarterdeck Corporation Subsidiaries and
Greyrock Business Credit
99.6 Standby Agreement dated April 1, 1997 between
Quarterdeck Corporation as Borrower and Greyrock
Business Credit as Lender
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
QUARTERDECK CORPORATION, a Delaware
corporation
By: /s/ Frank R. Greico
-----------------------------------
Name: Frank R. Greico
Title: Senior Vice President and
Chief Financial Officer
April 28, 1997
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EXHIBIT 99.1
_____________________________________________________CONTACT:
Ana Thorne
Quarterdeck Corporation
310-309-3787
[email protected]
FOR IMMEDIATE RELEASE
Sue Bohle
The Bohle Company
310-785-0515
[email protected]
Fiona Ross
Financial Relations Board
310-442-0599
[email protected]
(for financial information only)
QUARTERDECK CORPORATION SECURES NEW $12M LINE OF CREDIT
- NEW CREDIT FACILITY OFFERS COMPANY GREATER AVAILABILITY -
MARINA DEL REY, CALIF. - APRIL 14, 1997 - Quarterdeck Corporation
(Nasdaq:QDEK) today announced it has closed a new $12 million lending facility
with a division of NationsBank. This new line of credit, which replaces an
existing credit facility, offers the company extended accessibility.
"We are pleased that this new line offers significantly greater availability
through an expanded borrowing base," said Curtis Hessler, president and CEO of
Quarterdeck Corporation. "This credit facility, with fewer restrictions, gives
the company increased borrowing flexibility."
Quarterdeck's cash balance at the end of the 1997 March quarter was in
excess of $9 million. In addition, during the quarter the company repaid
approximately $1.75 million of bank debt.
- MORE -
QUARTERDECK CORPORATION SECURES NEW $12M LINE OF CREDIT
PAGE 2 OF 2
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ABOUT QUARTERDECK
Quarterdeck Corporation is a developer and marketer of utilities and
communications software for small business, home office, corporate, government
and individual personal computer users.
Its worldwide headquarters are in Marina del Rey, California, with Dublin,
Ireland serving as its European headquarters. Further information on the
company and its products may be obtained by calling 800-683-6696 toll free, or
813-523-9700, by accessing Quarterdeck's Web site at http://www.quarterdeck.com,
or by sending email requests to [email protected].
NOTE TO EDITORS: If you would like more information on Quarterdeck
Corporation and its products, please view the Quarterdeck Press Center at
http://www.quarterdeck.com/qdeck/press.
Quarterdeck is a registered trademark of Quarterdeck Corporation or its
subsidiaries. All other brands and products referenced herein are the
trademarks or registered trademarks of their respective holders.
This release contains forward-looking statements which are made pursuant to
the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. Expressions of future goals and similar expressions reflecting something
other than historical fact are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements. These
forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
technologies, successful integration of acquisitions, the ability to secure
additional sources of financing, the ability to reduce operating expenses and
other factors described in the Company's filings with the Securities and
Exchange Commission. The actual results that the Company achieves may differ
materially from any forward-looking statements due to such risks and
uncertainties. The Company undertakes no obligations to revise or update any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this release.
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TO CONTACT QUARTERDECK:
PRODUCT INFORMATION: 800-683-6696
813-523-9700
813-523-2391 FAX
Q/FAX PRODUCT INFO.: 800-371-4566
ONLINE STORE: http://www.qdeck.com/qdeck/howbuy
CUSTOMER SERVICE: 800-354-3222
573-443-3282
800-354-3329 FAX
[email protected]
TECHNICAL SUPPORT: Forum.qdeck.com
573-875-0932 Utilities
573-875-0530 Procomm Plus
573-499-4558 IWARE Connect
800-339-1136 Priority Support
WEB SITE: http:/www.quarterdeck.com
COMPUSERVE: GO QUARTERDECK
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EXHIBIT 99.2
Greyrock
Business
Credit
A NationsBank Company
LOAN AND SECURITY AGREEMENT
BORROWER: QUARTERDECK CORPORATION
ADDRESS: 13160 MINDANAO WAY
MARINA DEL REY, CA 90292
DATE: APRIL 1, 1997
This Loan and Security Agreement is entered into on the above date
between GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial
Corporation ("GBC"), whose address is 10880 Wilshire Boulevard, Suite 950, Los
Angeles, California 90024 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. GBC will make loans to Borrower (the "Loans"), up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing. If at any time or for any
reason the total of all outstanding Loans and all other Obligations exceeds the
Credit Limit, Borrower shall pay the amount of the excess to GBC, without
notice or demand within one Business Day.
1.2 INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement or in another written agreement signed
by GBC and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in GBC's discretion, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans.
1.3 FEES. Borrower shall pay GBC the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to GBC and are not
refundable. Borrower shall not pay any fees
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Greyrock Business Credit Loan and Security Agreement
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other than those expressly provided for herein and on the Schedule.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all
of the Obligations when due, Borrower hereby grants to GBC a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment, Receivables, Investment Property and General Intangibles,
including, without limitation, all of Borrower's Deposit Accounts, all money,
all collateral in which GBC is granted a security interest pursuant to any
other present or future agreement including all Additional Collateral, all
property now or at any time in the future in GBC's possession, and all proceeds
(including proceeds of any insurance policies, proceeds of letters of credit,
proceeds of proceeds and claims against third parties), all products of the
foregoing, and all books and records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true except as expressly
provided below and for changes pursuant to written notice by Borrower to GBC
which are approved by GBC, and that Borrower will at all times comply with all
of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower is
and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a Material Adverse
Effect. The execution, delivery and performance by Borrower of this Agreement,
and all other documents contemplated hereby (i) have been duly and validly
authorized, (ii) are enforceable against Borrower in accordance with their
terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and
(iv) do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give GBC 30 days prior written notice before changing
its name or doing business under any other name. Borrower has complied, and
will in the future comply, with all laws relating to the conduct of business
under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule except for sales offices at which not more
than $50,000 of Collateral (other than Inventory) is located. Borrower will
give GBC at lease 30 days' prior written notice before opening any additional
place of business, changing its chief executive office, or moving any of the
Collateral
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Greyrock Business Credit Loan and Security Agreement
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to any new location not previously reported to GBC, provided that no such notice
is required in respect of Collateral (other than Inventory) which is moved to a
location within a jurisdiction in which GBC already has taken all necessary
action in order to protect and perfect its security interest therein other than
Borrower's Address or one of the locations set forth on the Schedule except as
disclosed to GBC in writing and approved by GBC and except to the extent
provided under leases with respect to which the landlord has entered into a
Landlord's Waiver and Agreement in recordable form and satisfactory to GBC,
acknowledging GBC's prior security interest in the Collateral and providing
access for GBC to the Collateral and the premises.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GBC and the Collateral against all claims of
others. So long as any Loan is outstanding which is a term loan, none of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become
a lessee under any real property lease pursuant to which the lessor may obtain
any rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises except as disclosed to GBC in writing and
approved by GBC and except to the extent provided under leases with respect to
which the landlord has entered into a Landlord's waiver and Agreement in
recordable form and satisfactory to GBC, acknowledging GBC's prior security
interest is the Collateral and providing access for GBC to the Collateral and
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by GBC,
use its best efforts to cause such third party to execute and deliver to GBC,
in form acceptable to GBC, such waivers and subordinations as GBC shall
specify, so as to ensure that GBC's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located. Notwithstanding the foregoing, if no Event of Default exists
hereunder, Borrower may incur indebtedness from another lender secured by a
first priority lien on Equipment, and GBC will enter into such subordination
agreement as such lender shall reasonably request in connection therewith. If
no Event of Default exists, and if required by any such lender in connection
with such Equipment financing, GBC will release its security interest in the
Equipment which is security for such indebtedness, and any identifiable
proceeds (including insurance proceeds) thereof. GBC will promptly execute and
deliver to borrower such documents and instruments reasonably requested by
Borrower as shall be necessary to evidence any such release of the security
interest given by Borrower to GBC in such Equipment.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, ordinary wear and tear excepted, and Borrower will
not use the Collateral for any unlawful purpose. Borrower will promptly and in
any event within one Business Day advise GBC in writing of any material loss or
damage to the Collateral. Borrower will maintain the validity of, and
otherwise maintain, preserve and protect, its patents, trademarks, copyrights
and other intellectual property in accordance with prudent business practices.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
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Greyrock Business Credit Loan and Security Agreement
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prepared in conformity with generally accepted accounting principles and now
and in the future will completely and fairly reflect the financial condition of
Borrower in all material respects, at the times and for the periods therein
stated, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Between the last date covered
by any such statement provided to GBC and the date hereof, there has been no
Material Adverse Effect. Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
filed, and will timely file or will file within a reasonable period upon
notification of a delinquent return by a taxing authority, all tax returns and
reports required by applicable law, and Borrower has paid, and will timely pay,
all applicable material taxes, assessments, deposits and contributions now or
in the future owed by Borrower where failure to do so could reasonably be
expected to have a Material Adverse Effect. Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies GBC in writing
of the commencement of, and any material development in, any proceedings where
the assessment may exceed $1,000,000, and (iii) posts bonds or takes any other
steps required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any
of Borrower's prior tax years which could result in additional material taxes
becoming due and payable by Borrower other than as set forth in the Schedule.
Borrower has paid, and shall continue to pay all amounts necessary to fund all
present and future pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower which could reasonably be expected to have a
Material Adverse Effect, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in
all material respects, with all provisions of all applicable laws and
regulations, including, but not limited to, those relating to Borrower's
ownership of real or personal property, the conduct and licensing of Borrower's
business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which could reasonably be expected to result in a Material Adverse
Effect. Borrower will promptly inform GBC in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against Borrower involving any single claim of $250,000 or more, or involving
$500,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
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Greyrock Business Credit Loan and Security Agreement
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4. RECEIVABLES AND INVESTMENT PROPERTY.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to GBC that each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, represent an
undisputed, bona fide, existing, unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods, the licensing of
software, or the rendition of services, in the ordinary course of Borrower's
business or Irish Subsidiary's business (except as disclosed to and approved by
GBC), AND SHALL MEET THE MINIMUM ELIGIBILITY REQUIREMENTS SET FORTH IN SECTION
8 BELOW.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to GBC as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct in all material
respects and all such invoices, instruments and other documents and all of
Borrower's and Irish Subsidiary's books and records are and shall be genuine
and in all respects what they purport to be, and all signatories and endorsers
have the capacity to contract. All sales and other transactions underlying or
giving rise to each Receivable shall comply with all applicable laws and
governmental rules and regulations in all material respects. All signatures
and indorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT
PROPERTY. Borrower shall deliver to GBC transaction reports and loan requests,
schedules and assignments of all Receivables, and schedules of collections, as
set forth in the Schedule or as GBC shall reasonably request, all on GBC's
standard forms, or on such other forms as shall be reasonably satisfactory to
GBC; provided, however, that Borrower's failure to execute and deliver the same
shall not affect or limit GBC's security interest and other rights in all of
Borrower's and Irish Subsidiary's Receivables, nor shall GBC's failure to
advance or lend against a specific Receivable affect or limit GBC's security
interest and other rights therein. If at any time requested by GBC, together
with each such schedule and assignment, or later if requested by GBC, Borrower
shall furnish GBC with copies (or, at GBC's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence
of delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to GBC an aged accounts receivable trial balance in
such form and at such intervals as GBC shall reasonably request. In addition,
Borrower shall deliver to GBC the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Receivables, promptly, and in any event within one Business Day,
of receipt thereof and in the same form as received, with all necessary
indorsements, and, upon the request of GBC, Borrower shall deliver to GBC all
letters of credit and also all certificated securities with respect to any
Investment Property, with all necessary indorsements, and obtain such account
control agreements with securities intermediaries and take such other action
with respect to any Investment Property, as GBC shall reasonably request, in
form and substance satisfactory to GBC. Upon request of GBC Borrower
additionally shall obtain consents from any letter of credit issuers with
respect to the assignment to GBC of any letter of credit proceeds.
4.4 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME.
Borrower* shall have the right to collect all Receivables and retain all
Investment Property payments and distributions, unless and until a Default or
an Event of Default has occurred. Borrower shall hold all payments on, and
proceeds of, and distributions with respect to, Receivables and Investment
Property in trust for GBC, and Borrower shall deliver all such payments,
proceeds and distributions to GBC, within
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Greyrock Business Credit Loan and Security Agreement
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one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall
determine, except that unless GBC shall request daily delivery in kind of such
payments, proceeds and distributions, Borrower shall instead make such delivery
at least once a week and either in original form or such other form as shall be
reasonably satisfactory to GBC. If a Default of an Event of Default has
occurred, Borrower shall cause Irish Subsidiary to hold all payments on, and
proceeds of, and distributions with respect to, Irish Subsidiary's Receivables
in trust for GBC, and cause Irish Subsidiary to deliver all such payments,
proceeds and distributions to GBC, within one business day after receipt of the
same, in their original form, duly endorsed, to be applied to the Obligations
in such order as GBC shall determine. Upon the request of GBC, any such
distributions and payments with respect to any Investment Property held in any
securities account shall be held and retained in such securities account as
part of the Collateral.
4.5 DISPUTES. Borrower shall notify GBC promptly of all disputes or
claims in excess of $50,000 relating to Receivables on the regular reports to
GBC. Borrower shall not forgive, or settle any Receivable for less than
payment in full, or agree to do any of the foregoing (or permit Irish
Subsidiary to do any of the foregoing, except that each of Irish Subsidiary and
Borrower may do so, provided that: (i) Borrower or Irish Subsidiary as the case
may be does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or
Event of Default has occurred and is continuing; and (iii) taking into account
all such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall determine the reason for such
return and issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to GBC) in accordance with the Borrower's usual and
customary practices. In the event any attempted return involving a material
amount of inventory occurs after the occurrence of any Event of Default,
Borrower shall (i) not accept any return without GBC's prior written consent,
(ii) hold the returned Inventory in trust for GBC, (iii) segregate all returned
Inventory from all of Borrower's other property, (iv) conspicuously label the
returned Inventory as GBC's property, and (v)promptly, and in any event within
one Business Day, notify GBC of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned Inventory,
and on GBC's request deliver such returned Inventory to GBC. For purposes of
the foregoing Section 4.6, a return of Inventory is material if it involves
$50,000 or more.
4.7 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower, Irish Subsidiary or GBC or such other name as GBC may choose, and
GBC or its designee may, at any time, notify Account Debtors that it has a
security interest in the Receivables.
4.8 NO LIABILITY. GBC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Borrower's
or Irish Subsidiary's obligations under any contract or agreement giving rise
to a Receivable. Nothing herein shall, however, relieve GBC from liability for
its own gross negligence or willful misconduct.
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5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all times, in full
force and effect. All such insurance policies shall name GBC as an additional
loss payee, and shall contain a lenders loss payee endorsement in form
reasonably acceptable to GBC. Upon receipt of the proceeds of any such
insurance, GBC shall apply such proceeds in reduction of the Obligations as GBC
shall determine in its sole discretion, except that, provided no Default or
Event of Default has occurred and is continuing, GBC shall release to Borrower
insurance proceeds with respect to Equipment totaling less than $250,000, which
shall be utilized by Borrower for the replacement of the Equipment with respect
to which the insurance proceeds were paid. GBC's interest in, and right to
receive, any such insurance proceeds shall be subject to the rights of any
permitted senior lender with respect thereto. GBC may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower
fails to provide or pay for any insurance, GBC may, but is not obligated to,
obtain the same at Borrower's expense. Borrower shall promptly deliver to GBC
copies of all reports made to insurance companies involving claims in excess of
$50,000.
5.2 REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as GBC shall from time to time reasonably
specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's and any of
Borrower's subsidiaries books and records. GBC shall take reasonable steps to
keep confidential all information obtained in any such inspection or audit, but
GBC shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The foregoing inspections and audits shall be at Borrower's expense
and the charge therefor shall be $600 per person per day (or such higher amount
as shall represent GBC's then current standard charge for the same), plus
reasonable out-of-pockets expenses. Borrower shall not be charged more than
$3,000 per audit (plus reasonable out-of-pockets expenses), nor shall audits be
done more frequently than four times per calendar year, provided that the
foregoing limits shall not apply after the occurrence of a Default or Event of
Default, nor shall they restrict GBC's right to conduct audits at its own
expense (whether or not a Default or Event of Default has occurred). Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than
Borrower's Address, without first obtaining GBC's written consent, which may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give GBC the same rights with respect to access to books and
records and related rights as GBC has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or
other disposition of any Collateral shall be delivered, in kind, by Borrower to
GBC in the original form in which received by Borrower not later than the
following business day after receipt by Borrower, to be applied to the
Obligations in such order as GBC shall determine; provided that, if no Default
or Event of Default has occurred and is continuing, and if no term loan is
outstanding hereunder, then Borrower shall not be obligated to remit to GBC the
proceeds of the sale of Equipment which is sold in the ordinary course of
business, in a good-faith arm's length transaction nor shall Borrower be
required to remit to GBC the proceeds of the Permitted Dispositions (as defined
in Section 5.5 (iv) below), unless such proceeds consist of the proceeds of the
sale or disposition of any Inventory; additionally, this Section 5.4 shall be
subject to the terms of Section 4.4. Except for the proceeds of the sale of
Equipment as
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set forth above, Borrower shall not commingle proceeds of Collateral with any
of Borrower's other funds or property, and shall hold such proceeds separate
and apart from such other funds and property and in an express trust for GBC.
Nothing in this Section limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity, except
that (a) any of Borrower's subsidiaries may merge with or consolidate into
Borrower, and (b) Borrower may merge with or consolidate into any other Person,
provided that (1) Borrower is the surviving corporation, (2) no such merger or
consolidation shall be made while there exists any Event of Default or if an
Event of Default would occur as a result thereof, (3) such Person is engaged in
business activities (including development activities) or operations
substantially similar to or related to present software and other business
activities and operations of Borrower and its subsidiaries, (4) such
transaction is undertaken in accordance with all requirements or law, and (5)
GBC is given at least 15 days prior notice of such transaction, and GBC has
notified Borrower in writing that all steps necessary to protect the validity
and perfection of GBC's first-priority security interest in the Collateral,
subject to Permitted Liens, have been taken; (ii) acquire any assets, except in
the ordinary course of business except (a) Borrower may acquire assets of its
wholly owned subsidiaries, and (b) in a transaction or a series of transactions
not involving the payment of an aggregate amount in excess of $2,000,000 in any
fiscal year, provided in either such case that no Event of Default shall exist
either immediately prior to or after giving effect to the transaction; (iii)
enter into any other transaction outside the ordinary course of business; (iv)
sell or transfer any Collateral or permit any subsidiary to sell or transfer
any property or assets, except that, provided no Default or Event of Default
has occurred and is continuing, Borrower may (a) sell finished Inventory in the
ordinary course of Borrower's business, (b) if no term loan is outstanding
hereunder, sell Equipment in the ordinary course of business, in good-faith
arm's length transactions, (c) license or sublicense and grant distribution and
similar rights (and rights incidental thereto) to OEMs, third party publishers,
distributors and others intellectual property in the ordinary course of
Borrower's business (d) provided no Event of Default shall exist either
immediately prior to or after giving effect to the transaction, Borrower or any
subsidiary of Borrower may enter into any sale and leaseback transaction
covering its fixed or capital assets if the aggregate indebtedness (including
any capital leases) incurred in connection therewith by Borrower and its
subsidiaries does not exceed $7,500,000 in aggregate principal amount at any
one time outstanding, (e) provided no Event of Default shall exist either
immediately prior to or after giving effect to the transaction, Borrower or any
subsidiary of Borrower may sell or dispose of the following: (1) up to $500,000
of Equipment in the aggregate for Borrower and its subsidiaries in any fiscal
year (valued at fair market value), (2) additional Equipment exceeding the
foregoing $500,000 limit in any fiscal year with the consent of GBC (such
consent not be unreasonably withheld or delayed), and (3) other assets
(excluding the CleanSweep, MagnaRam, ProComm, PartitionIt, ZipIt, NameIt,
RemoveIt, and FixIt products, and any related Collateral with respect thereto,
and excluding any Receivables) outside of the ordinary course of business not
exceeding in the aggregate $15,000,000 for Borrower and its subsidiaries in any
fiscal year (with each such asset to be valued at fair market value) (any such
permitted disposition referred to in clauses (1), (2) and (3) above hereinafter
a "Permitted Disposition") and (f) a subsidiary of Borrower may enter into any
sale or disposal as permitted under any other present or future agreement
between it and GBC, (v) store any Inventory or other Collateral with any
warehouseman or other third party except after GBC has notified Borrower in
writing that all steps necessary to protect the validity, perfection and
enforceability of GBC's first-priority security interest in the Inventory,
subject to Permitted Liens, has been taken; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis, except
in accordance with Borrower's usual and customary practices, as disclosed in
writing to GBC; (vii) make any loans of any money or other assets, except (a)
advances to subsidiaries of Borrower, and guarantees of the obligations of
subsidiaries, in each case, if created or made in the ordinary course of
business, (b) travel advances in the ordinary course of business, (c) employee
relocation loans in the ordinary course of business, (d) other employee loans
and advances in the ordinary course of business, (e) investments in cash
equivalents and short-term marketable securities; (f) extensions of credit in
the nature of accounts receivable or notes receivable arising from the sale or
lease of goods or services in the ordinary course of business; (g) investments
incurred in order to consummate acquisitions and other transactions otherwise
permitted hereunder; investments in existence on the date
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hereof and disclosed in writing to GBC and extensions, renewals and
restructurings thereof, provided that the amount thereof is not increased
unless such increase is otherwise permissible hereunder; and (i) other loans,
advances or other extensions of credit or investments in an aggregate amount
not to exceed $1,000,000 at any one time, and provided , further, that no Event
of Default shall exist either immediately prior to or after giving effect to
the making of any of the foregoing advances, loans or other extensions of
credit; (viii) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect, or incur any debts if after and giving
effect to such incurrence the "Senior Debt" (as defined in Borrower's Note
Agreement dated as of March 1, 1996 for its 6.0% Convertible Senior
Subordinated Notes due March 31, 2001) of Borrower would exceed $40,000,000 in
aggregate principal amount at any one time outstanding; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity other than endorsements of instruments or items of payment for
collection in the ordinary course of business, obligations pursuant to
Borrower's bylaws or in indemnification agreements, to indemnify officers,
directors and employees of Borrower in connection with the performance of their
duties for Borrower, and the guarantees of the obligations of Borrower's
subsidiaries described above, (x) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); (xi) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock except from current or former employees, directors or
consultants of Borrower under the terms of any stock option or stock purchase
plans or agreements up to a maximum of $500,000 in any one fiscal year; (xii)
make any change in Borrower's capital structure which would have a Material
Adverse Effect; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do
any of the foregoing. In connection with any Permitted Disposition referred to
in Section 5.5(iv) above GBC will promptly execute and deliver to Borrower such
documents and instruments reasonably requested by Borrower as shall be
necessary to evidence the release of GBC's security interest in the assets
which are the subject of the Permitted Disposition.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against GBC with respect to any Collateral or in
any manner relating to Borrower, Borrower shall, without expense to GBC, make
available Borrower and its officers, employees and agents, and Borrower's books
and records subject to the preservation of the attorney-client privilege,
without charge, to the extent that GBC may deem them reasonably necessary in
order to prosecute or defend any such suit or proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in
writing of any change in its executive officers or directors, the opening of
any new bank account or other deposit account, the opening of any new
securities account, and any Material Adverse Effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by GBC, to execute all documents and take all actions, as GBC may deem
reasonably necessary or useful in order to perfect and maintain GBC's perfected
security interest in the Collateral, and in order to fully consummate the
transactions contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
GBC may sustain or incur based upon or arising out of any of the Obligations,
any actual or alleged failure to collect and pay over any withholding or other
tax relating to Borrower or its employees, any relationship or agreement
between GBC and Borrower, any actual or alleged failure of GBC to comply with
any writ of attachment or other legal process relating to Borrower or any of
its property, or any other matter, cause or thing whatsoever occurred, done,
omitted or suffered to be done by GBC relating to
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Borrower or the Obligations (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of GBC or any of its
directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing GBC). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GBC; or (ii) by GBC at any time after
the occurrence of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by GBC under this Section 6.2,
Borrower shall pay to GBC a termination fee (the "Termination Fee") in the
amount shown on the Schedule. The Termination Fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding letters
of credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GBC, then on such date Borrower shall provide to GBC
cash collateral in an amount equal to 110% of the face amount of all such
letters of credit plus all interest, fees and costs due or (in GBC's
estimation) likely to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to GBC's then standard
form cash pledge agreement. Notwithstanding any termination of this Agreement,
all of GBC's security interests in all of the Collateral and all of the terms
and provisions of this Agreement shall continue in full force and effect until
all Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to certain conditions, GBC may, in its
sole discretion, refuse to make any further Loans after termination. No
termination shall in any way affect or impair any right or remedy of GBC, nor
shall any such termination relieve Borrower of any Obligation to GBC, until all
of the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
GBC shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate GBC's security interests.
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7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give GBC immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to GBC by
Borrower or any Guarantor or any of Borrower's or any Guarantor's officers,
employees or agents, now or in the future, shall be untrue or misleading in a
material respect as of the time or deemed made; or (b) Borrower shall fail to
pay when due any Loan or any interest thereon or any other monetary Obligation
and in the case of any amount other than principal, such default shall continue
for three Business Days; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit (except to the extent
authorized by GBC in writing) and which excess continues for three Business
Days; or (d) Borrower shall fail to perform any non-monetary Obligation which
by its nature cannot be cured; or (e) Borrower shall fail to perform any other
non-monetary Obligation, which failure is not cured within 20 business days
after the date performance is due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or
any part of the Collateral which is not cured within 30 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien, provided that if the amount involved is less than $50,000 then the same
shall not be an Event of Default unless and until the holder of the Permitted
Lien commences any action to enforce its lien against any Collateral; or (h)
Borrower or any Guarantor breaches any material contract or obligation, which
has or may reasonably be expected to have a Material Adverse Effect; or (i)
dissolution, termination of existence, insolvency or business failure of
Borrower or any Guarantor; or appointment of a receiver, trustee or custodian,
for all or any part of the property of, assignment for the benefit of creditors
by, or the commencement of any proceeding by Borrower or any Guarantor under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing or
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any defined "Event of Default" shall occur under any Irish Document or under
any Security Agreement or guaranty entered into by any other Guarantor in favor
of GBC; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset pledged by any other Person to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such Person under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect; or (m) Borrower
or any Guarantor makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 30% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of GBC; or (o) Borrower or any Guarantor shall
generally not pay its debts as they become due, or Borrower or any Guarantor
shall conceal, remove or transfer any part of its property, with intent to
hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or (p) there occurs any Material Adverse Effect.
GBC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence and during the continuance
of any Event of Default, GBC, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following: (a) Cease making Loans or otherwise extending credit
to Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes GBC without judicial process to
enter onto any of Borrower's premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as GBC deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should GBC seek to take possession of
any of the Collateral by Court process, Borrower hereby irrevocably waives: (i)
any bond and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover
possession thereof; and (iii) any requirement that GBC retain possession of,
and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and make it
available to GBC at places designated by GBC which are reasonably convenient to
GBC and Borrower, and to remove the Collateral to such locations as GBC may
deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, GBC shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time GBC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GBC shall have the right to
conduct such disposition on Borrower's premises without charge, for such time
or times as GBC deems reasonable, or on GBC's premises, or elsewhere and the
Collateral need not be located at the place of disposition. GBC may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as
to title or physical condition or otherwise at the time of sale; (g) Demand
payment of, and collect any Receivables and General Intangibles comprising
Collateral and, in connection therewith, Borrower irrevocably authorizes GBC to
endorse or sign Borrower's name on all collections, receipts, instruments and
other documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of the Collateral or
proceeds thereof, and, in GBC's sole discretion, to grant extensions of time to
pay, compromise
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claims and settle Receivables, General Intangibles and the like for less than
face value; (h) Collect, receive, dispose of and realize upon any Investment
Property, including withdrawal of any and all funds from any securities
accounts; and (i) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GBC with respect to
the foregoing shall be added to and become part of the Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and GBC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least ten days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by GBC,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, GBC may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. GBC shall be free to employ other methods of
noticing and selling the Collateral, in its discretion, if they are
commercially reasonable. Without limiting the generality of the foregoing,
Borrower recognizes that GBC may be unable to make a public sale of any or all
of the Investment Property, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the
continuance of any Event of Default, without limiting GBC's other rights and
remedies, Borrower grants to GBC an irrevocable power of attorney coupled with
an interest, authorizing and permitting GBC (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to
do any or all of the following, in Borrower's name or otherwise, but GBC agrees
to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that GBC may, in its sole
discretion, deem advisable in order to perfect and maintain GBC's security
interest in the Collateral, or in order to exercise a right of Borrower or GBC,
or in order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements entered into by the
parties; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part
of GBC's Collateral or in which GBC has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any
Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into GBC's
possession; (e) Endorse all checks and other forms of remittances received by
GBC; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same;
(g) Grant extensions of time to pay, compromise claims and settle Receivables
and General Intangibles for less than face value and execute all releases and
other documents in connection therewith; (h) Pay any sums required on account
of Borrower's taxes or to secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim that relates
to any of the Collateral and obtain payment therefor; (j) Instruct any third
party having custody or control of any books or records belonging to, or
relating to, Borrower to give GBC the same rights of access and other rights
with respect thereto as GBC has under this Agreement; (k) Execute and deliver
to any securities intermediary or other Person any entitlement order, account
control agreement or other notice, document or instrument with
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respect to any Investment Property; and (l) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other present or future
agreements entered into by the parties. Any and all reasonable sums paid and
any and all reasonable costs, expenses, liabilities, obligations and reasonable
attorneys' fees incurred by GBC with respect to the foregoing shall be added to
and become part of the Obligations, shall be payable on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. In no event shall GBC's rights under the foregoing power of
attorney or any of GBC's other rights under this Agreement be deemed to
indicate that GBC is in control of the business, management or properties of
Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale or other disposition of the Collateral shall be applied by GBC first to
the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If, GBC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GBC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GBC of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"Account Debtor" means the obligor on a Receivable.
"ADDITIONAL COLLATERAL" MEANS ALL PROPERTY AND INTERESTS IN PROPERTY
AND PROCEEDS THEREOF DESCRIBED AS COLLATERAL IN THE IRISH SECURITY AGREEMENT.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security
Agreement and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
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Greyrock Business Credit Loan and Security Agreement
- -------------------------------------------------------------------------------
"Default" means any event which with notice or passage of time or
both, would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Inventory" means Inventory which GBC, in its reasonable
business judgment, deems eligible for borrowing, based on such considerations
as GBC may from time to time deem appropriate. Without limiting the fact that
the determination of which Inventory is eligible for borrowing is a matter of
GBC's reasonable business judgment, Inventory which does not meet the following
requirements will not be deemed to be Eligible Inventory: Inventory which (i)
consists of finished goods, in good, new and salable condition which is not
perishable, not obsolete or unmerchantable, and is not comprised of raw
materials, work in process, packaging materials or supplies; (iii) meets all
applicable governmental standards; (iv) has been manufactured in compliance
with the Fair Labor Standards Act; (v) conforms in all respects to the
warranties and representations set forth in this Agreement; (vi) is at all
times subject to GBC's duly perfected, first priority security interest; and
(vii) is situated at a one of the locations set forth on the Schedule.
"Eligible Receivables" means unconditional Receivables arising in the
ordinary course of Borrower's or Irish Subsidiary's business from the completed
sale of goods or rendition of services or the licensing of software, which GBC,
in its reasonable business judgment, shall deem eligible for borrowing, based
on. THE FOLLOWING MINIMUM REQUIREMENTS (THE "MINIMUM ELIGIBILITY
REQUIREMENTS") FOR A RECEIVABLE TO BE AN ELIGIBLE RECEIVABLE: (I) THE
RECEIVABLE MUST NOT BE OUTSTANDING FOR MORE THAN 120 DAYS FROM ITS INVOICE
DATE, (II) THE RECEIVABLE MUST NOT REPRESENT PROGRESS BILLINGS, OR BE DUE UNDER
A FULFILLMENT OR REQUIREMENTS CONTRACT WITH THE ACCOUNT DEBTOR, (III) THE
RECEIVABLE MUST NOT BE SUBJECT TO ANY CONTINGENCIES (INCLUDING RECEIVABLES
ARISING FROM SALES ON CONSIGNMENT, GUARANTEED SALE OR OTHER TERMS PURSUANT TO
WHICH PAYMENT BY THE ACCOUNT DEBTOR MAY BE CONDITIONAL), (IV) THE RECEIVABLE
MUST NOT BE OWING FROM AN ACCOUNT DEBTOR WITH WHOM THE BORROWER OR IRISH
SUBSIDIARY HAS ANY DISPUTE (WHETHER OR NOT RELATING TO THE PARTICULAR
RECEIVABLE), (V) THE RECEIVABLE MUST NOT BE OWING FROM AN AFFILIATE OF
BORROWER, (VI) THE RECEIVABLE MUST NOT BE OWING FROM AN ACCOUNT DEBTOR WHICH IS
SUBJECT TO ANY INSOLVENCY OR BANKRUPTCY PROCEEDING, OR WHOSE FINANCIAL
CONDITION IS NOT ACCEPTABLE TO GBC, OR WHICH FAILS OR GOES OUT OF A MATERIAL
PORTION OF ITS BUSINESS, (VII) THE RECEIVABLE MUST NOT BE OWING FROM THE UNITED
STATES OR ANY DEPARTMENT, AGENCY OR INSTRUMENTALITY THEREOF (UNLESS THERE HAS
BEEN COMPLIANCE, TO GBC'S SATISFACTION, WITH THE UNITED STATES ASSIGNMENT OF
CLAIMS ACT), (VIII) EXCEPT FOR RECEIVABLES OF IRISH SUBSIDIARY, THE RECEIVABLE
MUST NOT BE OWING FROM AN ACCOUNT DEBTOR LOCATED OUTSIDE THE UNITED STATES OR
CANADA (UNLESS PRE-APPROVED BY GBC IN ITS REASONABLE BUSINESS JUDGMENT IN
WRITING, OR BACKED BY A LETTER OF CREDIT SATISFACTORY TO GBC, OR FCIA INSURED
SATISFACTORY TO GBC), (IX) THE RECEIVABLE MUST NOT BE OWING FROM AN ACCOUNT
DEBTOR TO WHOM BORROWER OR IRISH SUBSIDIARY IS OR MAY BE LIABLE FOR GOODS
PURCHASED FROM SUCH ACCOUNT DEBTOR OR OTHERWISE, (X) THE RECEIVABLE MUST NOT
VIOLATE ANY REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT, (XI) THE
RECEIVABLE MUST NOT BE ONE IN WHICH GBC DOES NOT HAVE A FIRST-PRIORITY, VALID,
PERFECTED SECURITY INTEREST, (XII) THE RECEIVABLE MUST NOT BE ONE WHICH GBC, IN
ITS REASONABLE BUSINESS JUDGMENT, BELIEVES THE COLLECTION OF WHICH IS INSECURE
OR MAY NOT BE PAID BY REASON OF THE ACCOUNT DEBTOR'S FINANCIAL INABILITY TO
PAY, AND (XIII) BORROWER AND EACH OF ITS SUBSIDIARIES MUST BE IN COMPLIANCE
WITH SECTION 5(E) OF THE SECURITY AGREEMENT IN COPYRIGHTED WORKS BETWEEN GBC
AND BORROWER, OR SUCH SUBSIDIARY, AS THE CASE MAY BE, WITH RESPECT TO THE
RECEIVABLE (EXCEPT TO THE EXTENT OTHERWISE PERMITTED IN THE SCHEDULE). IF MORE
THAN 50% OF THE RECEIVABLES OWING FROM AN ACCOUNT DEBTOR ARE OUTSTANDING MORE
THAN 120 DAYS FROM THEIR INVOICE DATE (WITHOUT REGARD TO UNAPPLIED CREDITS) OR
ARE OTHERWISE NOT ELIGIBLE RECEIVABLES, THEN ALL RECEIVABLES OWING FROM THAT
ACCOUNT DEBTOR WILL BE DEEMED INELIGIBLE FOR BORROWING.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools,
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Greyrock Business Credit Loan and Security Agreement
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parts, dyes, jigs, goods and other tangible personal property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to any of the foregoing, wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against GBC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the
Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"Investment Property" means any and all investment property of
Borrower, including all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or otherwise,
wherever located, and whether now existing or hereafter acquired or arising.
"IRISH SUBSIDIARY" MEANS QUARTERDECK INTERNATIONAL LIMITED, A COMPANY
ORGANIZED AND EXISTING UNDER THE LAWS OF THE REPUBLIC OF IRELAND AND A
SUBSIDIARY OF BORROWER.
"IRISH DOCUMENTS" MEANS THE IRISH SUBSIDIARY SECURITY AGREEMENT, AND
ALL OTHER CERTIFICATES, DOCUMENTS, AGREEMENTS AND INSTRUMENTS DELIVERED BY
IRISH SUBSIDIARY, OR BORROWER ON BEHALF OF IRISH SUBSIDIARY, TO GBC IN
CONNECTION THEREWITH OR WITH THIS AGREEMENT.
"IRISH SUBSIDIARY SECURITY AGREEMENT" MEANS A GUARANTEE AND DEBENTURE
BETWEEN IRISH SUBSIDIARY AND GBC, IN FORM AND SUBSTANCE SATISFACTORY TO GBC,
PURSUANT TO WHICH IRISH SUBSIDIARY PLEDGES TO GBC, AND GRANTS TO GBC A SECURITY
INTEREST IN, IRISH SUBSIDIARY'S ACCOUNTS RECEIVABLE AND OTHER PROPERTY AND
INTERESTS IN PROPERTY DESCRIBED THEREIN AS SECURITY FOR THE OBLIGATIONS AND
PURSUANT TO WHICH IRISH SUBSIDIARY GUARANTEES THE OBLIGATIONS.
"MATERIAL ADVERSE EFFECT" MEANS ANY EVENT, MATTER, CONDITION OR
CIRCUMSTANCE WHICH (I) HAS OR WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON THE BUSINESS, PROPERTIES,
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Greyrock Business Credit Loan and Security Agreement
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RESULTS OF OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF BORROWER AND ITS
SUBSIDIARIES TAKEN AS A WHOLE; OR (II) AFFECTS THE LEGALITY, VALIDITY, BINDING
EFFECT OR ENFORCEABILITY OF ANY OF THIS AGREEMENT OR ANY RELATED AGREEMENT OR
INSTRUMENT.
"Prime Rate" means the actual "Reference Rate" or the substitute
therefor of Bank of America NT & SA ("B of A") whether or not that rate is the
lowest interest rate charged by B of A. If the Prime Rate, as so defined, is
unavailable on any date of determination, "Prime Rate" shall mean the highest
of the prime rates published in the Wall Street Journal, on such date of
determination, as the base rate on corporate loans at large United States money
center commercial banks, as determined in good faith by GBC, which
determination shall be conclusive absent manifest error.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become
due, including, without limitation, all interest, charges, expenses, fees,
attorney's fees, expert witness fees, audit fees, letter of credit fees, loan
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other present or future
instrument or agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment, including in connection with the sale-leaseback transactions
permitted hereunder; (iii) liens for taxes not yet payable; (iv) additional
security interests and liens which are subordinate to the security interest in
favor of GBC and are consented to in writing by GBC (which consent shall not be
unreasonably withheld); (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course
of business and securing obligations which are not delinquent; (vii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or
(ii) above, provided that any extension, renewal or replacement lien is limited
to the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. GBC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GBC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GBC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's or Irish Subsidiary's now owned
and hereafter acquired accounts (whether or not earned by performance), letters
of credit, contract rights, chattel paper, instruments, documents and all other
forms of obligations at any time owing to Borrower or Irish Subsidiary, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower or Irish Subsidiary, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or secured
party.
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Greyrock Business Credit Loan and Security Agreement
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Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by GBC
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by GBC on account of the Obligations TWO Business Days
after receipt by GBC of immediately available funds. GBC shall not, however,
be required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to GBC in its discretion, and GBC may charge Borrower's
Loan account for the amount of any item of payment which is returned to GBC
unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied to the Obligations, in such order and manner as GBC
shall determine in its sole discretion.
9.3 CHARGES TO ACCOUNT. GBC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GBC, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate
applicable to the Loans.
9.4 MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by GBC), unless Borrower
notifies GBC in writing to the contrary within 90 days after each account is
rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private
delivery service, or by facsimile, or by regular first-class mail, or certified
mail return receipt requested, addressed to GBC or Borrower at the addresses
shown in the heading to this Agreement, or at any other address designated in
writing by one party to the other party. All notices shall be deemed to have
been given upon delivery in the case of notices personally delivered, or at the
expiration of one business day following delivery to the private delivery
service, or one day after the date sent by facsimile, or two business days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 WAIVERS. The failure of GBC at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and GBC shall not waive or
diminish any right of GBC later to demand and receive strict compliance
therewith.
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Greyrock Business Credit Loan and Security Agreement
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Any waiver of any default shall not waive or affect any other default, whether
prior or subsequent, and whether or not similar. None of the provisions of
this Agreement or any other agreement now or in the future executed by Borrower
and delivered to GBC shall be deemed to have been waived by any act or
knowledge of GBC or its agents or employees, but only by a specific written
waiver signed by an authorized officer of GBC and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by GBC on which Borrower is
or may in any way be liable, and notice of any action taken by GBC, unless
expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse GBC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GBC, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GBC incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its
rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim;
examine, audit, copy, and inspect any of the Collateral or any of Borrower's
books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce GBC's security interest in, the Collateral; and otherwise
represent GBC in any litigation relating to Borrower. If either GBC or
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and attorneys' fees, including (but not limited to) reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys' fees and costs
to which GBC may be entitled pursuant to this Paragraph shall immediately
become part of Borrower's Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of GBC, and any prohibited
assignment shall be void. No consent by GBC to any assignment shall release
Borrower from its liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based, and the
service of a summons and
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Greyrock Business Credit Loan and Security Agreement
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complaint on an officer of GBC, or on any other person authorized to accept
service on behalf of GBC, within thirty (30) days thereafter. Borrower agrees
that such one-year period is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year
period provided herein shall not be waived, tolled, or extended except by the
written consent of GBC in its sole discretion. This provision shall survive
any termination of this Loan Agreement or any other present or future
agreement.
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including," whenever used in this Agreement, shall mean "including (but not
limited to)." This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GBC or Borrower under any rule of
construction or otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of GBC and Borrower
shall be governed by the laws of the State of California. As a material part
of the consideration to GBC to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at GBC's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.18 CONFIDENTIALITY. GBC SHALL HOLD ALL NON-PUBLIC INFORMATION
RELATING TO BORROWER AND ITS SUBSIDIARIES OBTAINED BY IT UNDER THIS AGREEMENT
IN ACCORDANCE WITH ITS CUSTOMARY PROCEDURES FOR HANDLING CONFIDENTIAL
INFORMATION OF THIS NATURE, EXCEPT FOR: (I) DISCLOSURE TO ITS AFFILIATES OR TO
ITS COUNSEL OR TO ANY AGENT OR ADVISOR ACTING ON ITS BEHALF IN CONNECTION WITH
THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT; (II) DISCLOSURE AS
REASONABLY REQUIRED IN CONNECTION WITH A TRANSFER TO A PROSPECTIVE ASSIGNEE OR
PARTICIPANT OF ALL OR PART OF THE OBLIGATIONS OR PARTICIPATION THEREIN; (III)
DISCLOSURE AS MAY BE REQUIRED OR REQUESTED BY ANY GOVERNMENTAL AUTHORITY OR
AGENCY OR REPRESENTATIVE THEREOF OR PURSUANT TO LEGAL PROCESS; (IV) DISCLOSURE
IN CONNECTION WITH ANY SALE OR DISPOSITION OF COLLATERAL OR OTHERWISE TO ANY
PERSON AND IN ANY PROCEEDING NECESSARY IN GBC'S JUDGMENT TO PROTECT ITS
INTERESTS IN CONNECTION WITH ANY CLAIM OR DISPUTE INVOLVING GBC; AND (V) ANY
OTHER DISCLOSURE WITH THE PRIOR WRITTEN CONSENT OF BORROWER. IN NO EVENT SHALL
GBC OR BE OBLIGATED OR REQUIRED TO RETURN ANY MATERIALS FURNISHED BY BORROWER
OR ITS SUBSIDIARIES. NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION OF
CONFIDENTIALITY SHALL NOT APPLY IF THE INFORMATION OR SUBSTANTIALLY SIMILAR
INFORMATION (A) IS RIGHTFULLY RECEIVED BY GBC FROM A PERSON OTHER THAN BORROWER
OR ANY OF ITS AFFILIATES WITHOUT GBC BEING UNDER AN OBLIGATION TO SUCH PERSON
NOT TO DISCLOSE SUCH INFORMATION, OR (B) IS OR BECOMES PART OF THE PUBLIC
DOMAIN.
BORROWER:
QUARTERDECK CORPORATION
BY PRESIDENT OR VICE PRESIDENT
BY SECRETARY OR ASSISTANT SECRETARY
GBC: GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION
BY __
TITLE ___
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<PAGE> 1
EXHIBIT 99.3
Greyrock
Business
Credit
A NationsBank Company
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: QUARTERDECK CORPORATION
ADDRESS: 13160 MINDANAO WAY
MARINA DEL REY, CA 90292
<PAGE> 2
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
DATE: APRIL 1, 1997
This Schedule is an integral part of the Loan and Security Agreement
between GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION (GBC) and the borrower named above ("Borrower") of even date.
======================================================================
1. CREDIT LIMIT An amount equal to the lesser of (1) or (2) below:
(Section 1.1):
(1) $12,000,000 at any one time outstanding; or
(2) an amount equal to the sum of the
following (without duplication):
(i) an amount equal to 85% of
Borrower's Eligible Receivables;
plus
(ii) an amount equal to the lesser of
(A) $2,000,000 at any one time
outstanding and (B) an amount
equal to 50% of the Eligible
Receivables of the Irish
Subsidiary; plus
(iii) the lesser of (A) 100% of the Value
of Borrower's Eligible Inventory
(as defined in Section 8 above) or
(B) $2,000,000. Value, as used
herein, means the lower of cost or
wholesale market value.
======================================================================
2. INTEREST
INTEREST RATE The interest rate in effect throughout each calendar
month during the term of this
(Section 1.2): Agreement shall be the highest Prime Rate in effect
during such month, plus 2% per annum, and provided that
the interest charged for each month shall be a
<PAGE> 3
Greyrock Business Credit Continuing Guaranty
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minimum of $10,000, regardless of the amount of the
Obligations outstanding. Interest shall be calculated
on the basis of a 360-day year for the actual number of
days elapsed. "Prime Rate" has the meaning set forth in
Section 8 above.
======================================================================
3. FEES (Section 1.3/Section 6.2):
LOAN FEE: $50,000, payable concurrently herewith.
TERMINATION FEE: None.
NSF CHECK CHARGE: $15.00 per item.
WIRE TRANSFERS: $15.00 per transfer.
======================================================================
4. MATURITY DATE April 30, 1998, subject to automatic renewal as
provided in Section 6.1 above,
(Section 6.1): and early termination as provided in Section 6.2
above.
======================================================================
5. REPORTING Borrower shall provide GBC with the following:
(Section 5.2):
1. Annual financial statements, certified by KPMG
Peat Marwick LLP or other independent certified
public accountants reasonably acceptable to GBC,
within 5 days after the date the Form 10-K is
filed with the Securities and Exchange Commission
("SEC"), but, in any event, no later than 100 days
after the end of Borrower's fiscal year.
2. Quarterly unaudited financial statements as soon
as available after the end of the first three
fiscal quarters of each fiscal year, and, in any
event, no later than the earlier of (i) 5 days
after the date the Form 10-Q is filed with the
SEC, or (ii) 50 days after the end of each such
fiscal quarter of Borrower.
<PAGE> 4
Greyrock Business Credit Continuing Guaranty
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3. Copies of the regular, periodical or special
reports (including Forms 10K, 10Q and 8K) that the
Borrower or any subsidiary may make to, or file
with, the SEC, within 5 days after the earlier the
date they are filed with the SEC.
4. Such financial statements as are prepared in the
ordinary course for Irish Subsidiary, as soon as
available.
5. Such information as GBC shall from time to time
reasonably request with respect to Receivables of
Irish Subsidiary and such other information
reasonably requested by GBC relating thereto.
6. Monthly Receivable agings, aged by invoice date,
within 10 days after the end of each month.
7. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers within 10 days after the end of each
month.
8. Monthly perpetual inventory reports for the
Inventory valued on a standard costing basis (in
accordance with generally accepted accounting
principles) or such other inventory reports as are
reasonably requested by GBC, all within 10 days
after the end of each month.
=======================================================================
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): See attachment hereto
PRIOR TRADE
NAMES OF BORROWER
<PAGE> 5
Greyrock Business Credit Continuing Guaranty
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(Section 3.2): See attachment hereto
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): See attachment hereto
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): See attachment hereto
TAX ADJUSTMENTS (Section 3.8) See attachment hereto
MATERIAL ADVERSE
LITIGATION (Section 3.10): See attachment hereto
=======================================================================
7. COPYRIGHT REGISTRATION COVENANT
(Section 5.8): Borrower agrees promptly, and in any event not later
than 60 days after the date hereof, to file
registration applications with respect to its
currently unregistered material copyrights, and the
currently unregistered material copyrights of its
subsidiaries, with the Copyright Office in
Washington, D.C., and to promptly provide GBC with
evidence of the registration of such copyrights.
Upon obtaining or acquiring any additional material
copyright, Borrower will, on an ongoing basis,
promptly, and in any event not less than 60 days
after Borrower obtains or acquires such additional
material copyright, file a registration application
with respect to each such unregistered additional
material copyright, and each such unregistered
additional material copyright of its subsidiaries,
with the Copyright Office. The date 60 days after
the date hereof with respect to such registration of
the currently unregistered material copyrights, and
the date 60 days after obtaining or acquiring any
additional material copyright with respect to the
registration of such copyright, is hereinafter
referred to as the "Registration Completion Date" for
any such copyright. A copyright will be considered
material (i) if Borrower derives any revenues in any
fiscal quarter in excess of $1,000,000 from such
copyright, (ii) if such copyright has a value in
excess of $1,000,000, (iii) if it consists of any
derivative work for which Borrower seeks compensation
or receives economic benefit in any fiscal quarter in
excess of $1,000,000 or if it otherwise involves a
significant improvement, enhancement or upgrade, or
(iv) if in connection with the sale or disposition of
such copyright the
<PAGE> 6
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
absence of such registration would materially
adversely affect the price or marketability thereof.
Until the Registration Completion Date for any such
copyright Borrower may request Loans notwithstanding
any noncompliance with Section 2(e) of the Security
Agreement in Copyrighted Works (the "Copyright
Security Agreement") between GBC and Borrower or the
applicable subsidiary as to any such copyright (which
Section 2(e) requires registration with the Copyright
Office of any copyright the sale, licensing or other
disposition of which results in any Receivable (a
"Copyright Receivable") with respect to which any Loan
is requested). Effective the Registration Completion
Date for any such copyright, no Loan request may be
made with respect to any Copyright Receivables if the
copyright giving rise to such Copyright Receivables
has not been so registered, except that if GBC has
received reasonably satisfactory evidence that a
registration application has been filed with respect
to such copyright prior to the applicable
Registration Completion Date, then Borrower may
request Loans with respect to the Copyright
Receivables arising from such copyright for an
additional 120 day period while the registration of
such copyright is pending, notwithstanding the
noncompliance with Section 2(e) of the Copyright
Security Agreement during the foregoing additional
120 day period with respect to such copyright.
=======================================================================
8. DORMANT SUBSIDIARIES REPRESENTATION
(Section 4): Borrower represents and warrants that as of the date
hereof each of its subsidiaries (other than
its Non-U.S. Subsidiaries and Inactive
Subsidiaries (as such terms are defined
below)) has entered into a subsidiary Security
Agreement (a "Security Agreement") and
a Continuing Guaranty (a Guaranty), each in
form and substance satisfactory to GBC. As
used herein, a "Non-U.S. Subsidiary" is a
subsidiary of Borrower which is organized
under the laws of a jurisdiction outside the
United States; and an "Inactive Subsidiary" is
a subsidiary of Borrower which is a shell
subsidiary, dormant or otherwise inactive
(provided that any subsidiary with assets in
excess of $50,000 shall not qualify as an
Inactive Subsidiary).
=======================================================================
9. ADDITIONAL SUBSIDIARIES COVENANT
(Section 5.8): (i) Borrower agrees that promptly after the
date Borrower incorporates, creates or
acquires any additional subsidiary (other
than any Non-U.S. Subsidiary and any
subsidiary at any time that it is an Inactive
Subsidiary) and, in any event, within five
Business Days following receipt by Borrower
from GBC of a security agreement
substantially in the form of the Security
Agreement delivered in connection herewith,
and a guaranty of the Obligations in
substantially the form of the Guaranty also
delivered in connection herewith, Borrower
shall cause such subsidiary to execute and
deliver such guaranty and security agreement
to GBC.
<PAGE> 7
Greyrock Business Credit Continuing Guaranty
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(ii) Within five Business Days after the date
such subsidiary becomes a subsidiary,
Borrower shall cause such subsidiary to have
executed and filed any UCC-1 financing
statements furnished by GBC in each
jurisdiction in which such filing is
necessary to perfect the security interest of
GBC in the Collateral of such subsidiary and
in which GBC requests that such filing be
made. (iii) Additionally, Borrower and such
subsidiary shall have executed and delivered
to GBC such other items as reasonably
requested by GBC in connection with the
foregoing, including resolutions, incumbency
and officers' certificates, opinions of
counsel, search reports and other
certificates and documents.
=======================================================================
10. BAILEE LETTER COVENANT
(Section 5.8): Borrower agrees promptly, and in any event
not later than 60 days after the date hereof,
to deliver to GBC a fully executed Notice to
Bailee of Security Interest, in form and
substance satisfactory to GBC and its
counsel, with respect to Borrower's
Collateral at DiscCopy Labs.
=======================================================================
11. CERTAIN CONDITIONS PRECEDENT
The availability of Loans under the Credit
Limit set forth above with respect to the
Receivables of Irish Subsidiary shall be
subject to the condition precedent that GBC
shall have received each of the following, in
form and substance satisfactory to GBC and
its counsel:
(i) the Irish Subsidiary Security Agreement,
duly executed by GBC and Irish
Subsidiary;
(ii) a certificate of the Secretary or other
appropriate officer of the Irish
Subsidiary certifying (A) copies of the
constitutional documents of Irish
Subsidiary and the board resolutions and
other actions taken or adopted by Irish
Subsidiary authorizing the execution,
delivery and performance of the Irish
Documents, and (B) the incumbency,
authority and signatures of each officer
of Irish Subsidiary authorized to
execute and deliver the Irish Documents
and act with respect thereto;
<PAGE> 8
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
(iii) a favorable legal opinion of Irish
counsel to Irish Subsidiary as to
such matters as GBC may reasonably
request; and
(iv) evidence that all filings,
registrations and recordings have
been made in the appropriate
governmental offices, and all other
action has been taken, which shall
be necessary to create, in favor of
GBC, a perfected first priority
pledge of and security interest in
the Additional Collateral.
=======================================================================
<PAGE> 9
Greyrock Business Credit Continuing Guaranty
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BORROWER: GBC:
QUARTERDECK CORPORATION GREYROCK BUSINESS CREDIT,
BY_______________________________ A DIVISION OF NATIONSCREDIT
PRESIDENT OR VICE PRESIDENT COMMERCIAL CORPORATION
BY___________________________
TITLE________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
<PAGE> 1
EXHIBIT 99.4
Greyrock
Business
Credit
A NationsBank Company
SECURITY AGREEMENT
DEBTOR: DATASTORM TECHNOLOGIES, INC.
ADDRESS: 13160 MINDANAO WAY
MARINA DEL REY, CA 90292
DATE: APRIL 1, 1997
THIS SECURITY AGREEMENT is entered into as of the above date at Los
Angeles, California, between the above-named debtor (the "Debtor"), whose chief
executive office is set forth above ("Debtor's Address"), and Greyrock Business
Credit, a Division of NationsCredit Commercial Corporation ("GBC"), whose
address is 10880 Wilshire Blvd., Suite 950, Los Angeles, CA 90024.
1. DEFINITIONS OF OBLIGATIONS AND COLLATERAL; GRANT OF SECURITY
INTEREST.
1.1 OBLIGATIONS. The term "Obligations" as used in this Agreement
shall mean and include each and all of the following: the obligation to pay
and perform when due all indebtedness, liabilities, obligations, guarantees,
covenants and agreements of Debtor to GBC, whether heretofore, now or hereafter
existing, owing or arising; whether primary, secondary, direct, absolute,
contingent, fixed, secured or unsecured; joint or several, monetary or
non-monetary; and whether created pursuant to, or caused by Debtor's breach of,
this Agreement, or any other present or future agreement or instrument, or
created by operation of law or otherwise. The Obligations include without
limitation the obligations of Debtor under that certain Continuing Guaranty in
favor of GBC with respect to the indebtedness of Quarterdeck Corporation
("Borrower"), and all extensions and renewals thereof.
-1-
<PAGE> 2
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1.2 COLLATERAL. As security and collateral for all Obligations,
Debtor hereby grants to GBC a continuing security interest in, and assigns to
GBC, all of Debtor's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment, Receivables, Investment Property and General Intangibles,
including, without limitation, all of Debtor's Deposit Accounts, all money, all
collateral in which GBC is granted a security interest pursuant to any other
present or future agreement, all property now or at any time in the future in
GBC's possession, and all proceeds (including proceeds of any insurance
policies, proceeds of letters of credit, proceeds of proceeds and claims
against third parties), all products of the foregoing, and all books and
records related to any of the foregoing. Payment and performance of the
Obligations are collateralized by the Collateral and by any security interest
created in any other agreement now or hereafter existing between GBC and Debtor
unless such other agreement is a deed of trust or other security instrument
having real property or rents from real property as its subject matter and
expressly provides to the contrary. Notwithstanding the foregoing provisions
of this Section 1.2, such grant of a security interest shall not extend to, and
the term "Collateral" as used herein shall not include, any Equipment and other
property or assets of Debtor constituting "Collateral" as defined in that
certain Construction Loan Agreement dated as of August 5,1996 (the "MTB
Agreement"), between Debtor and Mark Twain Bank (the "Excluded Property"), to
the extent that (i) such Excluded Property is not assignable or permitted to be
encumbered under the terms of the MTB Agreement, without the consent of Mark
Twain Bank and (ii) such consent has not been obtained; provided, however, that
the foregoing grant of security interest shall extend to, and the term
"Collateral" shall include, (A) any and all proceeds of any Excluded Property
to the extent that the assignment or encumbrance of such proceeds is not so
restricted, and (B) all such Excluded Property upon the earlier to occur of (1)
obtaining the consent of Mark Twain Bank (if requested by GBC) and (2)
termination of the MTB Agreement.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor represents and warrants that each of the following
representations and warranties now is and hereafter will continue to be true
and correct in all respects (except as expressly provided below and for changes
pursuant to written notice by Debtor to GBC which are approved by GBC) and
Debtor has and will timely perform each of the following covenants:
2.1 CORPORATE EXISTENCE AND POWER. Debtor, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Debtor is and will
continue to be qualified and licensed to do business in all jurisdictions in
which any failure to do so would have a Material Adverse Effect, and Debtor has
and will continue to have all requisite power and authority to carry on its
business as it is now, or may hereafter be, conducted.
2.2 AUTHORITY. Debtor is, and will continue to be, authorized to
enter into, to grant security interests in its property pursuant to, and to
perform its obligations under, this Agreement, and all other instruments and
transactions contemplated herein. The execution, delivery and performance by
Debtor of this Agreement, and all other documents contemplated hereby (i) have
been duly and validly authorized, (ii) are enforceable against Debtor in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), (iii) do not violate Debtor's
articles or certificate of incorporation, or Debtor's by-laws, or any law or
any material agreement or instrument which is binding upon Debtor or its
property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any material agreement or instrument which is
binding upon Debtor or its property.
2.3 NAME; TRADE NAMES AND STYLES. The name of Debtor set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Debtor and all of Debtor's present and prior trade names.
Debtor shall give GBC 30 days' prior written notice before changing its name or
doing business under any other name. Debtor has complied, and will in the
future
<PAGE> 3
comply, with all laws relating to the conduct of business under a fictitious
business name.
2.4 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Debtor's chief executive office. In
addition, Debtor has places of business and Collateral is located only at the
locations set forth on the Schedule (except for sales offices at which not more
than $50,000 of Collateral (other than Inventory) is located). Debtor will
give GBC at least 30 days' prior written notice before opening any additional
place of business, changing its chief executive office, or moving any of the
Collateral to any new location not previously reported to GBC, provided that no
such notice is required in respect of Collateral (other than Inventory) which
is moved to a location within a jurisdiction in which GBC already has taken all
necessary action in order to protect and perfect its security interest other
than Debtor's Address or one of the locations set forth on the Schedule (except
for sales offices at which not more than $50,000 of Collateral (other than
Inventory) is located).
2.5 TITLE TO COLLATERAL; PERMITTED LIENS. Debtor is now, and will at
all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Debtor. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Debtor will at all times defend GBC and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to constitute a fixture thereto.
Debtor is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Debtor's right to remove any Collateral from the leased premises except
to the extent provided under leases with respect to which the landlord has
entered into a Landlord's Waiver and Agreement in recordable form and
satisfactory to GBC, acknowledging GBC's prior security interest in the
Collateral and providing access for GBC to the Collateral and the premises.
Whenever any Collateral is located upon premises in which any third party has
an interest (whether as owner, mortgagee, beneficiary under a deed of trust,
lien or otherwise), Debtor shall, whenever requested by GBC, use its best
efforts to cause such third party to execute and deliver to GBC, in form
acceptable to GBC, such waivers and subordinations as GBC shall specify, so as
to ensure that GBC's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Debtor will keep in full force
and effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
Notwithstanding the foregoing, if no Event of Default exists hereunder, Debtor
may incur indebtedness from another lender secured by a first priority lien on
Equipment, and GBC will enter into such subordination agreement as such lender
shall reasonably request in connection therewith. If no Event of Default
exists, and if required by any such lender in connection with such Equipment
financing, GBC will release its security for such indebtedness, and any
identifiable proceeds (including insurance proceeds) thereof. GBC will
promptly execute and deliver to Debtor such documents and instruments
reasonably requested by Debtor as shall be necessary to evidence any such
release of the security interest given by Debtor to GBC in such Equipment.
2.6 MAINTENANCE OF COLLATERAL. Debtor will maintain the Collateral
in good working condition, ordinary wear and tear excepted, and Debtor will not
use the Collateral for any unlawful purpose. Debtor will promptly and in any
event within one Business Day advise GBC in writing of any material loss or
damage to the Collateral. Debtor will maintain the validity of, and otherwise
maintain, preserve and protect, its patents, trademarks, copyrights and other
intellectual property in accordance with prudent business practices.
2.7 BOOKS AND RECORDS. Debtor has maintained and will maintain at
Debtor's Address complete and accurate books and records comprising an
accounting system in accordance with generally accepted accounting principles.
<PAGE> 4
- --------------------------------------------------------------------------------
2.8 FINANCIAL CONDITION AND STATEMENTS. All financial statements now
or in the future delivered to GBC have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and fairly reflect the financial condition of Debtor in
all material respects, at the times and for the periods therein stated,
subject, in the case of any quarterly financial statements, to normal year-end
adjustments and the absence of notes. Between the last date covered by any
such statement provided to GBC and the date hereof, there has been no Material
Adverse Effect. Debtor is now and will continue to be solvent in both the
"equity" and "bankruptcy" sense. Debtor will deliver to GBC a copy of all
financial statements as and when required under the Continuing Guaranty dated
April 1, 1997, made by Debtor in favor of GBC.
2.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Debtor has
filed, and will timely file or will file within a reasonable period upon
notification of a delinquent return by a taxing authority, all tax returns and
reports required by foreign, federal, state or local law. Debtor has paid,
and will timely pay, all material foreign, federal, state and local taxes,
assessments, deposits and contributions now or hereafter owed by Debtor.
Debtor may defer payment of any contested taxes provided that Debtor (i) in
good faith contests Debtor's obligation to pay such taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies GBC
in writing of the commencement of and any material development in any
proceedings where the assessment may exceed $1,000,000, and (iii) posts bonds
or takes any other steps required to keep such contested taxes from becoming a
lien against or charge upon any of the Collateral. Debtor shall, at all times,
utilize the services of an outside payroll service providing for the automatic
deposit of all payroll taxes payable by Debtor. Debtor is unaware of any
claims or adjustments proposed for any of Debtor's prior tax years which could
result in additional material taxes becoming due and payable by Debtor other
than as set forth in the Schedule. Debtor has paid, and shall continue to pay,
all amounts necessary to fund all present and future pension, profit sharing
and deferred compensation plans in accordance with their terms, and Debtor has
not and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to,
any such plan which could result in any liability of Debtor which could
reasonably be expected to have a Material Adverse Effect, including, without
limitation, any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency. When requested, Debtor will
furnish GBC with proof satisfactory to GBC of Debtor's making the payment or
deposit of all such taxes and contributions, such proof to be delivered within
five (5) days after the due date established by law for each such payment or
deposit. If Debtor fails or is unable to pay or deposit such taxes or
contributions, GBC may, but is not obligated to, pay the same and treat all
such advances as additional Obligations of Debtor. Such advances shall bear
interest at the highest interest rate applicable to any of the Obligations.
2.10 COMPLIANCE WITH LAW. Debtor has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Debtor, including, but not limited to, those
relating to Debtor's ownership of real or personal property, the conduct and
licensing of Debtor's business and employment of Debtor's personnel and all
environmental matters.
2.11 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Debtor's knowledge) threatened by or against or affecting Debtor in any court or
before any governmental agency (or any basis therefor known to Debtor) which
could reasonably be expected to result in a Material Adverse Effect. Debtor will
promptly inform GBC in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Debtor
involving any single claim of $250,000 or more, or involving $250,000 or more in
the aggregate.
2.12 REPRESENTATIONS RELATING TO RECEIVABLES. Debtor represents and
warrants to GBC that each of its Receivables represents, bona fide,
<PAGE> 5
- --------------------------------------------------------------------------------
existing, unconditional obligation of the Account Debtor created by the sale,
delivery, and acceptance of goods, the licensing of software or the rendition
of services, in the ordinary course of Debtor's business except as disclosed to
and approved by.
2.13 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Debtor
represents and warrants to GBC as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct in all materials respects and
all such invoices, instruments and other documents and all of Debtor's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall comply
with all applicable laws and governmental rules and regulations in all materials
respects. All signatures and indorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their terms.
2.14 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT
PROPERTY. Debtor shall deliver to GBC such reports, schedules and other
documents with respect to the Receivables as GBC shall from time to time
reasonably request; provided, however, that Debtor's failure to execute and
deliver the same shall not affect or limit GBC's security interest and other
rights in all of Debtor's Receivables. In addition if at any time requested by
GBC, Debtor shall deliver to GBC the originals of all instruments, chattel
paper, security agreements, guarantees and other documents and property
evidencing or securing any Receivables, promptly, and in any event within one
Business Day, of receipt thereof and in the same form as received, with all
necessary indorsements, and, upon the request of GBC, Debtor shall deliver to
GBC all letters of credit and also all certificated securities with respect to
any Investment Property, with all necessary indorsements, and obtain such
account control agreements with securities intermediaries and take such other
action with respect to any Investment Property, as GBC shall reasonably request,
in form and substance satisfactory to GBC. Upon request of GBC Debtor
additionally shall obtain consents from any letter of credit issuers with
respect to the assignment to GBC of any letter of credit proceeds.
2.15 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME. Debtor
shall have the right to collect all Receivables and retain all Investment
Property payments and distributions, unless and until a Default or an Event of
Default has occurred. Upon the request of GBC following the occurrence of an
Event of Default, Debtor shall hold all payments on, and proceeds of, and
distributions with respect to, Receivables and Investment Property in trust for
GBC, and Debtor shall deliver all such payments, proceeds and distributions to
GBC, within one business day after receipt of the same, in their original form,
duly endorsed, to be applied to the Obligations in such order as GBC shall
determine. Upon the request of GBC, any such distributions and payments with
respect to any Investment Property held in any securities account shall be held
and retained in such securities account as part of the Collateral.
2.16 DISPUTES. Debtor shall notify GBC promptly of all disputes or
claims in excess of $50,000 relating to Receivables, as requested by GBC. Debtor
shall not forgive, or settle any Receivable for less than payment in full, or
agree to do any of the foregoing, except that Debtor may do so, provided that:
(i) Debtor does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on in any reports requested by to GBC hereunder; and (ii) no
Default or Event of Default has occurred and is continuing.
2.17 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Debtor in the
ordinary course of its business, Debtor shall determine
<PAGE> 6
- --------------------------------------------------------------------------------
the reason for such return and issue a credit memorandum to the Account Debtor
in the appropriate amount (and, if requested by GBC with respect to such
returns, sending a copy to GBC) in accordance with Debtor's usual and customary
practices. In the event any attempted return involving a material amount of
Inventory occurs after the occurrence of any Event of Default, Debtor shall (i)
not accept any return without GBC's prior written consent, (ii) hold the
returned Inventory in trust for GBC, (iii) segregate all returned Inventory
from all of Debtor's other property, (iv) conspicuously label the returned
Inventory as GBC's property, and (v) promptly, and in any event within one
Business Day notify GBC of the return of any Inventory, specifying the reason
for such return, the location and condition of the returned Inventory, and on
GBC's request deliver such returned Inventory to GBC. For purposes of the
foregoing Section 2.17, a return of Inventory is material if it involves
$50,000 or more.
2.18 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Debtor or GBC or such other name as GBC may choose, and GBC or its designee may,
at any time, notify Account Debtors that it has a security interest in the
Receivables.
2.19 NO LIABILITY. GBC shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Debtor's
obligations under any contract or agreement giving rise to a Receivable. Nothing
herein shall, however, relieve GBC from liability for its own gross negligence
or willful misconduct.
2.20 CONTINUING EFFECT. All representations, warranties and covenants
of Debtor contained in this Agreement and any other agreement with GBC shall be
true and correct at the time of the effective date of each such agreement and
shall be deemed continuing and shall remain true, correct and in full force and
effect (except as disclosed to and approved by and approved by GBC) until
payment and satisfaction in full of all of the Obligations, and Debtor
acknowledges that GBC is and will be expressly relying on such representations,
warranties and covenants.
3. ADDITIONAL DUTIES OF DEBTOR.
3.1 INSURANCE. Debtor shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Debtor shall provide evidence of such insurance to GBC,
so that GBC is satisfied that such insurance is, at all times, in full force and
effect. All such insurance policies shall name GBC as an additional loss payee,
and shall contain a lenders loss payee endorsement in form reasonably acceptable
to GBC. Upon receipt of the proceeds of any such insurance, GBC shall apply such
proceeds in reduction of the Obligations as GBC shall determine in its sole
discretion, except that, provided no Event of Default has occurred and is
continuing, GBC shall release to Debtor insurance proceeds with respect to
Equipment totaling less than $100,000, which shall be utilized by Debtor for the
replacement of the Equipment with respect to which the insurance proceeds were
paid. GBC may require reasonable assurance that the insurance proceeds so
released will be so used. If Debtor fails to provide or pay for any insurance,
GBC may, but is not obligated to, obtain the same at Debtor's expense. Debtor
shall promptly deliver to GBC copies of all reports made to insurance companies
involving claims in excess of $50,000.
3.2 REPORTS. At its expense, Debtor shall report, in form satisfactory
to GBC, such information as GBC may from time to time reasonably specify
regarding Debtor or the Collateral; such reports shall be rendered with such
frequency as GBC may reasonably specify. All reports furnished GBC shall be
complete and accurate in all material respects.
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3.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and
on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Debtor's books and
records, in accordance with the terms of the Loan Agreement. GBC shall take
reasonable steps to keep confidential all information obtained in any such
inspection or audit, but GBC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Debtor's expense. Debtor will not enter into any agreement with any
accounting firm, service bureau or third party to store Debtor's books or
records at any location other than Debtor's Address, without first obtaining
GBC's written consent, which may be conditioned upon such accounting firm,
service bureau or other third party agreeing to give GBC the same rights with
respect to access to books and records and related rights as GBC has under this
Agreement.
3.4 REMITTANCE OF PROCEEDS. Upon request of GBC*, all proceeds arising
from the sale or other disposition of any Collateral shall be delivered, in
kind, by Debtor to GBC in the original form in which received by Debtor not
later than the following business day after receipt by Debtor, to be applied to
the Obligations in such order as GBC shall determine Debtor shall not commingle
proceeds of Collateral with any of Debtor's other funds or property following
the occurrence of a Default or an Event of Default, and shall hold such proceeds
thereafter separate and apart from such other funds and property and in an
express trust for GBC. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.
3.5 PROHIBITED TRANSACTIONS. Debtor shall not without GBC's prior
written consent: merge, consolidate, dissolve, acquire any other corporation or
entity, except that Debtor may merge with or consolidate into, or transfer
substantially all of its assets to, Borrower or any other wholly-owned
subsidiary of Borrower which is a guarantor of the Indebtedness, and in
connection therewith Debtor may be liquidated or dissolved; enter into any
transaction not in its usual course of business; guarantee or otherwise become
in any way liable with respect to the obligations of another party or entity
(except by endorsements of instruments or items of payment for deposit to the
general account of Debtor or which are transmitted or turned over to GBC on
account of the Obligations); pay or declare any dividends upon Debtor's stock
(except to Borrower); redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Debtor's stock; make any change in Debtor's capital structure
which would have a Material Adverse Effect; sell or transfer any Collateral,
except for the sale of finished Inventory or Equipment in the ordinary course of
Debtor's business, and licenses and sublicenses of intellectual property in the
ordinary course of Debtor's business, in good-faith arm's length transactions
and grants of distribution and similar rights (and rights incidental thereto) to
OEMs, third party publishers, distributors and others and except as permitted by
the Loan Agreement, provided that, in each case, no Event of Default has
occurred and is continuing; lend or distribute any of Debtor's property or
assets, or incur any debts, outside of the ordinary course of Debtor's business,
except (a) advances to Borrower, (b) travel advances in the ordinary course of
business, (d) other employee loans and advances in the ordinary course of
business, (e) investments in cash equivalents and short-term marketable
securities; (f) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business; (g) investments incurred in order to consummate
acquisitions and other transactions otherwise permitted hereunder; (h)
investments in existence on the date hereof and disclosed in writing to GBC and
extensions, renewals and restructurings therof, provided that the amount thereof
is not increased unless such increase is otherwise permissible hereunder; and
(i) other loans, advances or other extensions of credit or investments in the
ordinary course of business, and provided, further, that no Event of Default
shall exist either immediately prior to or after giving effect to the making of
any of the foregoing advances, loans or other extensions of credit.
3.6 LITIGATION COOPERATION. Should any third-party suit or proceeding
be instituted by or against GBC with respect to any Collateral or in
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any manner relating to Debtor, Debtor shall, without expense to GBC, make
available Debtor and its officers, employees and agents, and Debtor's books and
records subject to the preservation of the attorney-client privilege to the
extent that GBC may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
3.7 NOTIFICATION OF CHANGES. Debtor will promptly notify GBC in writing
of any change in its executive officers or directors, the opening of any new
bank account or other deposit account, the opening of any new securities
account, and any Material Adverse Effect.
3.8 FURTHER ASSURANCES. Debtor agrees, at its expense, on request by
GBC, to execute all documents and take all actions, as GBC may deem reasonably
necessary or useful in order to perfect and maintain GBC's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
3.9 INDEMNITY. Debtor hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses (including
attorneys' fees), of every nature, character and description, which GBC may
sustain or incur based upon or arising out of any of the Obligations, any actual
or alleged failure to collect and pay over any withholding or other tax relating
to Debtor or its employees, any relationship or agreement between GBC and
Debtor, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Debtor or any of its property, or
any other matter, cause or thing whatsoever occurred, done, omitted or suffered
to be done by GBC relating to Debtor or the Obligations (except any such amounts
sustained or incurred as the result of the gross negligence or willful
misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
4. EVENTS OF DEFAULT AND REMEDIES.
4.1 EVENTS OF DEFAULT. If any of the following events shall occur, such
an occurrence shall constitute an "Event of Default" and Debtor shall provide
GBC with immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to GBC by Debtor or any of
Debtor's officers, employees or agents now or hereafter shall be incorrect,
false, untrue or misleading in any material respect as of the time made or
deemed made; or (b) Debtor shall fail to perform when due any term or condition
contained in this Agreement or any other agreement between GBC and Debtor and,
in the case of any non-monetary Obligation, such failure is not cured with 20
Business Days after the date performance is due; or (c) Debtor shall fail to pay
or perform any other Obligation when due and, in the case of any non-monetary
Obligation, such failure is not cured with 20 Business Days after the date
performance is due; or (d) Any loss, theft, or substantial damage to, or
destruction of, Collateral having an aggregate book value of $100,000 or more
(unless within fifteen (15) days after the occurrence of any such event, Debtor
furnishes GBC with evidence satisfactory to GBC that the amount of any such
loss, theft, damage to or destruction of the Collateral is fully insured under
policies designating GBC as the exclusive additional named insured); or (e) or
(f) Any event shall arise which may result or actually results in the
acceleration of the maturity of the indebtedness of Debtor to others under any
loan or other agreement or undertaking; or (g) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) for any cause or
reason whatsoever, upon all or any part of the Collateral (unless discharged by
payment, release or fully bonded against not more than 30 days after such event
has occurred); or (h) except as permitted by Section 3.5, Dissolution,
termination of existence, insolvency or business failure of Debtor; or
appointment of a receiver, trustee or custodian, for all or any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding by or against, Debtor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or hereafter in effect, which is not cured by
the dismissal thereof within 45 days after the
<PAGE> 9
date commenced; or entry of a court or governmental order which enjoins,
restrains or in any way prevents Debtor from conducting all or any part of its
business; or (i) A notice of lien, levy or assessment is filed of record with
respect to any of Debtor's assets by the United States or any department,
agency or instrumentality thereof, or by any state, county, municipal or other
governmental agency, or if any taxes or debts now or hereafter owing to any one
or more of them becomes a lien upon all or any of the Collateral or any other
assets of Debtor (other than a Permitted Lien); or (j) Death, insolvency or
incompetency of any guarantor of the Obligations; appointment of a conservator
or guardian of the person of any such guarantor; appointment of a conservator,
guardian, trustee, custodian or receiver of all or any part of the assets,
property or estate of, any such guarantor; revocation or termination of, or
limitation of liability upon, any guaranty of the Obligations; or commencement
of proceedings by or against any guarantor or surety for Debtor under any
bankruptcy or insolvency law which is not cured by the dismissal thereof within
45 days after the date commenced; or (k) Debtor makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
or if any Person who has subordinated such indebtedness or obligations
terminates or in any way limits its subordination agreement; or (l) Debtor
shall generally not pay its debts as they become due or shall enter into any
agreement (whether written or oral), or offer to enter into any such agreement,
with all or a significant number of its creditors regarding any moratorium or
other indulgence with respect to its debts or the participation of such
creditors or their representatives in the supervision, management or control of
the business of Debtor; or Debtor shall conceal, remove or transfer any part of
its property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law, or shall make any transfer of
its property to or for the benefit of any creditor at a time when other
creditors similarly situated have not been paid; or (m) the occurrence of any
"Event of Default" as defined in the Loan Agreement.
4.2 REMEDIES. Upon the occurrence of any Event of Default, and at any
time thereafter, GBC, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Debtor), may do any one or more of
the following: (a) Accelerate and declare all or any part of the Obligations to
be immediately due, payable, and performable notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (b) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Debtor hereby authorizes GBC without judicial
process to enter onto any of the Debtor's premises without hindrance to search
for, take possession of, keep, store, or remove any of the Collateral and remain
on such premises or cause a custodian to remain thereon in exclusive control
thereof without charge for so long as GBC deems necessary in order to complete
the enforcement of its rights under this Agreement or any other agreement;
provided, however, that should GBC seek to take possession of any or all of the
Collateral by Court process, Debtor hereby irrevocably waives: (i) any bond and
any surety or security relating thereto required by any statute, court rule or
otherwise as an incident to such possession; (ii) any demand for possession
prior to the commencement of any suit or action to recover possession thereof;
and (iii) any requirement that GBC retain possession of and not dispose of any
such Collateral until after trial or final judgment; (c) Require Debtor to
assemble any or all of the Collateral and make it available to GBC at a place or
places to be designated by GBC which are reasonably convenient to GBC and
Debtor, and to remove the Collateral to such locations as GBC may deem
advisable; (d) Complete processing, manufacturing or repair of all or any
portion of the Collateral prior to a disposition thereof and, for such purpose
and for the purpose of removal, GBC shall have the right to use Debtor's
premises, vehicles, hoists, lifts, cranes, equipment and all other property
without charge. Without limiting any security interest granted GBC in other
provisions of this Agreement or any other agreement, for the purpose of
completing manufacturing, processing or repair of Collateral and the disposition
thereof, GBC is hereby granted a security interest in, and GBC and any purchaser
from GBC may use without charge, all of the Debtor's plant, machinery,
equipment, labels, licenses, processes, patents, patent applications,
copyrights, names, trade names, trademarks, trade secrets, logos, advertising
material and all other assets, and may also utilize all of Debtor's rights under
any license or franchise agreement; (e) Sell, ship, reclaim, lease or otherwise
dispose of all or any portion of the Collateral in its condition at the time GBC
obtains possession or after further manufacturing, processing or repair, at any
one or more public and/or private sales (including execution sales), in lots or
in bulk, for cash, exchange or other property or on credit and to adjourn any
such sale from time to time without notice
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other than oral announcement at the time scheduled for sale. GBC shall have
the right to conduct such disposition on Debtor's premises without charge for
such time or times as GBC deems fit, or on GBC's premises, or elsewhere and the
Collateral need not be located at the place of disposition. GBC may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition and, if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Debtor of any liability Debtor may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (f) Demand
payment of, and collect any Receivables and General Intangibles comprising part
or all of the Collateral and, in connection therewith, Debtor irrevocably
authorizes GBC to endorse or sign Debtor's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to Debtor and remove therefrom payments made with respect to any item of the
Collateral or proceeds thereof, and, in GBC's sole discretion, to grant
extensions of time to pay, compromise claims and settle Receivables, General
Intangibles and the like for less than face value; (g) Collect, receive,
dispose of and realize upon any Investment Property, including withdrawal of
any and all funds from any securities accounts; and (h) Demand and receive
possession of any of Debtor's federal and state income tax returns and the
Records utilized in the preparation thereof or referring thereto. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by GBC with respect to the foregoing shall be added to and become part
of the Obligations, shall be due on demand, and shall bear interest at a rate
equal to the highest interest rate applicable to any of the Obligations.
4.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Debtor and GBC
agree that a sale or other disposition (collectively, sale) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Debtor at least ten
days prior to the sale, and, in the case of a public sale, notice of the sale is
published at least ten days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by GBC, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, GBC may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Debtor any and all information concerning the same. GBC shall be free to employ
other methods of noticing and selling the Collateral, in its discretion, if they
are commercially reasonable. Without limiting the generality of the foregoing,
Debtor recognizes that GBC may be unable to make a public sale of any or all of
the Investment Property, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
4.4 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by GBC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Debtor or other persons legally entitled thereto;
Debtor shall remain liable to GBC for any deficiency. If GBC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GBC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GBC of the cash
therefor.
4.5 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the Code and under any and all other applicable
laws and in any other instrument or agreement now or hereafter entered into
between GBC and Debtor and all of such rights and remedies are cumulative and
none is exclusive. Exercise or partial exercise by GBC of one or more of its
rights or remedies shall not be deemed an election, nor bar GBC from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of GBC to exercise any rights or
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remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
5. POWER OF ATTORNEY.
Upon the occurrence of any Event of Default, without limiting GBC's
other rights and remedies, Debtor grants to GBC an irrevocable power of attorney
coupled with an interest, authorizing and permitting GBC (acting through any of
its employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Debtor, and at Debtor's expense, to do any
or all of the following, in Debtor's name or otherwise, but GBC agrees to
exercise the following powers in a commercially reasonable manner: (a) Execute
on behalf of Debtor any documents that GBC may, in its sole discretion, deem
advisable in order to perfect and maintain GBC's security interest in the
Collateral, or in order to exercise a right of Debtor or GBC, or in order to
fully consummate all the transactions contemplated under this Agreement, and all
other present and future agreements entered into by the parties; (b) Execute on
behalf of Debtor any document exercising, transferring or assigning any option
to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of GBC's Collateral or in which GBC has
an interest; (c) Execute on behalf of Debtor, any invoices relating to any
Receivables, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Debtor upon any instruments, or documents, evidence of payment or Collateral
that may come into GBC's possession; (e) Endorse all checks and other forms of
remittances received by GBC; (f) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (g) Grant extensions of time to pay, compromise claims and
settle Receivables and General Intangibles for less than face value and execute
all releases and other documents in connection therewith; (h) Pay any sums
required on account of Debtor's taxes or to secure the release of any liens
therefor, or both; (i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment therefor; (j)
Instruct any third party having custody or control of any books or records
belonging to, or relating to, Debtor to give GBC the same rights of access and
other rights with respect thereto as GBC has under this Agreement; and (k)
Execute and deliver to any securities intermediary or other Person any
entitlement order, account control agreement or other notice, document or
instrument with respect to any Investment Property; and (l) Take any action or
pay any sum required of Debtor pursuant to this Agreement and any other present
or future agreements entered into by the parties. Any and all reasonable sums
paid and any and all reasonable costs, expenses, liabilities, obligations and
reasonable attorneys' fees incurred by GBC with respect to the foregoing shall
be added to and become part of the Obligations, shall be payable on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. In no event shall GBC's rights under the foregoing power
of attorney or any of GBC's other rights under this Agreement be deemed to
indicate that GBC is in control of the business, management or properties of
Debtor.
6. TERM.
This Agreement shall continue in effect until all of the Obligations
have been paid and performed in full and all agreements between GBC and Debtor
have been terminated.
7. GENERAL WAIVERS.
The failure of GBC at any time or times hereafter to require Debtor to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Debtor and GBC shall not waive or diminish
any right of GBC thereafter to demand and receive strict compliance therewith.
Any waiver of any default shall not waive or affect any other default, whether
prior or subsequent thereto. None of the provisions of this Agreement or other
agreement now or hereafter executed by Debtor and delivered to GBC shall be
deemed to have been waived by any act or knowledge of GBC or its agents or
employees, but only by a specific written waiver signed by an officer of GBC
<PAGE> 12
and delivered to Debtor. Debtor waives the benefit of all statute(s) of
limitations in any action or proceeding based upon or arising out of this
Agreement or any other present or future instrument or agreement between GBC
and Debtor. Debtor waives any and all notices or demands which Debtor might be
entitled to receive with respect to this Agreement, or any other agreement by
virtue of any applicable law. Debtor hereby waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial paper,
instrument, Receivables, General Intangible, document or guaranty at any time
held by GBC on which Debtor is or may in any way be liable, and notice of any
action taken by GBC unless expressly required by this Agreement. Debtor hereby
ratifies and confirms whatever GBC may do pursuant to this Agreement and agrees
that GBC shall not be liable for (a) the safekeeping of the Collateral or any
loss or damage thereto, or diminution in value thereof, from any cause
whatsoever, or (b) any act or omission of any carrier, warehouseman, bailee,
forwarding agent or other person, or (c) any act of commission or any omission
by GBC or its officers, employees, agents, or attorneys, or any of its or their
errors of judgment or mistakes of fact or law.
8. ATTACHMENT WAIVERS.
To the extent that GBC, in its sole and absolute discretion,
determines, prior to the disposition of all of the Collateral, that the amount
to be realized by GBC from the disposition of all of the Collateral may be less
than the amount of the Obligations, and to the full extent of any such
anticipated deficiency, Debtor waives the benefit of Section 483.010(b) of the
California Code of Civil Procedure and of any and all other statutes requiring
GBC to first resort to and exhaust all of the Collateral before seeking or
obtaining any attachment remedy against Debtor, and Debtor expressly agrees
that, to the extent of such anticipated deficiency, GBC shall have all of the
rights of an unsecured creditor, including, but not limited to, the right of
GBC, prior to the disposition of all of the Collateral, to obtain a temporary
protective order and writ of attachment or other available remedy. GBC shall
have no liability to Debtor if the actual deficiency realized by GBC is less
than the anticipated deficiency on the basis of which GBC obtained a temporary
protective order or writ of attachment. In the event GBC should seek a
temporary protective order, or writ of attachment, or both, Debtor hereby
irrevocably waives any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident or condition
precedent to the issuance of any temporary protective order or writ of
attachment.
9. DEFINITIONS
As used in this Agreement, the following terms have the following
meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Security Agreement and all
modifications and amendments thereto, extensions thereof, and replacements
therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 1.2 of this
Agreement.
"Default" means any event which with notice or passage of time or both,
would constitute an Event of Default.
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"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Equipment" means all of Debtor's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Debtor's operations or owned by Debtor and any interest in
any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section 4.1 of
this Agreement.
"General Intangibles" means all general intangibles of Debtor, whether
now owned or hereafter created or acquired by Debtor, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Debtor against GBC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Debtor, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"Inventory" means all of Debtor's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease (including all raw
materials, work in process, finished goods and goods in transit), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Debtor's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Investment Property" means any and all investment property of Debtor,
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising.
"Loan Agreement" means the Loan and Security Agreement dated April 1,
1997, between Borrower and GBC.
"Material Adverse Effect" means any event, matter, condition or
circumstance which (i) has or would reasonably be expected to have a material
adverse effect on the business, properties, results of operations or condition
(financial or otherwise) of Borrower and its subsidiaries taken as a whole; or
(ii) affects the legality, validity, binding effect or enforceability of any of
this Agreement or any related agreement or instrument.
"Obligations" has the meaning set forth in Section 1.1 of this
Agreement.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens which are subordinate to the security interest in favor of
GBC and are consented to in writing by GBC (which consent shall not be
unreasonably withheld);
<PAGE> 14
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(v) security interests being terminated substantially concurrently with this
Agreement; (vi) liens of materialmen, mechanics, warehousemen, carriers, or
other similar liens arising in the ordinary course of business and securing
obligations which are not delinquent; (vii) liens incurred in connection with
the extension, renewal or refinancing of the indebtedness secured by liens of
the type described above in clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods. GBC will have the right to require, as a condition
to its consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on GBC's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of GBC, and agree not to take any action to enforce
its subordinate security interest so long as any Obligations remain
outstanding, and that Debtor agree that any uncured default in any obligation
secured by the subordinate security interest shall also constitute an Event of
Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Debtor's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, documents and all other forms of obligations
at any time owing to Debtor, all guaranties and other security therefor, all
merchandise returned to or repossessed by Debtor, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or secured
party.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
10. GENERAL PROVISIONS.
10.1 NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private
delivery service, or by facsimile, or by regular first-class mail, or certified
mail return receipt requested, addressed to GBC or Debtor at the addresses
shown in the heading to this Agreement, or at any other address designated in
writing by one party to the other party. All notices shall be deemed to have
been given upon delivery in the case of notices personally delivered, or at the
expiration of one business day following delivery to the private delivery
service, or one day after the date sent by facsimile, or two business days
following the deposit thereof in the United States mail, with postage prepaid.
10.2 SEVERABILITY. Should any provision, clause or condition of this
Agreement be held by any court of competent jurisdiction to be void or
unenforceable, such defect shall not affect the remainder of this Agreement.
10.3 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith shall be
construed as the entire and complete agreement between Debtor and GBC and shall
supersede all prior negotiations, all of which are merged and integrated
herein. There are no oral understandings, representations or agreements
between the parties which are not set forth in this Agreement or in other
written agreements signed by the parties in connection herewith.
10.4 AMENDMENT. The terms and provisions of this Agreement may not
be waived or amended except in a writing executed by Debtor and a duly
authorized officer of GBC.
<PAGE> 15
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10.5 TIME OF ESSENCE. Time is of the essence in the performance by
Debtor of each and every obligation under this Agreement.
10.6 ATTORNEYS' FEES AND COSTS. Debtor shall reimburse GBC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GBC, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GBC incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Debtor; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Debtor's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GBC's
security interest in, the Collateral; and otherwise represent GBC in any
litigation relating to Debtor. If either GBC or Debtor files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing
party in such action shall be entitled to recover its reasonable costs and
attorneys' fees, including (but not limited to) reasonable attorneys' fees and
costs incurred in the enforcement of, execution upon or defense of any order,
decree, award or judgment. All attorneys' fees and costs to which GBC may be
entitled pursuant to this Paragraph shall immediately become part of Debtor's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
10.7 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of the parties hereto; provided,
however, that Debtor may not assign or transfer any of its rights under this
Agreement without the prior written consent of GBC, and any prohibited
assignment shall be void. No consent by GBC to any assignment shall relieve
Debtor or any guarantor from its liability for the Obligations.
10.8 JOINT AND SEVERAL LIABILITY. If Debtor consists of more than
one Person, the liability of each Debtor shall be joint and several and the
compromise of any claim with, or the release of, any Debtor shall not
constitute a compromise with, or a release of, any other Debtor.
10.9 LIMITATION OF ACTIONS. Any claim or cause of action by Debtor
against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Debtor by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based, and the
service of a summons and complaint on an officer of GBC, or on any other person
authorized to accept service on behalf of GBC, within thirty (30) days
thereafter. Debtor agrees that such one-year period is a reasonable and
sufficient time for Debtor to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of GBC in its sole discretion. This
provision shall survive any termination of this Agreement or any other present
or future agreement.
10.10 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are used
herein for convenience only. Debtor acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the
same shall not be used in any manner to construe, limit, define or interpret
any term or provision hereof. This Agreement has been fully reviewed and
negotiated between the parties and no uncertainty or ambiguity in any term or
provision of this Agreement shall be construed strictly against GBC or Debtor
under any rule of construction or otherwise.
<PAGE> 16
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10.11 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all
acts and transactions hereunder and all rights and obligations of GBC and
Debtor shall be governed by and in accordance with the laws of the State of
California. As a material part of the consideration to GBC to enter into this
Agreement, Debtor (i) agrees that all actions and proceedings relating directly
or indirectly hereto shall, at GBC's option, be litigated in courts located
within California, and that the exclusive venue therefor shall be Los Angeles
County; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Debtor may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding.
10.12 MUTUAL WAIVER OF JURY TRIAL. DEBTOR AND GBC EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND DEBTOR, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR DEBTOR, ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR DEBTOR, IN ALL OF
THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
10.13 CONFIDENTIALITY. GBC SHALL HOLD ALL NON-PUBLIC INFORMATION
RELATING TO DEBTOR AND ITS SUBSIDIARIES OBTAINED BY IT UNDER THIS AGREEMENT IN
ACCORDANCE WITH ITS CUSTOMARY PROCEDURES FOR HANDLING CONFIDENTIAL INFORMATION
OF THIS NATURE, EXCEPT FOR: (I) DISCLOSURE TO ITS AFFILIATES OR TO ITS COUNSEL
OR TO ANY AGENT OR ADVISOR ACTING ON ITS BEHALF IN CONNECTION WITH THE
NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT; (II) DISCLOSURE AS
REASONABLY REQUIRED IN CONNECTION WITH A TRANSFER TO A PROSPECTIVE ASSIGNEE OR
PARTICIPANT OF ALL OR PART OF THE OBLIGATIONS OR PARTICIPATION THEREIN; (III)
DISCLOSURE AS MAY BE REQUIRED OR REQUESTED BY ANY GOVERNMENTAL AUTHORITY OR
AGENCY OR REPRESENTATIVE THEREOF OR PURSUANT TO LEGAL PROCESS; (IV) DISCLOSURE
IN CONNECTION WITH ANY SALE OR DISPOSITION OF COLLATERAL OR OTHERWISE TO ANY
PERSON AND IN ANY PROCEEDING NECESSARY IN GBC'S JUDGMENT TO PROTECT ITS
INTERESTS IN CONNECTION WITH ANY CLAIM OR DISPUTE INVOLVING GBC; AND (V) ANY
OTHER DISCLOSURE WITH THE PRIOR WRITTEN CONSENT OF DEBTOR. IN NO EVENT SHALL
GBC OR BE OBLIGATED OR REQUIRED TO RETURN ANY MATERIALS FURNISHED BY DEBTOR.
NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION OF CONFIDENTIALITY SHALL NOT
APPLY IF THE INFORMATION OR SUBSTANTIALLY SIMILAR INFORMATION (A) IS RIGHTFULLY
RECEIVED BY GBC FROM A PERSON OTHER THAN DEBTOR OR ANY OF ITS AFFILIATES
WITHOUT GBC BEING UNDER AN OBLIGATION TO SUCH PERSON NOT TO DISCLOSE SUCH
INFORMATION, OR (B) IS OR BECOMES PART OF THE PUBLIC DOMAIN.
<PAGE> 17
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DEBTOR:
DATASTORM TECHNOLOGIES, INC.
BY________________________________
TITLE_____________________________
BY________________________________
TITLE_____________________________
GBC:
GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION
BY________________________________
TITLE_____________________________
<PAGE> 18
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SCHEDULE TO SECURITY AGREEMENT
------------------------------
PRIOR NAMES OF DEBTOR (SECTION 2.3):
See attached.
FICTITIOUS NAMES, TRADE NAMES AND TRADE STYLES OF DEBTOR (SECTION 2.3):
See attached.
OTHER ADDRESSES AND OTHER LOCATIONS OF COLLATERAL (SECTION 2.4):
See attached.
TAX ASSESSMENTS
(SECTION 3.8)
See attached.
LITIGATION
(SECTION 3.10):
See attached.
SCHEDULE TO SECURITY AGREEMENT
------------------------------
<PAGE> 19
Greyrock Business Credit Security Agreement
- -------------------------------------------------------------------------------
PRIOR NAMES OF DEBTOR (SECTION 2.3):
See attached.
FICTITIOUS NAMES, TRADE NAMES AND TRADE STYLES OF DEBTOR (SECTION 2.3):
See attached.
OTHER ADDRESSES AND OTHER LOCATIONS OF COLLATERAL (SECTION 2.4):
<PAGE> 20
See attached.
TAX ASSESSMENTS
(SECTION 3.8)
See attached.
LITIGATION
(SECTION 3.10):
See attached.
<PAGE> 1
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
EXHIBIT 99.5
Greyrock
Business
Credit
A NationsBank Company
CONTINUING GUARANTY
BORROWER: QUARTERDECK CORPORATION
GUARANTOR(S): DATASTORM TECHNOLOGIES, INC.
DATE: APRIL 1, 1997
This Continuing Guaranty is executed by the above-named guarantor(s)
(jointly and severally, the "Guarantor"), as of the above date, in favor of
GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL CORPORATION
("GBC"), whose address is 10880 Wilshire Boulevard, Suite 950, Los Angeles,
California 90024, with respect to the Indebtedness of the above-named borrower
("Borrower").
1. CONTINUING GUARANTY. Guarantor hereby unconditionally guarantees
and promises to pay on demand to GBC, at the address indicated above, or at
such other address as GBC may direct, in lawful money of the United States, and
to perform for the benefit of GBC, all Indebtedness of Borrower now or
hereafter owing to or held by GBC. As used herein, the term "Indebtedness" is
used in its most comprehensive sense and shall mean and include without
limitation: (a) any and all debts, obligations, and liabilities of Borrower or
any one or more of them, heretofore, now, or hereafter made, incurred, or
created, whether directly to GBC or acquired by GBC by assignment or otherwise,
or held by GBC on behalf of others, however arising, whether voluntary or
involuntary, due or not due, absolute or contingent, liquidated or
unliquidated, certain or uncertain, determined or undetermined, monetary or
nonmonetary, written or oral, and whether Borrower may be liable individually
or jointly with others, and regardless of whether recovery thereon may be or
hereafter become barred by any statute of limitations, discharged or
uncollectible in any bankruptcy, insolvency or other proceeding, or otherwise
unenforceable; and (b) any and all amendments, modifications, renewals and
extensions of any or all of the foregoing, including without limitation
amendments, modifications, renewals and extensions which are evidenced by any
new or additional instrument, document or agreement; and (c) any and all
reasonable attorneys' fees, court costs, and collection charges incurred in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor, or any other person liable thereon (whether or not suit be brought)
and any other reasonable expenses of, for or incidental to collection thereof.
As used herein, the term "Borrower" shall include any successor to the business
and assets of Borrower, and shall also include Borrower in its capacity as a
debtor or debtor in
<PAGE> 2
Greyrock Business Credit Continuing Guaranty
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possession under the federal Bankruptcy Code, and any trustee, custodian or
receiver for Borrower or any of its assets, should Borrower hereafter become
the subject of any bankruptcy or insolvency proceeding, voluntary or
involuntary; and all indebtedness, liabilities and obligations incurred by any
such person shall be included in the Indebtedness guaranteed hereby. This
Guaranty is given in consideration for credit and other financial
accommodations which may, from time to time, be given by GBC to Borrower in
GBC's sole discretion, but Guarantor acknowledges and agrees that acceptance by
GBC of this Guaranty shall not constitute a commitment of any kind by GBC to
extend such credit or other financial accommodation to Borrower or to permit
Borrower to incur Indebtedness to GBC. All sums due under this Guaranty shall
bear interest from the date due until the date paid at the highest rate charged
to Borrower with respect to any of the Indebtedness.
2. WAIVERS. Guarantor hereby waives: (a) presentment for payment,
notice of dishonor, demand, protest, and notice thereof as to any instrument,
and all other notices and demands to which Guarantor might be entitled,
including without limitation notice of all of the following: the acceptance
hereof; the creation, existence, or acquisition of any Indebtedness; the amount
of the Indebtedness from time to time outstanding; any foreclosure sale or
other disposition of any property which secures any or all of the Indebtedness
or which secures the obligations of any other guarantor of any or all of the
Indebtedness; any adverse change in Borrower's financial position; any other
fact which might increase Guarantor's risk; any default, partial payment or
non-payment of all or any part of the Indebtedness; the occurrence of any other
Event of Default (as hereinafter defined); any and all agreements and
arrangements between GBC and Borrower and any changes, modifications, or
extensions thereof, and any revocation, modification or release of any guaranty
of any or all of the Indebtedness by any person (including without limitation
any other person signing this Guaranty); (b) any right to require GBC to
institute suit against, or to exhaust its rights and remedies against, Borrower
or any other person, or to proceed against any property of any kind which
secures all or any part of the Indebtedness, or to exercise any right of offset
or other right with respect to any reserves, credits or deposit accounts held
by or maintained with GBC or any indebtedness of GBC to Borrower, or to
exercise any other right or power, or pursue any other remedy GBC may have; (c)
any defense arising by reason of any disability or other defense of Borrower or
any other guarantor or any endorser, co-maker or other person, or by reason of
the cessation from any cause whatsoever of any liability of Borrower or any
other guarantor or any endorser, co-maker or other person, with respect to all
or any part of the Indebtedness, or by reason of any act or omission of GBC or
others which directly or indirectly results in the discharge or release of
Borrower or any other guarantor or any other person or any Indebtedness or any
security therefor, whether by operation of law or otherwise; (d) any defense
arising by reason of any failure of GBC to obtain, perfect, maintain or keep in
force any security interest in, or lien or encumbrance upon, any property of
Borrower or any other person; (e) any defense based upon any failure of GBC to
give Guarantor notice of any sale or other disposition of any property securing
any or all of the Indebtedness, or any defects in any such notice that may be
given, or any failure of GBC to comply with any provision of applicable law in
enforcing any security interest in or lien upon any property securing any or
all of the Indebtedness including, but not limited to, any failure by GBC to
dispose of any property securing any or all of the Indebtedness in a
commercially reasonable manner; (f) any defense based upon or arising out of
any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against Borrower or any
other guarantor or any endorser, co-maker or other person, including without
limitation any discharge of, or bar against collecting, any of the Indebtedness
(including without limitation any interest thereon), in or as a result of any
such proceeding; and (g) the benefit of any and all statutes of limitation with
respect to any action based upon, arising out of or related to this Guaranty.
Until all of the Indebtedness has been paid, performed, and discharged in full,
nothing shall discharge or satisfy the liability of Guarantor hereunder except
the full performance and payment of all of the Indebtedness. If any claim is
ever made upon GBC for repayment or recovery of any amount or amounts received
by GBC in payment of or on account of any of the Indebtedness, because of any
claim that any such payment constituted a preferential transfer or fraudulent
conveyance, or for any other reason whatsoever, and GBC repays all or part of
said amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over GBC or any of its property, or by
reason of any settlement or compromise of any such claim effected by GBC with
any such claimant (including without limitation the Borrower), then and in any
such event, Guarantor agrees that any such judgment, decree, order, settlement
and compromise shall be binding upon Guarantor, notwithstanding any revocation
or release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to GBC under this Guaranty
<PAGE> 3
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
for the amount so repaid or recovered, to the same extent as if such amount had
never originally been received by GBC, and the provisions of this sentence
shall survive, and continue in effect, notwithstanding any revocation or
release of this Guaranty. Until all of the Indebtedness has been irrevocably
paid and performed in full, Guarantor hereby expressly and unconditionally
waives all rights of subrogation, reimbursement and indemnity of every kind
against Borrower, and all rights of recourse to any assets or property of
Borrower, and all rights to any collateral or security held for the payment and
performance of any Indebtedness, including (but not limited to) any of the
foregoing rights which Guarantor may have under any present or future document
or agreement with any Borrower or other person, and including (but not limited
to) any of the foregoing rights which Guarantor may have under any equitable
doctrine of subrogation, implied contract, or unjust enrichment, or any other
equitable or legal doctrine. Neither GBC, nor any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or
representing GBC shall be liable for any claims, demands, losses or damages, of
any kind whatsoever, made, claimed, incurred or suffered by Guarantor or any
other party through the ordinary negligence of GBC, or any of its directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing GBC.
3. CONSENTS. Guarantor hereby consents and agrees that, without
notice to or by Guarantor and without affecting or impairing in any way the
obligations or liability of Guarantor hereunder, GBC may, from time to time
before or after revocation of this Guaranty, do any one or more of the
following in GBC's sole and absolute discretion: (a) accelerate, accept
partial payments of, compromise or settle, renew, extend the time for the
payment, discharge, or performance of, refuse to enforce, and release all or
any parties to, any or all of the Indebtedness; (b) grant any other indulgence
to Borrower or any other person in respect of any or all of the Indebtedness or
any other matter; (c) accept, release, waive, surrender, enforce, exchange,
modify, impair, or extend the time for the performance, discharge, or payment
of, any and all property of any kind securing any or all of the Indebtedness or
any guaranty of any or all of the Indebtedness, or on which GBC at any time may
have a lien, or refuse to enforce its rights or make any compromise or
settlement or agreement therefor in respect of any or all of such property; (d)
substitute or add, or take any action or omit to take any action which results
in the release of, any one or more endorsers or guarantors of all or any part
of the Indebtedness, including, without limitation one or more parties to this
Guaranty, regardless of any destruction or impairment of any right of
contribution or other right of Guarantor; (e) amend, alter or change in any
respect whatsoever any term or provision relating to any or all of the
Indebtedness, including the rate of interest thereon; (f) apply any sums
received from Borrower, any other guarantor, endorser, or co-signer, or from
the disposition of any collateral or security, to any indebtedness whatsoever
owing from such person or secured by such collateral or security, in such
manner and order as GBC determines in its sole discretion, and regardless of
whether such indebtedness is part of the Indebtedness, is secured, or is due
and payable; (g) apply any sums received from Guarantor or from the disposition
of any collateral or security securing the obligations of Guarantor, to any of
the Indebtedness in such manner and order as GBC determines in its sole
discretion, regardless of whether or not such Indebtedness is secured or is due
and payable. Guarantor consents and agrees that GBC shall be under no
obligation to marshal any assets in favor of Guarantor, or against or in
payment of any or all of the Indebtedness. Guarantor further consents and
agrees that GBC shall have no duties or responsibilities whatsoever with
respect to any property securing any or all of the Indebtedness. Without
limiting the generality of the foregoing, GBC shall have no obligation to
monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. ACCOUNT STATED. GBC's books and records showing the account
between it and the Borrower shall be admissible in evidence in any action or
proceeding as prima facie proof of the items therein set forth. GBC's monthly
statements rendered to the Borrower shall be binding upon the Guarantor
(whether or not the Guarantor receives copies thereof), and shall constitute an
account stated between GBC and the Borrower, unless GBC receives a written
statement of the Borrower's exceptions within 60 days after the statement was
mailed to the Borrower. The Guarantor assumes full responsibility for
obtaining copies of such monthly statements from the Borrower, if the Guarantor
desires such copies.
5. EXERCISE OF RIGHTS AND REMEDIES; FORECLOSURE OF TRUST DEEDS.
Guarantor consents and agrees that, without notice to or by Guarantor and
without affecting or impairing in any way the obligations or liability of
Guarantor hereunder, GBC may, from time to time, before or after revocation of
this Guaranty,
<PAGE> 4
Greyrock Business Credit Continuing Guaranty
- -------------------------------------------------------------------------------
exercise any right or remedy it may have with respect to any or all of the
Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure,
nonjudicial foreclosure, exercise of a power of sale, and taking a deed,
assignment or transfer in lieu of foreclosure as to any such property, and
Guarantor expressly waives any defense based upon the exercise of any such
right or remedy, notwithstanding the effect thereof upon any of Guarantor's
rights, including without limitation, any destruction of Guarantor's right of
subrogation against Borrower and any destruction of Guarantor's right of
contribution or other right against any other guarantor of any or all of the
Indebtedness or against any other person, whether by operation of Sections
580a, 580d or 726 of the California Code of Civil Procedure, or any comparable
provisions of the laws of any other jurisdiction, or any other statutes or
rules of law now or hereafter in effect, or otherwise. Without limiting the
generality of the foregoing, (a) Guarantor waives all rights and defenses
arising out of an election of remedies by GBC, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for any of
the Indebtedness, has destroyed the guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
Code of Civil Procedure or otherwise. (b) Guarantor further waives all rights
and defenses arising out of an election of remedies by GBC, even though that
election of remedies, such as a nonjudicial foreclosure with respect to
security for any of the Indebtedness, has destroyed the guarantor's rights of
subrogation, reimbursement and contribution against any other guarantor of the
guaranteed obligation, by the operation of Section 580d of the Code of Civil
Procedure or otherwise. (c) Guarantor understands that if GBC forecloses any
present or future trust deed, which secures any or all of the Indebtedness or
which secures any other guaranty of any or all of the Indebtedness, by
nonjudicial foreclosure, Guarantor may, as a result, have a complete defense to
liability under this Guaranty, based on the legal doctrine of estoppel and
Sections 580a, 580d or 726 of the California Code of Civil Procedure, and
Guarantor hereby expressly waives all such defenses. (d) Guarantor understands
and agrees that, in the event GBC in its sole discretion forecloses any trust
deed now or hereafter securing any or all of the Indebtedness, by nonjudicial
foreclosure, Guarantor will remain liable to GBC for any deficiency, even
though Guarantor will lose its right of subrogation against the Borrower, and
even though Guarantor will be unable to recover from the Borrower the amount of
the deficiency for which Guarantor is liable, and even though Guarantor may
have retained its right of subrogation against Borrower if GBC had foreclosed
said trust deed by judicial foreclosure as opposed to nonjudicial foreclosure,
and even though absent the waivers set forth herein Guarantor may have had a
complete defense to any liability for any deficiency hereunder. (e) Guarantor
understands and agrees that, in the event GBC in its sole discretion forecloses
any trust deed now or hereafter securing any other guaranty of any or all of
the Indebtedness, by nonjudicial foreclosure, Guarantor will remain liable to
GBC for any deficiency, even though Guarantor will lose its right of
subrogation or contribution against the other guarantor, and even though
Guarantor will be unable to recover from the other guarantor any part of the
deficiency for which Guarantor is liable, and even though Guarantor may have
retained its right of subrogation or contribution against the other guarantor
if GBC had foreclosed said trust deed by judicial foreclosure as opposed to
nonjudicial foreclosure, and even though absent the waivers set forth herein
Guarantor may have had a complete defense to any liability for any deficiency
hereunder.
6. ACCELERATION. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of GBC, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to GBC by Guarantor, or any of their
respective officers, partners, employees, or agents, is incorrect, false,
untrue, or misleading when given in any material respect as of the time made or
deemed made; or (b) Guarantor shall fail to pay or perform when due all or any
part of the Indebtedness; or (c) Guarantor shall fail to pay or perform when
due any indebtedness or obligation of Guarantor to GBC or to any parent,
subsidiary or corporate affiliate of GBC, whether under this Guaranty or any
other instrument, document, or agreement heretofore or hereafter entered into;
or (d) any event shall occur which may or does result in the acceleration of
the maturity of any material indebtedness of Guarantor to others (regardless of
any requirement of notice, opportunity to cure or other condition prior to the
exercise of any right of acceleration); or (e) Guarantor shall fail promptly to
perform or comply with any term or condition of any agreement with any third
party which reasonably may be expected to have a Material Adverse Effect (as
defined in Section 13 below); or (f) there shall be made or exist any levy,
assessment, attachment, seizure, lien, or encumbrance for any cause or reason
whatsoever upon all or any part of the property of Guarantor (unless discharged
by payment, release or bond not more than 30 days after such event has
<PAGE> 5
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occurred); or (g) there shall occur the dissolution, termination of existence,
insolvency, or business failure of Guarantor, or the appointment of a receiver,
trustee or custodian for Guarantor or all or any part of the property of either
of them, or the assignment for the benefit of creditors by Guarantor, or the
commencement of any proceeding by or against Guarantor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or hereafter
in effect (in the case of any involuntary proceeding, if not cured by the
dismissal thereof within 45 days after the date commenced); or (h) Guarantor
shall generally not pay its debts as they become due or shall enter into any
agreement (whether written or oral), or offer to enter into any such agreement,
with all or a significant number of its creditors regarding any moratorium or
other indulgence with respect to its debts or the participation of such
creditors or their representatives in the supervision, management, or control
of the business of either of them; or (i) Guarantor shall conceal, remove or
permit to be concealed or removed any part of its property, with intent to
hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law, or shall make any transfer of its property to or for
the benefit of any creditor at a time when other creditors similarly situated
have not been and will not be paid; or (j) the board of directors or
shareholders of Guarantor shall adopt any resolution or plan for its
dissolution or the liquidation of all or substantially all of its assets,
except that Guarantor may merge with, consolidate into or transfer all or
substantially all of its assets to another of Borrower's wholly owned
subsidiaries which is a guarantor of the Indebtedness or to the Borrower and in
connection therewith Guarantor may be liquidated or dissolved; or (k) Guarantor
shall revoke this Guaranty or contest or deny liability under this Guaranty.
All of the foregoing are hereinafter referred to as "Events of Default."
7. RIGHT TO ATTACHMENT REMEDY. Guarantor agrees that,
notwithstanding the existence of any property securing any or all of the
Indebtedness, GBC shall have all of the rights of an unsecured creditor of
Guarantor, including without limitation the right to obtain a temporary
protective order and writ of attachment against Guarantor with respect to any
sums due under this Guaranty. Guarantor further agrees that in the event any
property secures the obligations of Guarantor under this Guaranty, to the
extent that GBC, in its sole and absolute discretion, determines prior to the
disposition of such property that the amount to be realized by GBC therefrom
may be less than the indebtedness of the Guarantor under this Guaranty, GBC
shall have all the rights of an unsecured creditor against Guarantor, including
without limitation the right of GBC, prior to the disposition of said property,
to obtain a temporary protective order and writ of attachment against
Guarantor. Guarantor waives the benefit of Section 483.010(b) of the
California Code of Civil Procedure and of any and all other statutes and rules
of law now or hereafter in effect requiring GBC to first resort to or exhaust
all such collateral before seeking or obtaining any attachment remedy against
Guarantor. GBC shall have no liability to Guarantor as a result thereof,
whether or not the actual deficiency realized by GBC is less than the
anticipated deficiency on the basis of which GBC obtains a temporary protective
order or writ of attachment.
8. INDEMNITY. Guarantor hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses
(including without limitation attorneys' fees), of every nature, character and
description, which GBC may sustain or incur based upon or arising out of any of
the Indebtedness, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any
relationship or agreement between GBC and Borrower, any actual or alleged
failure of GBC to comply with any writ of attachment or other legal process
relating to Borrower or any of its property, or any other matter, cause or
thing whatsoever occurred, done, omitted or suffered to be done by GBC relating
in any way to Borrower or the Indebtedness (except any such amounts sustained
or incurred as the result of the gross negligence or willful misconduct of GBC
or any of its directors, officers, employees, agents, attorneys, or any other
person affiliated with or representing GBC). Notwithstanding any provision in
this Guaranty to the contrary, the indemnity agreement set forth in this
Section shall survive any termination or revocation of this Guaranty and shall
for all purposes continue in full force and effect.
9. SUBORDINATION. Any and all rights of Guarantor under any and all
debts, liabilities and obligations owing from Borrower to Guarantor, including
any security for and guaranties of any such obligations, whether now existing
or hereafter arising, are hereby subordinated in right of payment to the prior
payment in full of all of the Indebtedness. No payment in respect of
<PAGE> 6
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any such subordinated obligations shall at any time be made to or accepted by
Guarantor if at the time of such payment any Indebtedness is outstanding. If
any Event of Default has occurred, Borrower and any assignee, trustee in
bankruptcy, receiver, or any other person having custody or control over any or
all of Borrower's property are hereby authorized and directed to pay to GBC the
entire unpaid balance of the Indebtedness before making any payments whatsoever
to Guarantor, whether as a creditor, shareholder, or otherwise; and insofar as
may be necessary for that purpose, Guarantor hereby assigns and transfers to
GBC all rights to any and all debts, liabilities and obligations owing from
Borrower to Guarantor, including any security for and guaranties of any such
obligations, whether now existing or hereafter arising, including without
limitation any payments, dividends or distributions out of the business or
assets of Borrower. Any amounts received by Guarantor in violation of the
foregoing provisions shall be received and held as trustee for the benefit of
GBC and shall forthwith be paid over to GBC to be applied to the Indebtedness
in such order and sequence as GBC shall in its sole discretion determine,
without limiting or affecting any other right or remedy which GBC may have
hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
10. REVOCATION. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions
which from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section
2815, and agrees that the obligations of Guarantor hereunder may not be
terminated or revoked in any manner except by giving 90 days' advance written
notice of revocation to GBC at its address above by registered first-class U.S.
mail, postage prepaid, return receipt requested, and only as to new loans made
by GBC to Borrower more than 90 days after actual receipt of such written
notice by GBC. No termination or revocation of this Guaranty shall be
effective until 90 days following the date of actual receipt of said written
notice of revocation by GBC. Notwithstanding such written notice of revocation
or any other act of Guarantor or any other event or circumstance, Guarantor
agrees that this Guaranty and all consents, waivers and other provisions hereof
shall continue in full force and effect as to any and all Indebtedness which is
outstanding on or before the 90th day following actual receipt of said written
notice of revocation by GBC, and all extensions, renewals and modifications of
said Indebtedness (including without limitation amendments, extensions,
renewals and modifications which are evidenced by new or additional
instruments, documents or agreements executed before or after expiration of
said 90-day period), and all interest thereon, accruing before or after
expiration of said 90-day period, and all attorneys' fees, court costs and
collection charges, incurred before or after expiration of said 90-day period,
in endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. INDEPENDENT LIABILITY. Guarantor hereby agrees that one or more
successive or concurrent actions may be brought hereon against Guarantor, in
the same action in which Borrower may be sued or in separate actions, as often
as deemed advisable by GBC. The liability of Guarantor hereunder is exclusive
and independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable
unless set forth in a writing signed by GBC or set forth in this Guaranty); or
(b) any direction as to the application of payment by Borrower or by any other
party; or (c) any other continuing or restrictive guaranty or undertaking or
any limitation on the liability of any other guarantor (whether under this
Guaranty or under any other agreement); or (d) any payment on or reduction of
any such other guaranty or undertaking; or (e) any revocation, amendment,
modification or release of any such other guaranty or undertaking; or (f) any
dissolution or termination of, or increase, decrease, or change in membership
of any Guarantor which is a partnership. Guarantor hereby expressly represents
that it was not induced to give this Guaranty by the fact that there are or may
be other guarantors either under this Guaranty or otherwise, and Guarantor
agrees that any release of any one or more of such other guarantors shall not
release Guarantor from its obligations hereunder either in full or to any
lesser extent.
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12. FINANCIAL CONDITION OF BORROWER. Guarantor is fully aware of the
financial condition of Borrower and is executing and delivering this Guaranty
at Borrower's request and based solely upon its own independent investigation
of all matters pertinent hereto, and Guarantor is not relying in any manner
upon any representation or statement of GBC with respect thereto. Guarantor
represents and warrants that it is in a position to obtain, and Guarantor
hereby assumes full responsibility for obtaining, any additional information
concerning Borrower's financial condition and any other matter pertinent hereto
as Guarantor may desire, and Guarantor is not relying upon or expecting GBC to
furnish to him any information now or hereafter in GBC's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which
Guarantor will be liable hereunder after Borrower's financial condition or
ability to pay such Indebtedness has deteriorated and/or after bankruptcy or
insolvency proceedings have been commenced by or against Borrower. Guarantor
shall have no right to require GBC to obtain or disclose any information with
respect to the Indebtedness, the financial condition or character of Borrower,
the existence of any collateral or security for any or all of the Indebtedness,
the filing by or against Borrower of any bankruptcy or insolvency proceeding,
the existence of any other guaranties of all or any part of the Indebtedness,
any action or non-action on the part of GBC, Borrower, or any other person, or
any other matter, fact, or occurrence.
13. REPORTS AND FINANCIAL STATEMENTS OF GUARANTOR. Guarantor shall,
at its sole cost and expense, at any time and from time to time, provide to GBC
upon GBC's reasonable prior request: (i) such financial statements and reports
concerning Guarantor for such periods of time as GBC may reasonably designate,
(ii) any other information concerning Guarantor's business, financial condition
or affairs as GBC may reasonably request, and (iii) copies of any and all
foreign, federal, state and local tax returns and reports of or relating to
Guarantor as GBC may from time to time request. Guarantor hereby intentionally
and knowingly waives any and all rights and privileges it may have not to
divulge or deliver said tax returns, reports and other information which are
requested by GBC hereunder or in any litigation in which GBC may be involved
relating directly or indirectly to Borrower or to Guarantor. Guarantor further
agrees promptly (and in any event within one business day) to give written
notice to GBC of any Material Adverse Effect (as defined below) and of any
condition or event which constitutes an Event of Default under this Guaranty.
All reports and information furnished to GBC hereunder shall be complete,
accurate and correct in all material respects. Whenever requested, Guarantor
shall further deliver to GBC a certificate signed by Guarantor warranting and
representing that all reports, financial statements and other documents and
information delivered or caused to be delivered to GBC under this Guaranty, are
complete and correct and accurately present the financial condition of
Guarantor in all material respects, and that there exists on the date of
delivery of said certificate to GBC no condition or event which constitutes an
Event of Default under this Guaranty. As used herein, "Material Adverse
Effect" means any event, matter, condition or circumstance which (i) has or
would reasonably be expected to have a material adverse effect on the business,
properties, results of operations or condition (financial or otherwise) of
Borrower and its subsidiaries taken as a whole; or (ii) affects the legality,
validity, binding effect or enforceability of any of this Guaranty or any
related agreement or instrument.
14. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and
warrants that (i) it is in Guarantor's direct interest to assist Borrower in
procuring credit, because Borrower is an affiliate of Guarantor, furnishes
goods or services to Guarantor, purchases or acquires goods or services from
Guarantor, and/or otherwise has a direct or indirect corporate or business
relationship with Guarantor, (ii) this Guaranty has been duly and validly
authorized, executed and delivered and constitutes the valid and binding
obligation of Guarantor, enforceable in accordance with its terms, and (iii)
the execution and delivery of this Guaranty does not violate or constitute a
default under (with or without the giving of notice, the passage of time, or
both) any material order, judgment, decree, instrument or agreement to which
Guarantor is a party or by which it or its assets are affected or bound.
<PAGE> 8
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15. COSTS. Whether or not suit shall be instituted, Guarantor agrees
to reimburse GBC on demand for all reasonable attorneys' fees and all other
reasonable costs and expenses incurred by GBC in enforcing this Guaranty, or
arising out of or relating in any way to this Guaranty, or in enforcing any of
the Indebtedness against Borrower, Guarantor, or any other person, or in
connection with any property of any kind securing all or any part of the
Indebtedness. Without limiting the generality of the foregoing, and in
addition thereto, Guarantor shall reimburse GBC on demand for all reasonable
attorneys' fees and costs GBC incurs in any way relating to Guarantor, Borrower
or the Indebtedness, in order to: obtain legal advice; enforce or seek to
enforce any of its rights; commence, intervene in, respond to, or defend any
action or proceeding; file, prosecute or defend any claim or cause of action in
any action or proceeding (including without limitation any probate claim,
bankruptcy claim, third-party claim, secured creditor claim, reclamation
complaint, and complaint for relief from any stay under the Bankruptcy Code or
otherwise); protect, obtain possession of, sell, lease, dispose of or otherwise
enforce any security interest in or lien on any property of any kind securing
any or all of the Indebtedness; or represent GBC in any litigation with respect
to Borrower's or Guarantor's affairs. Notwithstanding the foregoing, in the
event either GBC or Guarantor files any lawsuit against the other predicated on
a breach of this Guaranty, the prevailing party in such action shall be
entitled to recover its attorneys' fees and costs of suit from the
non-prevailing party.
16. NOTICES. Any notice which a party shall be required or shall
desire to give to the other hereunder (except for notice of revocation, which
shall be governed by Section 10 of this Guaranty) shall be given by personal
delivery or by facsimile or by depositing the same in the United States mail,
first class postage pre-paid, addressed to GBC at its address set forth in the
heading of this Guaranty and to Guarantor at its address set forth under its
signature hereon, and such notices shall be deemed duly given on the date of
personal delivery or one day after the date sent by facsimile or two business
days after the date of mailing as aforesaid. GBC and Guarantor may change
their address for purposes of receiving notices hereunder by giving written
notice thereof to the other party in accordance herewith. Guarantor shall give
GBC written notice of any change in its address promptly (and in any event
within one business day of such change).
17. CLAIMS. Guarantor agrees that any claim or cause of action by
Guarantor against GBC, or any of GBC's directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between GBC and Guarantor or
between GBC and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by GBC, or by GBC's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Guarantor by the commencement of
an action or proceeding in a court of competent jurisdiction within Los Angeles
County, California, by the filing of a complaint within one year after the
first act, occurrence or omission upon which such claim or cause of action, or
any part thereof, is based and service of a summons and complaint on an officer
of GBC or any other person authorized to accept service of process on behalf of
GBC, within 30 days thereafter. Guarantor agrees that such one year period is
a reasonable and sufficient time for Guarantor to investigate and act upon any
such claim or cause of action. The one year period provided herein shall not
be waived, tolled, or extended except by a specific written agreement of GBC.
This provision shall survive any termination of this Guaranty or any other
agreement.
18. CONSTRUCTION; SEVERABILITY. If more than one person has executed
this Guaranty, the term "Guarantor" as used herein shall be deemed to refer to
all and any one or more such persons and their obligations hereunder shall be
joint and several. Without limiting the generality of the foregoing, if more
than one person has executed this Guaranty, this Guaranty shall in all respects
be interpreted as though each person signing this Guaranty had signed a
separate Guaranty, and references herein to "other guarantors" or words of
similar effect shall include without limitation other persons signing this
Guaranty. As used in this Guaranty, the term "property" is used in its most
comprehensive sense and shall mean all property of every kind and nature
whatsoever, including without limitation real property, personal property,
mixed property, tangible property and intangible property. Words used herein
in the masculine gender shall include the neuter and feminine gender, words
used herein in the neuter gender shall include the masculine and feminine,
words used herein in the singular shall include the plural and words used in
the plural shall include the singular, wherever the context so reasonably
requires. If any provision of this
<PAGE> 9
Greyrock Business Credit Continuing Guaranty
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Guaranty or the application thereof to any party or circumstance is held
invalid, void, inoperative or unenforceable, the remainder of this Guaranty and
the application of such provision to other parties or circumstances shall not
be affected thereby, the provisions of this Guaranty being severable in any
such instance.
19. GENERAL PROVISIONS. GBC shall have the right to seek recourse
against Guarantor to the full extent provided for herein and in any other
instrument or agreement evidencing obligations of Guarantor to GBC, and against
Borrower to the full extent of the Indebtedness. No election in one form of
action or proceeding, or against any party, or on any obligation, shall
constitute a waiver of GBC's right to proceed in any other form of action or
proceeding or against any other party. The failure of GBC to enforce any of
the provisions of this Guaranty at any time or for any period of time shall not
be construed to be a waiver of any such provision or the right thereafter to
enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to GBC by law or under any
other instrument or agreement. Time is of the essence in the performance by
Guarantor of each and every obligation under this Guaranty. Guarantor hereby
agrees that GBC shall have no obligation to inquire into the power or authority
of Borrower or any of its officers, directors, partners, or agents acting or
purporting to act on its behalf, and any Indebtedness made or created in
reliance upon the professed exercise of any such power or authority shall be
included in the Indebtedness guaranteed hereby. This Guaranty is the entire
and only agreement between Guarantor and GBC with respect to the guaranty of
the Indebtedness of Borrower by Guarantor, and all representations, warranties,
agreements, or undertakings heretofore or contemporaneously made, which are not
set forth herein, are superseded hereby. No course of dealings between the
parties, no usage of the trade, and no parol or extrinsic evidence of any
nature shall be used or be relevant to supplement or explain or modify any term
or provision of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty. The terms and provisions hereof may not be
waived, altered, modified, or amended except in a writing executed by Guarantor
and a duly authorized officer of GBC. All rights, benefits and privileges
hereunder shall inure to the benefit of and be enforceable by GBC and its
successors and assigns and shall be binding upon Guarantor and its successors
and assigns. Section headings are used herein for convenience only. Guarantor
acknowledges that the same may not describe completely the subject matter of
the applicable Section, and the same shall not be used in any manner to
construe, limit, define or interpret any term or provision hereof.
20. GOVERNING LAW; VENUE AND JURISDICTION. This instrument and all
acts and transactions pursuant or relating hereto and all rights and
obligations of the parties hereto shall be governed, construed, and interpreted
in accordance with the internal laws of the State of California. In order to
induce GBC to accept this Guaranty, and as a material part of the consideration
therefor, Guarantor (i) agrees that all actions or proceedings relating
directly or indirectly hereto shall, at the option of GBC, be litigated in
courts located within Los Angeles County, California, (ii) consents to the
jurisdiction of any such court and consents to the service of process in any
such action or proceeding by personal delivery or any other method permitted by
law; and (iii) waives any and all rights Guarantor may have to transfer or
change the venue of any such action or proceeding.
21. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. GBC AND GUARANTOR HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING
BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I) THIS GUARANTEE OR
ANY SUPPLEMENT OR AMENDMENT THERETO; OR (II) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND GUARANTOR ; OR (III) ANY BREACH,
CONDUCT, ACTS OR OMISSIONS OF GBC OR GUARANTOR OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON
AFFILIATED WITH OR REPRESENTING GBC OR GUARANTOR; IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
<PAGE> 10
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22. RECEIPT OF COPY. Guarantor acknowledges receipt of a copy of this
Guaranty.
Guarantor Signature:
Datastorm Technologies, Inc.
By_____________________________
Title__________________________
Address: 13160 Mindanao Way
Marina del Rey, CA 90292
<PAGE> 1
Greyrock Business Credit
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EXHIBIT 99.6
STANDBY AGREEMENT
April 1, 1997
Quarterdeck Corporation
13160 Mindanao Way
Marina del Rey, CA 90292
Gentlemen:
Reference is made to the Loan and Security between us dated
April 1, 1997 (the ``Loan Agreement''). (This Agreement, the Loan Agreement,
and all other written documents and agreements between us are referred to
herein collectively as the ``Loan Documents''. Capitalized terms used but not
defined in this agreement, shall have the meanings set forth in the Loan
Agreement.)
You have requested that certain of the provisions of the Loan
Agreement not apply while there are no outstanding Loans under the Loan
Agreement.
Accordingly, this will confirm our agreement that, during the
time no Loans are outstanding under the Loan Agreement (the ``Standby
Period''), you will not be required to provide us with daily reporting of
transactions and daily schedules and assignments of Receivables and schedules
of collections (as called for by Section 4.3 of the Loan Agreement), and you
will not be required to deliver to us the proceeds of Receivables and other
Collateral (as called for by Sections 4.4 and 5.4 of the Loan Agreement).
<PAGE> 2
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You may, at your option, terminate the Standby Period, so that
you can thereafter request Loans under the Loan Agreement, by giving us written
notice at least two weeks before the Standby Period is to terminate, together
with such information relating to the Receivables and other Collateral we shall
specify.
Upon termination of the Standby Period, you will, then and
thereafter, provide us with the daily reporting of transactions and daily
schedules and assignments of Receivables and schedules of collections, as
called for by Section 4.3 of the Loan Agreement, and deliver all proceeds of
Receivables and other Collateral to us, as called for by Sections 4.4 and 5.4
of the Loan Agreement.
You may reinstitute the Standby Period during any time that no
Loans are outstanding under the Loan Agreement, by written notice to us.
<PAGE> 3
Please confirm your agreement to the foregoing by signing the
enclosed copy of this Standby Agreement and returning it to us.
Sincerely yours,
GREYROCK BUSINESS CREDIT,
a Division of NationsCredit
Commercial Corporation
By ________________________
Title: ____________________
Accepted and agreed:
QUARTERDECK CORPORATION
By ________________________
President or Vice President
