-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LF0EL680n2Q77GUSyj007R245/ZpcrndRUWCX3+K08R8s60SC6blWjfiQZzhteaE yNZW4OJ0HJfSkwTa61F6QA== 0000950148-97-001064.txt : 19970501 0000950148-97-001064.hdr.sgml : 19970501 ACCESSION NUMBER: 0000950148-97-001064 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970414 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUARTERDECK CORP CENTRAL INDEX KEY: 0000707668 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 954320650 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19207 FILM NUMBER: 97590546 BUSINESS ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3103093700 MAIL ADDRESS: STREET 1: 13160 MINDANAO WAY CITY: MARINA DEL RAY STATE: CA ZIP: 90292 FORMER COMPANY: FORMER CONFORMED NAME: QUARTERDECK OFFICE SYSTEMS INC DATE OF NAME CHANGE: 19940510 8-K 1 FORM 8-K 1 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 2 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 -2- 3 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 -3- EX-99.1 2 EXHIBIT 99.1 1 EXHIBIT 99.1 _____________________________________________________CONTACT: Ana Thorne Quarterdeck Corporation 310-309-3787 athorne@quarterdeck.com FOR IMMEDIATE RELEASE Sue Bohle The Bohle Company 310-785-0515 sue@bohle.com Fiona Ross Financial Relations Board 310-442-0599 far@la.frbd.com (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 -4- 2 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 info@quarterdeck.com. 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. -5- 3 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 info@quarterdeck.com 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 -6- EX-99.2 3 EXHIBIT 99.2 1 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 -7- 2 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -8- 3 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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, -9- 4 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -10- 5 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -11- 6 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -12- 7 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -13- 8 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -14- 9 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -15- 10 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -16- 11 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -17- 12 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -18- 13 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -19- 14 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -20- 15 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, -21- 16 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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, -22- 17 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -23- 18 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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. -24- 19 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 -25- 20 Greyrock Business Credit Loan and Security Agreement - ------------------------------------------------------------------------------- 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 ___ -26- EX-99.3 4 EXHIBIT 99.3 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 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 3 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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. 4 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 5 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- (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 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. 7 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- (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; 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. ======================================================================= 9 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 EX-99.4 5 EXHIBIT 99.4 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- 2 - -------------------------------------------------------------------------------- 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 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. 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, 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 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. 7 - -------------------------------------------------------------------------------- 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 8 - -------------------------------------------------------------------------------- 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 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 10 - -------------------------------------------------------------------------------- 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 11 - -------------------------------------------------------------------------------- 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 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. 13 - -------------------------------------------------------------------------------- "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); 14 - -------------------------------------------------------------------------------- (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. 15 - -------------------------------------------------------------------------------- 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. 16 - -------------------------------------------------------------------------------- 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. 17 - -------------------------------------------------------------------------------- DEBTOR: DATASTORM TECHNOLOGIES, INC. BY________________________________ TITLE_____________________________ BY________________________________ TITLE_____________________________ GBC: GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL CORPORATION BY________________________________ TITLE_____________________________ 18 - -------------------------------------------------------------------------------- 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 ------------------------------ 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): 20 See attached. TAX ASSESSMENTS (SECTION 3.8) See attached. LITIGATION (SECTION 3.10): See attached. EX-99.5 6 EXHIBIT 99.5 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 2 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 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, 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 5 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 6 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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. 7 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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. 8 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 9 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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. 10 Greyrock Business Credit Continuing Guaranty - ------------------------------------------------------------------------------- 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 EX-99.6 7 EXHIBIT 99.6 1 Greyrock Business Credit - ------------------------------------------------------------------------------- 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). 2 Greyrock Business Credit - ------------------------------------------------------------------------------- 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. 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 -----END PRIVACY-ENHANCED MESSAGE-----