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EXHIBIT 99.2
Greyrock
Business
Credit
A NationsBank Company
LOAN AND SECURITY AGREEMENT
BORROWER: QUARTERDECK CORPORATION
ADDRESS: 00000 XXXXXXXX XXX
XXXXXX XXX XXX, XX 00000
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 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxx
Xxxxxxx, Xxxxxxxxxx 00000 and the borrower named above ("Borrower"), whose chief
executive office is located at the above address ("Borrower's Address"). The
Schedule to this Agreement (the "Schedule") being signed concurrently is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. GBC will make loans to Borrower (the "Loans"), up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or
Event of Default has occurred and is continuing. If at any time or for any
reason the total of all outstanding Loans and all other Obligations exceeds the
Credit Limit, Borrower shall pay the amount of the excess to GBC, without
notice or demand within one Business Day.
1.2 INTEREST. All Loans and all other monetary Obligations shall
bear interest at the rate shown on the Schedule, except where expressly set
forth to the contrary in this Agreement or in another written agreement signed
by GBC and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in GBC's discretion, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans.
1.3 FEES. Borrower shall pay GBC the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to GBC and are not
refundable. Borrower shall not pay any fees
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other than those expressly provided for herein and on the Schedule.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all
of the Obligations when due, Borrower hereby grants to GBC a security interest
in all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All
Inventory, Equipment, Receivables, Investment Property and General Intangibles,
including, without limitation, all of Borrower's Deposit Accounts, all money,
all collateral in which GBC is granted a security interest pursuant to any
other present or future agreement including all Additional Collateral, all
property now or at any time in the future in GBC's possession, and all proceeds
(including proceeds of any insurance policies, proceeds of letters of credit,
proceeds of proceeds and claims against third parties), all products of the
foregoing, and all books and records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true except as expressly
provided below and for changes pursuant to written notice by Borrower to GBC
which are approved by GBC, and that Borrower will at all times comply with all
of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation,
is and will continue to be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Borrower is
and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a Material Adverse
Effect. The execution, delivery and performance by Borrower of this Agreement,
and all other documents contemplated hereby (i) have been duly and validly
authorized, (ii) are enforceable against Borrower in accordance with their
terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and
(iv) do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give GBC 30 days prior written notice before changing
its name or doing business under any other name. Borrower has complied, and
will in the future comply, with all laws relating to the conduct of business
under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule except for sales offices at which not more
than $50,000 of Collateral (other than Inventory) is located. Borrower will
give GBC at lease 30 days' prior written notice before opening any additional
place of business, changing its chief executive office, or moving any of the
Collateral
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to any new location not previously reported to GBC, provided that no such notice
is required in respect of Collateral (other than Inventory) which is moved to a
location within a jurisdiction in which GBC already has taken all necessary
action in order to protect and perfect its security interest therein other than
Borrower's Address or one of the locations set forth on the Schedule except as
disclosed to GBC in writing and approved by GBC and except to the extent
provided under leases with respect to which the landlord has entered into a
Landlord's Waiver and Agreement in recordable form and satisfactory to GBC,
acknowledging GBC's prior security interest in the Collateral and providing
access for GBC to the Collateral and the premises.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. GBC now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend GBC and the Collateral against all claims of
others. So long as any Loan is outstanding which is a term loan, none of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become
a lessee under any real property lease pursuant to which the lessor may obtain
any rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises except as disclosed to GBC in writing and
approved by GBC and except to the extent provided under leases with respect to
which the landlord has entered into a Landlord's waiver and Agreement in
recordable form and satisfactory to GBC, acknowledging GBC's prior security
interest is the Collateral and providing access for GBC to the Collateral and
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by GBC,
use its best efforts to cause such third party to execute and deliver to GBC,
in form acceptable to GBC, such waivers and subordinations as GBC shall
specify, so as to ensure that GBC's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located. Notwithstanding the foregoing, if no Event of Default exists
hereunder, Borrower may incur indebtedness from another lender secured by a
first priority lien on Equipment, and GBC will enter into such subordination
agreement as such lender shall reasonably request in connection therewith. If
no Event of Default exists, and if required by any such lender in connection
with such Equipment financing, GBC will release its security interest in the
Equipment which is security for such indebtedness, and any identifiable
proceeds (including insurance proceeds) thereof. GBC will promptly execute and
deliver to borrower such documents and instruments reasonably requested by
Borrower as shall be necessary to evidence any such release of the security
interest given by Borrower to GBC in such Equipment.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, ordinary wear and tear excepted, and Borrower will
not use the Collateral for any unlawful purpose. Borrower will promptly and in
any event within one Business Day advise GBC in writing of any material loss or
damage to the Collateral. Borrower will maintain the validity of, and
otherwise maintain, preserve and protect, its patents, trademarks, copyrights
and other intellectual property in accordance with prudent business practices.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to GBC have been, and will be,
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prepared in conformity with generally accepted accounting principles and now
and in the future will completely and fairly reflect the financial condition of
Borrower in all material respects, at the times and for the periods therein
stated, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Between the last date covered
by any such statement provided to GBC and the date hereof, there has been no
Material Adverse Effect. Borrower is now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
filed, and will timely file or will file within a reasonable period upon
notification of a delinquent return by a taxing authority, all tax returns and
reports required by applicable law, and Borrower has paid, and will timely pay,
all applicable material taxes, assessments, deposits and contributions now or
in the future owed by Borrower where failure to do so could reasonably be
expected to have a Material Adverse Effect. Borrower may, however, defer
payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies GBC in writing
of the commencement of, and any material development in, any proceedings where
the assessment may exceed $1,000,000, and (iii) posts bonds or takes any other
steps required to keep the contested taxes from becoming a lien upon any of the
Collateral. Borrower is unaware of any claims or adjustments proposed for any
of Borrower's prior tax years which could result in additional material taxes
becoming due and payable by Borrower other than as set forth in the Schedule.
Borrower has paid, and shall continue to pay all amounts necessary to fund all
present and future pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not and will not withdraw from
participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower which could reasonably be expected to have a
Material Adverse Effect, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in
all material respects, with all provisions of all applicable laws and
regulations, including, but not limited to, those relating to Borrower's
ownership of real or personal property, the conduct and licensing of Borrower's
business, and all environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which could reasonably be expected to result in a Material Adverse
Effect. Borrower will promptly inform GBC in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against Borrower involving any single claim of $250,000 or more, or involving
$500,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely
for lawful business purposes.
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4. RECEIVABLES AND INVESTMENT PROPERTY.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to GBC that each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, represent an
undisputed, bona fide, existing, unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods, the licensing of
software, or the rendition of services, in the ordinary course of Borrower's
business or Irish Subsidiary's business (except as disclosed to and approved by
GBC), AND SHALL MEET THE MINIMUM ELIGIBILITY REQUIREMENTS SET FORTH IN SECTION
8 BELOW.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to GBC as follows: All statements made and
all unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct in all material
respects and all such invoices, instruments and other documents and all of
Borrower's and Irish Subsidiary's books and records are and shall be genuine
and in all respects what they purport to be, and all signatories and endorsers
have the capacity to contract. All sales and other transactions underlying or
giving rise to each Receivable shall comply with all applicable laws and
governmental rules and regulations in all material respects. All signatures
and indorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES AND INVESTMENT
PROPERTY. Borrower shall deliver to GBC transaction reports and loan requests,
schedules and assignments of all Receivables, and schedules of collections, as
set forth in the Schedule or as GBC shall reasonably request, all on GBC's
standard forms, or on such other forms as shall be reasonably satisfactory to
GBC; provided, however, that Borrower's failure to execute and deliver the same
shall not affect or limit GBC's security interest and other rights in all of
Borrower's and Irish Subsidiary's Receivables, nor shall GBC's failure to
advance or lend against a specific Receivable affect or limit GBC's security
interest and other rights therein. If at any time requested by GBC, together
with each such schedule and assignment, or later if requested by GBC, Borrower
shall furnish GBC with copies (or, at GBC's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence
of delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to GBC an aged accounts receivable trial balance in
such form and at such intervals as GBC shall reasonably request. In addition,
Borrower shall deliver to GBC the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Receivables, promptly, and in any event within one Business Day,
of receipt thereof and in the same form as received, with all necessary
indorsements, and, upon the request of GBC, Borrower shall deliver to GBC all
letters of credit and also all certificated securities with respect to any
Investment Property, with all necessary indorsements, and obtain such account
control agreements with securities intermediaries and take such other action
with respect to any Investment Property, as GBC shall reasonably request, in
form and substance satisfactory to GBC. Upon request of GBC Borrower
additionally shall obtain consents from any letter of credit issuers with
respect to the assignment to GBC of any letter of credit proceeds.
4.4 COLLECTION OF RECEIVABLES AND INVESTMENT PROPERTY INCOME.
Borrower* shall have the right to collect all Receivables and retain all
Investment Property payments and distributions, unless and until a Default or
an Event of Default has occurred. Borrower shall hold all payments on, and
proceeds of, and distributions with respect to, Receivables and Investment
Property in trust for GBC, and Borrower shall deliver all such payments,
proceeds and distributions to GBC, within
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one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall
determine, except that unless GBC shall request daily delivery in kind of such
payments, proceeds and distributions, Borrower shall instead make such delivery
at least once a week and either in original form or such other form as shall be
reasonably satisfactory to GBC. If a Default of an Event of Default has
occurred, Borrower shall cause Irish Subsidiary to hold all payments on, and
proceeds of, and distributions with respect to, Irish Subsidiary's Receivables
in trust for GBC, and cause Irish Subsidiary to deliver all such payments,
proceeds and distributions to GBC, within one business day after receipt of the
same, in their original form, duly endorsed, to be applied to the Obligations
in such order as GBC shall determine. Upon the request of GBC, any such
distributions and payments with respect to any Investment Property held in any
securities account shall be held and retained in such securities account as
part of the Collateral.
4.5 DISPUTES. Borrower shall notify GBC promptly of all disputes or
claims in excess of $50,000 relating to Receivables on the regular reports to
GBC. Borrower shall not forgive, or settle any Receivable for less than
payment in full, or agree to do any of the foregoing (or permit Irish
Subsidiary to do any of the foregoing, except that each of Irish Subsidiary and
Borrower may do so, provided that: (i) Borrower or Irish Subsidiary as the case
may be does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or
Event of Default has occurred and is continuing; and (iii) taking into account
all such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall determine the reason for such
return and issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to GBC) in accordance with the Borrower's usual and
customary practices. In the event any attempted return involving a material
amount of inventory occurs after the occurrence of any Event of Default,
Borrower shall (i) not accept any return without GBC's prior written consent,
(ii) hold the returned Inventory in trust for GBC, (iii) segregate all returned
Inventory from all of Borrower's other property, (iv) conspicuously label the
returned Inventory as GBC's property, and (v)promptly, and in any event within
one Business Day, notify GBC of the return of any Inventory, specifying the
reason for such return, the location and condition of the returned Inventory,
and on GBC's request deliver such returned Inventory to GBC. For purposes of
the foregoing Section 4.6, a return of Inventory is material if it involves
$50,000 or more.
4.7 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name
of Borrower, Irish Subsidiary or GBC or such other name as GBC may choose, and
GBC or its designee may, at any time, notify Account Debtors that it has a
security interest in the Receivables.
4.8 NO LIABILITY. GBC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall GBC be deemed to be responsible for any of Borrower's
or Irish Subsidiary's obligations under any contract or agreement giving rise
to a Receivable. Nothing herein shall, however, relieve GBC from liability for
its own gross negligence or willful misconduct.
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5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to GBC, in such form and amounts as GBC may
reasonably require, and Borrower shall provide evidence of such insurance to
GBC, so that GBC is satisfied that such insurance is, at all times, in full
force and effect. All such insurance policies shall name GBC as an additional
loss payee, and shall contain a lenders loss payee endorsement in form
reasonably acceptable to GBC. Upon receipt of the proceeds of any such
insurance, GBC shall apply such proceeds in reduction of the Obligations as GBC
shall determine in its sole discretion, except that, provided no Default or
Event of Default has occurred and is continuing, GBC shall release to Borrower
insurance proceeds with respect to Equipment totaling less than $250,000, which
shall be utilized by Borrower for the replacement of the Equipment with respect
to which the insurance proceeds were paid. GBC's interest in, and right to
receive, any such insurance proceeds shall be subject to the rights of any
permitted senior lender with respect thereto. GBC may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower
fails to provide or pay for any insurance, GBC may, but is not obligated to,
obtain the same at Borrower's expense. Borrower shall promptly deliver to GBC
copies of all reports made to insurance companies involving claims in excess of
$50,000.
5.2 REPORTS. Borrower, at its expense, shall provide GBC with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as GBC shall from time to time reasonably
specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times,
and on one business day's notice, GBC, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's and any of
Borrower's subsidiaries books and records. GBC shall take reasonable steps to
keep confidential all information obtained in any such inspection or audit, but
GBC shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The foregoing inspections and audits shall be at Borrower's expense
and the charge therefor shall be $600 per person per day (or such higher amount
as shall represent GBC's then current standard charge for the same), plus
reasonable out-of-pockets expenses. Borrower shall not be charged more than
$3,000 per audit (plus reasonable out-of-pockets expenses), nor shall audits be
done more frequently than four times per calendar year, provided that the
foregoing limits shall not apply after the occurrence of a Default or Event of
Default, nor shall they restrict GBC's right to conduct audits at its own
expense (whether or not a Default or Event of Default has occurred). Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than
Borrower's Address, without first obtaining GBC's written consent, which may be
conditioned upon such accounting firm, service bureau or other third party
agreeing to give GBC the same rights with respect to access to books and
records and related rights as GBC has under this Agreement.
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or
other disposition of any Collateral shall be delivered, in kind, by Borrower to
GBC in the original form in which received by Borrower not later than the
following business day after receipt by Borrower, to be applied to the
Obligations in such order as GBC shall determine; provided that, if no Default
or Event of Default has occurred and is continuing, and if no term loan is
outstanding hereunder, then Borrower shall not be obligated to remit to GBC the
proceeds of the sale of Equipment which is sold in the ordinary course of
business, in a good-faith arm's length transaction nor shall Borrower be
required to remit to GBC the proceeds of the Permitted Dispositions (as defined
in Section 5.5 (iv) below), unless such proceeds consist of the proceeds of the
sale or disposition of any Inventory; additionally, this Section 5.4 shall be
subject to the terms of Section 4.4. Except for the proceeds of the sale of
Equipment as
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set forth above, Borrower shall not commingle proceeds of Collateral with any
of Borrower's other funds or property, and shall hold such proceeds separate
and apart from such other funds and property and in an express trust for GBC.
Nothing in this Section limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule,
Borrower shall not, without GBC's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity, except
that (a) any of Borrower's subsidiaries may merge with or consolidate into
Borrower, and (b) Borrower may merge with or consolidate into any other Person,
provided that (1) Borrower is the surviving corporation, (2) no such merger or
consolidation shall be made while there exists any Event of Default or if an
Event of Default would occur as a result thereof, (3) such Person is engaged in
business activities (including development activities) or operations
substantially similar to or related to present software and other business
activities and operations of Borrower and its subsidiaries, (4) such
transaction is undertaken in accordance with all requirements or law, and (5)
GBC is given at least 15 days prior notice of such transaction, and GBC has
notified Borrower in writing that all steps necessary to protect the validity
and perfection of GBC's first-priority security interest in the Collateral,
subject to Permitted Liens, have been taken; (ii) acquire any assets, except in
the ordinary course of business except (a) Borrower may acquire assets of its
wholly owned subsidiaries, and (b) in a transaction or a series of transactions
not involving the payment of an aggregate amount in excess of $2,000,000 in any
fiscal year, provided in either such case that no Event of Default shall exist
either immediately prior to or after giving effect to the transaction; (iii)
enter into any other transaction outside the ordinary course of business; (iv)
sell or transfer any Collateral or permit any subsidiary to sell or transfer
any property or assets, except that, provided no Default or Event of Default
has occurred and is continuing, Borrower may (a) sell finished Inventory in the
ordinary course of Borrower's business, (b) if no term loan is outstanding
hereunder, sell Equipment in the ordinary course of business, in good-faith
arm's length transactions, (c) license or sublicense and grant distribution and
similar rights (and rights incidental thereto) to OEMs, third party publishers,
distributors and others intellectual property in the ordinary course of
Borrower's business (d) provided no Event of Default shall exist either
immediately prior to or after giving effect to the transaction, Borrower or any
subsidiary of Borrower may enter into any sale and leaseback transaction
covering its fixed or capital assets if the aggregate indebtedness (including
any capital leases) incurred in connection therewith by Borrower and its
subsidiaries does not exceed $7,500,000 in aggregate principal amount at any
one time outstanding, (e) provided no Event of Default shall exist either
immediately prior to or after giving effect to the transaction, Borrower or any
subsidiary of Borrower may sell or dispose of the following: (1) up to $500,000
of Equipment in the aggregate for Borrower and its subsidiaries in any fiscal
year (valued at fair market value), (2) additional Equipment exceeding the
foregoing $500,000 limit in any fiscal year with the consent of GBC (such
consent not be unreasonably withheld or delayed), and (3) other assets
(excluding the CleanSweep, MagnaRam, ProComm, PartitionIt, ZipIt, NameIt,
RemoveIt, and FixIt products, and any related Collateral with respect thereto,
and excluding any Receivables) outside of the ordinary course of business not
exceeding in the aggregate $15,000,000 for Borrower and its subsidiaries in any
fiscal year (with each such asset to be valued at fair market value) (any such
permitted disposition referred to in clauses (1), (2) and (3) above hereinafter
a "Permitted Disposition") and (f) a subsidiary of Borrower may enter into any
sale or disposal as permitted under any other present or future agreement
between it and GBC, (v) store any Inventory or other Collateral with any
warehouseman or other third party except after GBC has notified Borrower in
writing that all steps necessary to protect the validity, perfection and
enforceability of GBC's first-priority security interest in the Inventory,
subject to Permitted Liens, has been taken; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis, except
in accordance with Borrower's usual and customary practices, as disclosed in
writing to GBC; (vii) make any loans of any money or other assets, except (a)
advances to subsidiaries of Borrower, and guarantees of the obligations of
subsidiaries, in each case, if created or made in the ordinary course of
business, (b) travel advances in the ordinary course of business, (c) employee
relocation loans in the ordinary course of business, (d) other employee loans
and advances in the ordinary course of business, (e) investments in cash
equivalents and short-term marketable securities; (f) extensions of credit in
the nature of accounts receivable or notes receivable arising from the sale or
lease of goods or services in the ordinary course of business; (g) investments
incurred in order to consummate acquisitions and other transactions otherwise
permitted hereunder; investments in existence on the date
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hereof and disclosed in writing to GBC and extensions, renewals and
restructurings thereof, provided that the amount thereof is not increased
unless such increase is otherwise permissible hereunder; and (i) other loans,
advances or other extensions of credit or investments in an aggregate amount
not to exceed $1,000,000 at any one time, and provided , further, that no Event
of Default shall exist either immediately prior to or after giving effect to
the making of any of the foregoing advances, loans or other extensions of
credit; (viii) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect, or incur any debts if after and giving
effect to such incurrence the "Senior Debt" (as defined in Borrower's Note
Agreement dated as of March 1, 1996 for its 6.0% Convertible Senior
Subordinated Notes due March 31, 2001) of Borrower would exceed $40,000,000 in
aggregate principal amount at any one time outstanding; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity other than endorsements of instruments or items of payment for
collection in the ordinary course of business, obligations pursuant to
Borrower's bylaws or in indemnification agreements, to indemnify officers,
directors and employees of Borrower in connection with the performance of their
duties for Borrower, and the guarantees of the obligations of Borrower's
subsidiaries described above, (x) pay or declare any dividends on Borrower's
stock (except for dividends payable solely in stock of Borrower); (xi) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock except from current or former employees, directors or
consultants of Borrower under the terms of any stock option or stock purchase
plans or agreements up to a maximum of $500,000 in any one fiscal year; (xii)
make any change in Borrower's capital structure which would have a Material
Adverse Effect; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do
any of the foregoing. In connection with any Permitted Disposition referred to
in Section 5.5(iv) above GBC will promptly execute and deliver to Borrower such
documents and instruments reasonably requested by Borrower as shall be
necessary to evidence the release of GBC's security interest in the assets
which are the subject of the Permitted Disposition.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against GBC with respect to any Collateral or in
any manner relating to Borrower, Borrower shall, without expense to GBC, make
available Borrower and its officers, employees and agents, and Borrower's books
and records subject to the preservation of the attorney-client privilege,
without charge, to the extent that GBC may deem them reasonably necessary in
order to prosecute or defend any such suit or proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in
writing of any change in its executive officers or directors, the opening of
any new bank account or other deposit account, the opening of any new
securities account, and any Material Adverse Effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request
by GBC, to execute all documents and take all actions, as GBC may deem
reasonably necessary or useful in order to perfect and maintain GBC's perfected
security interest in the Collateral, and in order to fully consummate the
transactions contemplated by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GBC and hold GBC
harmless from and against any and all claims, debts, liabilities, demands,
obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
GBC may sustain or incur based upon or arising out of any of the Obligations,
any actual or alleged failure to collect and pay over any withholding or other
tax relating to Borrower or its employees, any relationship or agreement
between GBC and Borrower, any actual or alleged failure of GBC to comply with
any writ of attachment or other legal process relating to Borrower or any of
its property, or any other matter, cause or thing whatsoever occurred, done,
omitted or suffered to be done by GBC relating to
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Borrower or the Obligations (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of GBC or any of its
directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing GBC). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that
the Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to GBC; or (ii) by GBC at any time after
the occurrence of an Event of Default, without notice, effective immediately.
If this Agreement is terminated by Borrower or by GBC under this Section 6.2,
Borrower shall pay to GBC a termination fee (the "Termination Fee") in the
amount shown on the Schedule. The Termination Fee shall be due and payable on
the effective date of termination and thereafter shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether
or not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or
on any earlier effective date of termination, there are any outstanding letters
of credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GBC, then on such date Borrower shall provide to GBC
cash collateral in an amount equal to 110% of the face amount of all such
letters of credit plus all interest, fees and costs due or (in GBC's
estimation) likely to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to GBC's then standard
form cash pledge agreement. Notwithstanding any termination of this Agreement,
all of GBC's security interests in all of the Collateral and all of the terms
and provisions of this Agreement shall continue in full force and effect until
all Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to certain conditions, GBC may, in its
sole discretion, refuse to make any further Loans after termination. No
termination shall in any way affect or impair any right or remedy of GBC, nor
shall any such termination relieve Borrower of any Obligation to GBC, until all
of the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
GBC shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate GBC's security interests.
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7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give GBC immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to GBC by
Borrower or any Guarantor or any of Borrower's or any Guarantor's officers,
employees or agents, now or in the future, shall be untrue or misleading in a
material respect as of the time or deemed made; or (b) Borrower shall fail to
pay when due any Loan or any interest thereon or any other monetary Obligation
and in the case of any amount other than principal, such default shall continue
for three Business Days; or (c) the total Loans and other Obligations
outstanding at any time shall exceed the Credit Limit (except to the extent
authorized by GBC in writing) and which excess continues for three Business
Days; or (d) Borrower shall fail to perform any non-monetary Obligation which
by its nature cannot be cured; or (e) Borrower shall fail to perform any other
non-monetary Obligation, which failure is not cured within 20 business days
after the date performance is due; or (f) any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made on all or
any part of the Collateral which is not cured within 30 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any
applicable cure period or waived in writing by the holder of the Permitted
Lien, provided that if the amount involved is less than $50,000 then the same
shall not be an Event of Default unless and until the holder of the Permitted
Lien commences any action to enforce its lien against any Collateral; or (h)
Borrower or any Guarantor breaches any material contract or obligation, which
has or may reasonably be expected to have a Material Adverse Effect; or (i)
dissolution, termination of existence, insolvency or business failure of
Borrower or any Guarantor; or appointment of a receiver, trustee or custodian,
for all or any part of the property of, assignment for the benefit of creditors
by, or the commencement of any proceeding by Borrower or any Guarantor under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or (k) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing or
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any defined "Event of Default" shall occur under any Irish Document or under
any Security Agreement or guaranty entered into by any other Guarantor in favor
of GBC; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset pledged by any other Person to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such Person under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect; or (m) Borrower
or any Guarantor makes any payment on account of any indebtedness or obligation
which has been subordinated to the Obligations other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a change in the record or
beneficial ownership of an aggregate of more than 30% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of GBC; or (o) Borrower or any Guarantor shall
generally not pay its debts as they become due, or Borrower or any Guarantor
shall conceal, remove or transfer any part of its property, with intent to
hinder, delay or defraud its creditors, or make or suffer any transfer of any
of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or (p) there occurs any Material Adverse Effect.
GBC may cease making any Loans hereunder during any of the above cure periods,
and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence and during the continuance
of any Event of Default, GBC, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following: (a) Cease making Loans or otherwise extending credit
to Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes GBC without judicial process to
enter onto any of Borrower's premises without interference to search for, take
possession of, keep, store, or remove any of the Collateral, and remain on the
premises or cause a custodian to remain on the premises in exclusive control
thereof, without charge for so long as GBC deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should GBC seek to take possession of
any of the Collateral by Court process, Borrower hereby irrevocably waives: (i)
any bond and any surety or security relating thereto required by any statute,
court rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover
possession thereof; and (iii) any requirement that GBC retain possession of,
and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and make it
available to GBC at places designated by GBC which are reasonably convenient to
GBC and Borrower, and to remove the Collateral to such locations as GBC may
deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, GBC shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time GBC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GBC shall have the right to
conduct such disposition on Borrower's premises without charge, for such time
or times as GBC deems reasonable, or on GBC's premises, or elsewhere and the
Collateral need not be located at the place of disposition. GBC may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as
to title or physical condition or otherwise at the time of sale; (g) Demand
payment of, and collect any Receivables and General Intangibles comprising
Collateral and, in connection therewith, Borrower irrevocably authorizes GBC to
endorse or sign Borrower's name on all collections, receipts, instruments and
other documents, to take possession of and open mail addressed to Borrower and
remove therefrom payments made with respect to any item of the Collateral or
proceeds thereof, and, in GBC's sole discretion, to grant extensions of time to
pay, compromise
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claims and settle Receivables, General Intangibles and the like for less than
face value; (h) Collect, receive, dispose of and realize upon any Investment
Property, including withdrawal of any and all funds from any securities
accounts; and (i) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GBC with respect to
the foregoing shall be added to and become part of the Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and GBC agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least ten days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least ten days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by GBC,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, GBC may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. GBC shall be free to employ other methods of
noticing and selling the Collateral, in its discretion, if they are
commercially reasonable. Without limiting the generality of the foregoing,
Borrower recognizes that GBC may be unable to make a public sale of any or all
of the Investment Property, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
7.4 POWER OF ATTORNEY. Upon the occurrence and during the
continuance of any Event of Default, without limiting GBC's other rights and
remedies, Borrower grants to GBC an irrevocable power of attorney coupled with
an interest, authorizing and permitting GBC (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to
do any or all of the following, in Borrower's name or otherwise, but GBC agrees
to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that GBC may, in its sole
discretion, deem advisable in order to perfect and maintain GBC's security
interest in the Collateral, or in order to exercise a right of Borrower or GBC,
or in order to fully consummate all the transactions contemplated under this
Agreement, and all other present and future agreements entered into by the
parties; (b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part
of GBC's Collateral or in which GBC has an interest; (c) Execute on behalf of
Borrower, any invoices relating to any Receivable, any draft against any
Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into GBC's
possession; (e) Endorse all checks and other forms of remittances received by
GBC; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the same;
(g) Grant extensions of time to pay, compromise claims and settle Receivables
and General Intangibles for less than face value and execute all releases and
other documents in connection therewith; (h) Pay any sums required on account
of Borrower's taxes or to secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim that relates
to any of the Collateral and obtain payment therefor; (j) Instruct any third
party having custody or control of any books or records belonging to, or
relating to, Borrower to give GBC the same rights of access and other rights
with respect thereto as GBC has under this Agreement; (k) Execute and deliver
to any securities intermediary or other Person any entitlement order, account
control agreement or other notice, document or instrument with
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respect to any Investment Property; and (l) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other present or future
agreements entered into by the parties. Any and all reasonable sums paid and
any and all reasonable costs, expenses, liabilities, obligations and reasonable
attorneys' fees incurred by GBC with respect to the foregoing shall be added to
and become part of the Obligations, shall be payable on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. In no event shall GBC's rights under the foregoing power of
attorney or any of GBC's other rights under this Agreement be deemed to
indicate that GBC is in control of the business, management or properties of
Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of
any sale or other disposition of the Collateral shall be applied by GBC first to
the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If, GBC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GBC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GBC of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set
forth in this Agreement, GBC shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms have
the following meanings:
"Account Debtor" means the obligor on a Receivable.
"ADDITIONAL COLLATERAL" MEANS ALL PROPERTY AND INTERESTS IN PROPERTY
AND PROCEEDS THEREOF DESCRIBED AS COLLATERAL IN THE IRISH SECURITY AGREEMENT.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security
Agreement and all modifications and amendments thereto, extensions thereof, and
replacements therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
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"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 XXXXXXXX, OR BE DUE UNDER
A FULFILLMENT OR REQUIREMENTS CONTRACT WITH THE ACCOUNT DEBTOR, (III) THE
RECEIVABLE MUST NOT BE SUBJECT TO ANY CONTINGENCIES (INCLUDING RECEIVABLES
ARISING FROM SALES ON CONSIGNMENT, GUARANTEED SALE OR OTHER TERMS PURSUANT TO
WHICH PAYMENT BY THE ACCOUNT DEBTOR MAY BE CONDITIONAL), (IV) THE RECEIVABLE
MUST NOT BE OWING FROM AN ACCOUNT DEBTOR WITH WHOM THE BORROWER OR IRISH
SUBSIDIARY HAS ANY DISPUTE (WHETHER OR NOT RELATING TO THE PARTICULAR
RECEIVABLE), (V) THE RECEIVABLE MUST NOT BE OWING FROM AN AFFILIATE OF
BORROWER, (VI) THE RECEIVABLE MUST NOT BE OWING FROM AN ACCOUNT DEBTOR WHICH IS
SUBJECT TO ANY INSOLVENCY OR BANKRUPTCY PROCEEDING, OR WHOSE FINANCIAL
CONDITION IS NOT ACCEPTABLE TO GBC, OR WHICH FAILS OR GOES OUT OF A MATERIAL
PORTION OF ITS BUSINESS, (VII) THE RECEIVABLE MUST NOT BE OWING FROM THE UNITED
STATES OR ANY DEPARTMENT, AGENCY OR INSTRUMENTALITY THEREOF (UNLESS THERE HAS
BEEN COMPLIANCE, TO GBC'S SATISFACTION, WITH THE UNITED STATES ASSIGNMENT OF
CLAIMS ACT), (VIII) EXCEPT FOR RECEIVABLES OF IRISH SUBSIDIARY, THE RECEIVABLE
MUST NOT BE OWING FROM AN ACCOUNT DEBTOR LOCATED OUTSIDE THE UNITED STATES OR
CANADA (UNLESS PRE-APPROVED BY GBC IN ITS REASONABLE BUSINESS JUDGMENT IN
WRITING, OR BACKED BY A LETTER OF CREDIT SATISFACTORY TO GBC, OR FCIA INSURED
SATISFACTORY TO GBC), (IX) THE RECEIVABLE MUST NOT BE OWING FROM AN ACCOUNT
DEBTOR TO WHOM BORROWER OR IRISH SUBSIDIARY IS OR MAY BE LIABLE FOR GOODS
PURCHASED FROM SUCH ACCOUNT DEBTOR OR OTHERWISE, (X) THE RECEIVABLE MUST NOT
VIOLATE ANY REPRESENTATION OR WARRANTY SET FORTH IN THIS AGREEMENT, (XI) THE
RECEIVABLE MUST NOT BE ONE IN WHICH GBC DOES NOT HAVE A FIRST-PRIORITY, VALID,
PERFECTED SECURITY INTEREST, (XII) THE RECEIVABLE MUST NOT BE ONE WHICH GBC, IN
ITS REASONABLE BUSINESS JUDGMENT, BELIEVES THE COLLECTION OF WHICH IS INSECURE
OR MAY NOT BE PAID BY REASON OF THE ACCOUNT DEBTOR'S FINANCIAL INABILITY TO
PAY, AND (XIII) BORROWER AND EACH OF ITS SUBSIDIARIES MUST BE IN COMPLIANCE
WITH SECTION 5(E) OF THE SECURITY AGREEMENT IN COPYRIGHTED WORKS BETWEEN GBC
AND BORROWER, OR SUCH SUBSIDIARY, AS THE CASE MAY BE, WITH RESPECT TO THE
RECEIVABLE (EXCEPT TO THE EXTENT OTHERWISE PERMITTED IN THE SCHEDULE). IF MORE
THAN 50% OF THE RECEIVABLES OWING FROM AN ACCOUNT DEBTOR ARE OUTSTANDING MORE
THAN 120 DAYS FROM THEIR INVOICE DATE (WITHOUT REGARD TO UNAPPLIED CREDITS) OR
ARE OTHERWISE NOT ELIGIBLE RECEIVABLES, THEN ALL RECEIVABLES OWING FROM THAT
ACCOUNT DEBTOR WILL BE DEEMED INELIGIBLE FOR BORROWING.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools,
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parts, dyes, jigs, goods and other tangible personal property (other than
Inventory) of every kind and description used in Borrower's operations or owned
by Borrower and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to any of the foregoing, wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of
this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against GBC, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the
Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
all raw materials, work in process, finished goods and goods in transit), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"Investment Property" means any and all investment property of
Borrower, including all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or otherwise,
wherever located, and whether now existing or hereafter acquired or arising.
"IRISH SUBSIDIARY" MEANS QUARTERDECK INTERNATIONAL LIMITED, A COMPANY
ORGANIZED AND EXISTING UNDER THE LAWS OF THE REPUBLIC OF IRELAND AND A
SUBSIDIARY OF BORROWER.
"IRISH DOCUMENTS" MEANS THE IRISH SUBSIDIARY SECURITY AGREEMENT, AND
ALL OTHER CERTIFICATES, DOCUMENTS, AGREEMENTS AND INSTRUMENTS DELIVERED BY
IRISH SUBSIDIARY, OR BORROWER ON BEHALF OF IRISH SUBSIDIARY, TO GBC IN
CONNECTION THEREWITH OR WITH THIS AGREEMENT.
"IRISH SUBSIDIARY SECURITY AGREEMENT" MEANS A GUARANTEE AND DEBENTURE
BETWEEN IRISH SUBSIDIARY AND GBC, IN FORM AND SUBSTANCE SATISFACTORY TO GBC,
PURSUANT TO WHICH IRISH SUBSIDIARY PLEDGES TO GBC, AND GRANTS TO GBC A SECURITY
INTEREST IN, IRISH SUBSIDIARY'S ACCOUNTS RECEIVABLE AND OTHER PROPERTY AND
INTERESTS IN PROPERTY DESCRIBED THEREIN AS SECURITY FOR THE OBLIGATIONS AND
PURSUANT TO WHICH IRISH SUBSIDIARY GUARANTEES THE OBLIGATIONS.
"MATERIAL ADVERSE EFFECT" MEANS ANY EVENT, MATTER, CONDITION OR
CIRCUMSTANCE WHICH (I) HAS OR WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON THE BUSINESS, PROPERTIES,
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RESULTS OF OPERATIONS OR CONDITION (FINANCIAL OR OTHERWISE) OF BORROWER AND ITS
SUBSIDIARIES TAKEN AS A WHOLE; OR (II) AFFECTS THE LEGALITY, VALIDITY, BINDING
EFFECT OR ENFORCEABILITY OF ANY OF THIS AGREEMENT OR ANY RELATED AGREEMENT OR
INSTRUMENT.
"Prime Rate" means the actual "Reference Rate" or the substitute
therefor of Bank of America NT & SA ("B of A") whether or not that rate is the
lowest interest rate charged by B of A. If the Prime Rate, as so defined, is
unavailable on any date of determination, "Prime Rate" shall mean the highest
of the prime rates published in the Wall Street Journal, on such date of
determination, as the base rate on corporate loans at large United States money
center commercial banks, as determined in good faith by GBC, which
determination shall be conclusive absent manifest error.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become
due, including, without limitation, all interest, charges, expenses, fees,
attorney's fees, expert witness fees, audit fees, letter of credit fees, loan
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other present or future
instrument or agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment, including in connection with the sale-leaseback transactions
permitted hereunder; (iii) liens for taxes not yet payable; (iv) additional
security interests and liens which are subordinate to the security interest in
favor of GBC and are consented to in writing by GBC (which consent shall not be
unreasonably withheld); (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course
of business and securing obligations which are not delinquent; (vii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or
(ii) above, provided that any extension, renewal or replacement lien is limited
to the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. GBC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GBC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GBC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's or Irish Subsidiary's now owned
and hereafter acquired accounts (whether or not earned by performance), letters
of credit, contract rights, chattel paper, instruments, documents and all other
forms of obligations at any time owing to Borrower or Irish Subsidiary, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower or Irish Subsidiary, and all rights of stoppage in
transit and all other rights or remedies of an unpaid vendor, lienor or secured
party.
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Greyrock Business Credit Loan and Security Agreement
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Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations,
all checks, wire transfers and other items of payment received by GBC
(including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by GBC on account of the Obligations TWO Business Days
after receipt by GBC of immediately available funds. GBC shall not, however,
be required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to GBC in its discretion, and GBC may charge Borrower's
Loan account for the amount of any item of payment which is returned to GBC
unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied to the Obligations, in such order and manner as GBC
shall determine in its sole discretion.
9.3 CHARGES TO ACCOUNT. GBC may, in its discretion, require that
Borrower pay monetary Obligations in cash to GBC, or charge them to Borrower's
Loan account, in which event they will bear interest at the same rate
applicable to the Loans.
9.4 MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by GBC), unless Borrower
notifies GBC in writing to the contrary within 90 days after each account is
rendered, describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by reputable private
delivery service, or by facsimile, or by regular first-class mail, or certified
mail return receipt requested, addressed to GBC or Borrower at the addresses
shown in the heading to this Agreement, or at any other address designated in
writing by one party to the other party. All notices shall be deemed to have
been given upon delivery in the case of notices personally delivered, or at the
expiration of one business day following delivery to the private delivery
service, or one day after the date sent by facsimile, or two business days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by
any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
9.7 INTEGRATION. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and GBC and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 WAIVERS. The failure of GBC at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and GBC shall not waive or
diminish any right of GBC later to demand and receive strict compliance
therewith.
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Greyrock Business Credit Loan and Security Agreement
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Any waiver of any default shall not waive or affect any other default, whether
prior or subsequent, and whether or not similar. None of the provisions of
this Agreement or any other agreement now or in the future executed by Borrower
and delivered to GBC shall be deemed to have been waived by any act or
knowledge of GBC or its agents or employees, but only by a specific written
waiver signed by an authorized officer of GBC and delivered to Borrower.
Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by GBC on which Borrower is
or may in any way be liable, and notice of any action taken by GBC, unless
expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of GBC.
9.10 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
9.11 ATTORNEYS' FEES AND COSTS. Borrower shall reimburse GBC for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by GBC, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
GBC incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its
rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim;
examine, audit, copy, and inspect any of the Collateral or any of Borrower's
books and records; protect, obtain possession of, lease, dispose of, or
otherwise enforce GBC's security interest in, the Collateral; and otherwise
represent GBC in any litigation relating to Borrower. If either GBC or
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and attorneys' fees, including (but not limited to) reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys' fees and costs
to which GBC may be entitled pursuant to this Paragraph shall immediately
become part of Borrower's Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and GBC; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of GBC, and any prohibited
assignment shall be void. No consent by GBC to any assignment shall release
Borrower from its liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than
one Person, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower
against GBC, its directors, officers, employees, agents, accountants or
attorneys, based upon, arising from, or relating to this Loan Agreement, or any
other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by GBC, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon
which such claim or cause of action, or any part thereof, is based, and the
service of a summons and
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Greyrock Business Credit Loan and Security Agreement
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complaint on an officer of GBC, or on any other person authorized to accept
service on behalf of GBC, within thirty (30) days thereafter. Borrower agrees
that such one-year period is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year
period provided herein shall not be waived, tolled, or extended except by the
written consent of GBC in its sole discretion. This provision shall survive
any termination of this Loan Agreement or any other present or future
agreement.
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. Borrower and GBC acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including," whenever used in this Agreement, shall mean "including (but not
limited to)." This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against GBC or Borrower under any rule of
construction or otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of GBC and Borrower
shall be governed by the laws of the State of California. As a material part
of the consideration to GBC to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at GBC's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF GBC OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
9.18 CONFIDENTIALITY. GBC SHALL HOLD ALL NON-PUBLIC INFORMATION
RELATING TO BORROWER AND ITS SUBSIDIARIES OBTAINED BY IT UNDER THIS AGREEMENT
IN ACCORDANCE WITH ITS CUSTOMARY PROCEDURES FOR HANDLING CONFIDENTIAL
INFORMATION OF THIS NATURE, EXCEPT FOR: (I) DISCLOSURE TO ITS AFFILIATES OR TO
ITS COUNSEL OR TO ANY AGENT OR ADVISOR ACTING ON ITS BEHALF IN CONNECTION WITH
THE NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT; (II) DISCLOSURE AS
REASONABLY REQUIRED IN CONNECTION WITH A TRANSFER TO A PROSPECTIVE ASSIGNEE OR
PARTICIPANT OF ALL OR PART OF THE OBLIGATIONS OR PARTICIPATION THEREIN; (III)
DISCLOSURE AS MAY BE REQUIRED OR REQUESTED BY ANY GOVERNMENTAL AUTHORITY OR
AGENCY OR REPRESENTATIVE THEREOF OR PURSUANT TO LEGAL PROCESS; (IV) DISCLOSURE
IN CONNECTION WITH ANY SALE OR DISPOSITION OF COLLATERAL OR OTHERWISE TO ANY
PERSON AND IN ANY PROCEEDING NECESSARY IN GBC'S JUDGMENT TO PROTECT ITS
INTERESTS IN CONNECTION WITH ANY CLAIM OR DISPUTE INVOLVING GBC; AND (V) ANY
OTHER DISCLOSURE WITH THE PRIOR WRITTEN CONSENT OF BORROWER. IN NO EVENT SHALL
GBC OR BE OBLIGATED OR REQUIRED TO RETURN ANY MATERIALS FURNISHED BY BORROWER
OR ITS SUBSIDIARIES. NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION OF
CONFIDENTIALITY SHALL NOT APPLY IF THE INFORMATION OR SUBSTANTIALLY SIMILAR
INFORMATION (A) IS RIGHTFULLY RECEIVED BY GBC FROM A PERSON OTHER THAN BORROWER
OR ANY OF ITS AFFILIATES WITHOUT GBC BEING UNDER AN OBLIGATION TO SUCH PERSON
NOT TO DISCLOSE SUCH INFORMATION, OR (B) IS OR BECOMES PART OF THE PUBLIC
DOMAIN.
BORROWER:
QUARTERDECK CORPORATION
BY PRESIDENT OR VICE PRESIDENT
BY SECRETARY OR ASSISTANT SECRETARY
GBC: GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT COMMERCIAL
CORPORATION
BY __
TITLE ___
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