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EXHIBIT 10.17    
  

PerfectData Corporation
  110 West Easy Street

Simi Valley, CA 93065 

    October 27,
2000 

Mr. Dimitri
Simonenko

Business Solutions Group, Inc.

45723 Paddington Station Terrace

Sterling, VA 20166 

Re: $60,000 Loan to Business Solutions Group, Inc.  

Gentleman:

    This
letter shall confirm our agreement with respect to the above referenced loan. Upon the execution hereof, PerfectData Corporation (the "Lender") shall loan (the "Loan") Sixty
Thousand ($60,000) Dollars to Business Solutions Group, Inc. (the "Borrower"), a Virginia corporation, which loan shall bear interest at a rate of seven (7%) percent per annum and shall be
repayable on December 15, 2000, and shall be mandatorily prepayable out of the proceeds of the Comp USA Receivables (herein defined). The Loan shall be evidenced by a promissory note (the "Note"). The
payment of the Loan shall be secured by a first priority security interest in all of the Borrower's accounts receivable from Comp USA (the "Comp USA Receivables"). All invoices relating to the Comp
USA accounts
receivable shall reflect the Lender's security interest therein and shall instruct that the Comp USA receivables shall be paid to an account designated and controlled by the Lender. The lender shall
apply the proceeds of the Comp USA Receivables to the payment of all amounts due under the Note and shall remit the balance to the Borrower. The Borrower and Dimitri Simonenko represent and warrant to
the lender that as of the date hereof the outstanding balance of the Comp USA Receivables are $99,456 which are represented by the invoices attached hereto as Exhibit "A". 

    This
Agreement shall be enforced, governed by, and construed in accordance with the laws of the State of New York, regardless of the choice of law or conflict of law provisions of or
any other jurisdiction. The parties agree that any suit brought in connection with this Agreement shall be brought in the state or federal courts located in the in the State of New York county of New
York. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO VENUE, INCLUDING AN OBJECTION BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT SUCH PARTY NOW HAS OR HEREAFTER MAY HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTION. 

    Lender
may assign this Agreement at any time without the consent of Borrower. All stipulations, promises and agreements herein by or on behalf of Borrower or Lender shall bind the
successors and assigns of such party, whether so expressed or not, and shall inure to the benefit of the successors and assigns of Borrower Lender. 

    If
any provision hereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other
provision hereof, and this 

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Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. 

	 	 	 	 	Very truly yours,
 PERFECTDATA CORPORATION
	

 	
 	

 	
 	

By:	
 	

/s/ HARRIS SHAPIRO   

	Acknowledged and Agreed to This 27th day of October, 2000:	 	 	 	 
	
BUSINESS SOLUTIONS GROUP, INC.	
 	

 	
 	

 
	

BY:	
 	

/s/ DMITRI SIMONENKO   
	
 	

 	
 	

 
	Title: President	 	 	 	 

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SECURITY AGREEMENT    
  

    SECURITY AGREEMENT, dated October 27, 2000 made by and among Business Solutions Group, Inc., a
Virginia corporation, having an address at 45723 Paddington Station Terrace (the "Grantor") in favor of Perfectdata Corporation, a California corporation, having an address at 110 West Easy Street,
Simi Valley, California 93065 (the "Secured Party"). 

W I T N E S S E T H:  

    WHEREAS, the Grantor has requested that the Secured Party loan to the Grantor Sixty Thousand ($60,000) Dollars
(the "Loan") which Loan will be evidenced by a promissory note of even date hereof (the "Note"); 

    WHEREAS, the Secured Party is willing to make the Loan to the Grantor only if the Grantor grants to the Secured Party a first priority
security interest in certain of the Grantor's assets to secure the payment of the Loan. 

    NOW, THEREFORE, in consideration of the making of the Loan and the premises and the agreements herein, the Grantor hereby agrees with
the Secured Party as follows: 

    SECTION 1.  Definitions.  All
terms used in this Agreement which are defined in the Note or in Article 9 of the Uniform Commercial Code currently in effect in the State of New York (the "Code") and which are not otherwise
defined herein shall have the same meanings herein as set forth therein. 

    SECTION 2.  Grant of Security
Interest.  As collateral security for all of the Obligations (as defined in Section 3 hereof), the Grantor hereby pledges, assigns and grants to the
Secured Party a continuing security interest in the following assets of the Grantor, wherever located and whether now or hereafter existing and whether now owned or hereafter acquired, (collectively,
the "Collateral"): 

    (a) all
of the Grantor's right, title and interest in and to all present and future accounts, contract rights, chattel paper, documents and instruments resulting from
the sale of inventory to CompUSA (any and
all such accounts, contract rights, chattel paper, instruments documents and rights and obligations being hereinafter referred to as the "Receivables"); 

    (b) all
proceeds and products of any and all of the foregoing Collateral and, to the extent not otherwise included, all payments under insurance (whether or not the
Secured Party is the loss payee thereof), and any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral); in each case,
howsoever the Grantor's interest therein may arise or appear (whether by ownership, security interest, claim or otherwise). 

    SECTION 3.  Security for
Obligations.  The security interest created hereby in the Collateral constitutes continuing collateral security for all of the following obligations, whether now
existing or hereafter incurred (the "Obligations"): the prompt and timely payment by the Grantor, as and when due and payable, of all amounts and liabilities of any kind or nature due under the Loan,
the Note and under this Agreement and any future advances from time to time owing by the Grantor to the Secured Party which may arise in the future. 

    SECTION 4.  Representations and
Warranties.  Grantor represents and warrants to the Secured Party as follows: 

    (a) The
Grantor is and will be at all times the owner of the Collateral free and clear of any lien, security interest or other charge or encumbrance, except for the
security interest created by this Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording or filing
office, except such as may have been filed in favor of the Secured Party relating to this Agreement. 

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    SECTION 5.  Covenants as to the
Collateral.  So long as any of the Obligations shall remain outstanding, unless the Secured Party shall otherwise consent in writing: 

    (a) The
Grantor will at its expense, at any time and from time to time, promptly execute and deliver all further instruments and documents and take all further action
that may be necessary or desirable or that the Secured Party may request in order (i) to perfect and protect the security interest purported to be created hereby, (ii) to enable the
Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral, or (iii) to effect otherwise the purposes of this Agreement, including without limitation,
(A) marking conspicuously each chattel paper included in the Receivables and, at the request of the Secured Party, each of their records pertaining to the Collateral with a legend, in form and
substance satisfactory to the Secured Party, indicating that such chattel paper or Collateral is subject to the security interest created hereby, (B) if any Receivable shall be evidenced by a
promissory note or other instrument or chattel paper, delivering and pledging to the Secured Party hereunder such note, instrument or chattel paper duly indorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to the Secured Party, as may be necessary or desirable or that the Secured Party may request in order to perfect and
preserve the security interest purported to be created hereby, and (C) furnishing to the Secured Party from time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Secured Party may reasonably request, all in reasonable detail. 

    (b) The
Secured Party shall have the right at any time, upon the occurrence and during the continuance of an Event of Default, or an event which the giving of notice or
the lapse of time or both would constitute an Event of Default, to notify the account debtors or obligors under any Receivables and to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the Secured Party and, upon such notification and at the expense of the Grantor and to the extent permitted by law, to enforce
collection of any such Receivables and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as the Grantor might have done. After an Event of
Default, or an event which the giving of notice or the lapse of time or both would constitute an Event of Default, (A) all amounts and proceeds (including instruments) received by the Grantor
in respect of the Receivables shall be received in trust for the benefit of the Secured Party hereunder, shall be segregated from other funds of the Grantor and shall be forthwith paid over to the
Secured Party in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (1) released to the Grantor so long as no Event of Default shall have
occurred and be continuing or (2) if any Event of Default shall have occurred and be continuing, applied as specified in Section 7(b) hereof, and (B) the Grantor will not adjust,
settle or compromise the amount or payment of any Receivable or release wholly or partly any account debtor or obligor thereof or allow any credit or discount thereon. 

    (c) The
Grantor will not (i) sell, assign (by operation of law or otherwise), exchange or otherwise dispose of any of the Collateral, or (ii) create or
suffer to exist any lien, security interest or other charge or encumbrance upon or with respect to any Collateral, except for the security interest created hereby 

    SECTION 6.  Additional Provisions Concerning the
Collateral.  

    (a) The
Grantor hereby authorizes the Secured Party to file, without the signature of the Grantor where permitted by law, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral which the Secured Party may deem necessary or desirable. 

    (b) The
Grantor hereby irrevocably appoints the Secured Party the Grantor's attorney-in-fact and proxy, with full authority in the place and
stead of the Grantor and in the name of the 

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Grantor or otherwise, upon the occurrence of an Event of Default, to take any action and to execute any instrument which the Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, (i) to ask, demand, collect, sue for, recover, compound, receive and give acquitence and receipts for moneys due and to become due under or in
respect of any Collateral; (ii) to receive, indorse, and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) of this subsection (b); and
(iii) to file any claims or take any action or institute any proceedings which the Secured Party may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the
rights of the Secured Party with respect to any Collateral. 

    (c) If
the Grantor fails to perform any agreement contained herein, the Secured Party may perform, or cause performance of, such agreement or obligation, and the
expenses of the Secured Party incurred in connection therewith shall be payable by the Grantor pursuant to Section 8 hereof. 

    (d) The
powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such
powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior Party or any other rights pertaining to any Collateral. 

    SECTION 7.  Remedies Upon
Default.  If any Event of Default shall have occurred and be continuing: 

    (a) The
Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all of the
rights and remedies of a secured party on default under the Code (whether or not the Code applies to the affected Collateral), and may also without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit or for future deliver, and at such price or
prices and upon such other terms as the Secured Party may deem commercially reasonable. The Grantor agrees that, to the extent notice of sale shall be required by law, at least 10 days' notice
to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 

    (b) Any
cash held by the Secured Party as Collateral and all cash proceeds received by the Secured Party in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral shall be applied (after payment of any amounts payable to the Secured Party pursuant to Section 8 hereof) in whole or in part by the Secured
Party against, all or any part of the Obligations in such order as the Secured Party and remaining after payment in full of all of the Obligations shall be paid over to the Grantor or to such person
as may be lawfully entitled to receive such surplus. 

    (c) In
the event that the proceeds of any such sale, collection or realization are insufficient to pay all amounts to which the Secured Party is legally entitled, the
Grantor shall be liable for the deficiency, together with interest thereon at the highest rate permitted by applicable law, together with the costs of collection and the reasonable fees and expenses
of any attorneys employed by the Secured Party to collect such deficiency. 

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    SECTION 8.  Indemnity and
Expenses.  

    (a) The
Grantor agrees to indemnify the Secured Party from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting solely and directly from the Secured Party's gross negligence or willful misconduct. 

    (b) The
Grantor will, upon demand, pay to the Secured Party the amount of any and all costs and expenses, including the reasonable fees and disbursements of the Secured
Party's counsel and of any experts and agents, which the Secured Party may incur in connection with (i) the custody, preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral; (ii) the exercise or enforcement of any of the rights of the Secured Party hereunder; or (iii) the failure by the Grantor to perform or observe any of
the provisions hereof. 

    SECTION 9.  Notices, Etc.  All
notices permitted or required by any provision of this Agreement shall be made in writing and sent via hand delivery or recognized overnight courier or by certified U.S. Mail, return receipt
requested, addressed to the address of the receiving party or parties, or to such other address as may be designated by written notice. In the event there is a change in the address of any of the
parties, such party shall inform the remaining parties within twenty (20) days of such change. Notice sent by certified U.S. Mail, return receipt requested, shall be deemed to have been given
on the date which falls two (2) days after the date postmarked by the United States Postal Service. In all other cases, notice shall be deemed to have been given upon delivery. For purposes of
this Agreement, notice to each of the parties shall given as follows: 

    a.  If
to Grantor:

Business Solutions Group, Inc.

45723 Paddington Station Terrace

Sterling, VA 20166 

    b.  If
to Secured Party;

110 West Easy Street

Simi Valley, CA 93065 

With
a copy to: 

Wachtel &
Masyr, LLP

110 East 59th Street

New York, N.Y. 10022

Attn: Scott J. Lesser, Esq. 

    SECTION 10.  Miscellaneous.  

    (a) No
amendment of any provision of this Agreement shall be effective unless it is in writing and signed by the Grantor and the Secured Party, and no waiver of any
provision of this Agreement, and no consent to any departure by the Grantor therefrom, shall be effective unless it is in writing and signed by the Secured Party, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for which given. 

    (b) No
failure on the part of the Secured Party to exercise, and no delay in exercising, any right hereunder or under the Loan Agreement or Note shall operate as a
waiver thereof; nor shall any single or partial exercise thereof or the exercise of any other right. The rights and remedies of the Secured Party provided herein, in the Loan Agreement and in the Note
are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. The rights of the Secured Party under this Agreement, the Loan Agreement and the Note are not
conditional or contingent on any attempt by the Secured Party to exercise any of its rights against any other 

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person. This Agreement does not in any way amend, limit, modify, waive, the Secured Party's rights under the Loan Agreement Note. 

    (c) Any
provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. 

    (d) This
Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the payment in full of the
Obligations, (ii) be binding on the Grantors and its successors and assigns and shall inure, together with all rights and remedies of the Secured Party and its successors, transferees and
assigns. Without limiting the generality of clause (ii) of the immediately preceding sentence, the Secured Party may assign or otherwise transfer its rights under the Note, and its rights under
this Agreement, to any other person, and such other person shall thereupon become vested with all of the benefits in respect thereof granted to the Secured Party herein or otherwise. None of the
rights or obligations of the Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Secured Party. 

    (e) Upon
the satisfaction in full of the Obligations: (i) this Agreement and the security interest created hereby shall terminate and all rights to the
Collateral shall revert to the Grantor, and (ii) the Secured Party will, upon the Grantor's request and at the Grantor's expense, (A) return to the Grantor such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and (B) execute and deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination. 

    (f)  This
Agreement shall be enforced, governed by, and construed in accordance with the laws of the State of New York, regardless of the choice of law or conflict of
law provisions of or any other jurisdiction. The parties agrees that any suit brought in connection with this Agreement shall be brought in the state or federal courts located in the in the State of
New York, County of New York. The parties consent to the personal jurisdiction of such courts. THE PARTIES HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO VENUE, INCLUDING AN OBJECTION BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, THAT THE PARTIES NOW HAVE OR HEREAFTER MAY HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION. 

    (g) All
pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the antecedent person
or persons or entity or entities may require. The headings preceding the text of the Sections included in this Agreement and the headings to Exhibits attached to this Agreement are for convenience
only and shall not be deemed part of this Agreement be given any effect in interpreting this Agreement. The use of the terms "including or "include" shall in all cases herein mean "including, without
limitation" or "Include, without limitation", respectively. Underscored references to Section, subsections or exhibits shall refer to those portions of this Agreement. Consummation of the transactions
contemplated herein shall not be deemed a waiver of a breach of or inaccuracy in any representation, warranty or covenant or of any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the generality or applicability of a more general representation, warranty or covenant was not also breached or inaccurate. 

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    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by its officer thereunto duly
authorized, as of the date first above written. 

	 	 	GRANTOR
	

 	
 	

By:	
 	

/s/ DMITRI V. SIMONENKO   

	

 	
 	

SECURED PARTY
	

 	
 	

By:	
 	

/s/ HARRIS SHAPIRO   

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PROMISSORY NOTE    
  

	$60,000	 	Date: October 27, 2000

    FOR VALUE RECEIVED, the undersigned, Business Solutions Group, Inc. a Virginia corporation (the "Maker"), hereby promises to pay
to the order of Perfectdata Corporation a California (the "Holder"), at the Maker's offices located at 110 West Easy Street, Simi Valley, CA 93065 (or at such other place as the Holder of this Note
designates in writing to the Maker), in lawful money of the United States of America, the principal sum of Sixty Thousand ($60,000) Dollars, plus all accrued and unpaid interest thereon as provided
below, on December 15, 2000. The outstanding principal balance of this Note shall bear simple interest from the date hereof until repaid in full, at the rate of seven (7%) percent per annum. 

    This
Note is being given pursuant to a Loan Agreement, dated October 27, 2000, between the Maker and the Holder (the "Loan Agreement") and is secured by a lien on certain of
the assets of the Maker pursuant to a Security Agreement, dated October 27, 2000, between the Maker and the Holder, (the "Security Agreement"). 

    1.  Prepayment.  

    The
unpaid principal amount of this Note may be prepaid at any time in whole, or in part, by the Maker without penalty. Any such prepayment shall first be applied to accrued interest
and then to principal. The unpaid principal amount of this Note shall be prepaid from the proceeds of the collateral. Any such prepayment shall first be applied to accrued interest and then to
principal. 

    2.  Default.  

    (a)  Definition.  For purposes of this Note, an Event of Default shall be deemed to have occurred if: 

	(i)
	the
Maker fails to pay when due any payable (whether at maturity or otherwise) the full amount of interest then accrued on this Note or the full
amount of any principal payment on this Note; or

	(ii)
	the
Maker fails to perform or observe any provision contained in the Security Agreement, and such failure is not cured within 5 days after
the occurrence thereof,; or

	(iii)
	any
representation, warranty or information contained in the Security Agreement, is false or misleading in any material respect on the date made;
or

	(iv)
	there
is entered any order, judgment or decree by a court of competent jurisdiction for relief in respect of the Maker, under any applicable
federal or state bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or other similar law, whether now or hereafter in effect, or appointing a
receiver, assignee or trustee of all or a substantial part of the Maker's property, assets or revenues and that order, judgment or decree shall have continued unstayed, unbonded and in effect for a
period of 30 days; or

	(v)
	the
filing by the Maker of a petition seeking relief under Title 11 of the United States Code, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or other similar law, or the consent by the Maker to the
institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession by a receiver, liquidator, assignee, trustee or custodian of any substantial
part of the properties, assets or revenues of the Maker or the making by the Maker of a general assignment for the benefit of its creditors; or 

E–26

 

	(vi)
	the
Maker shall admit in writing its inability to pay its debts as they mature or if the Maker becomes insolvent; 

    The
foregoing shall constitute Events of Default whatever the reason or cause for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. 

    (b)  Consequences of Event of Default.  

	(i)
	If
any Event of Default has occurred, the interest rate on this Note shall increase immediately by an increment of five (5) percentage
point(s) to the extent permitted by law thereafter, until such time as the Note is paid in full.

	(ii)
	If
an Event of Default has occurred, the aggregate principal amount of the Note (together with all accrued interest thereof and all other amounts
due and payable with respect thereto) shall become immediately due and payable without any action on the part of the Holder, and the Maker shall immediately pay to the Holder all amounts due and
payable with respect to the Note.

	(iii)
	The
Holder shall also have any other rights which the Holder may have been afforded under any contract or agreement at any time and any other
rights which the Holder may have pursuant to applicable law. 

    3.  Waiver.  

    The
Maker hereby waives diligence, presentment, protest and demand and notice of protest and demand, dishonor, nonpayment of this Note, and any statutory or other right of redemption,
and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the Holder may accept security for this Note or release security of this Note, all without in
any way affecting the liability of the Maker hereunder. 

    4.  Collection.  

    The
Maker shall pay to the Holder, upon demand, all reasonable out of pocket expenses (including, without limitation, reasonable fees and disbursements of counsel) incurred by the
Holder in connection with the collection of any amounts due under this Note. 

    5.  Miscellaneous.  

    (a) No
amendment, modification or waiver of any provision of this Note shall be effective unless the same shall be in writing and signed by the Maker and the Holder.
The provisions of this Note shall be binding upon the successors and assigns of the Maker. 

    (b) This
Note shall be enforced, governed by, and construed in accordance with the laws of the State of New York, regardless of the choice of law or conflict of law
provisions of or any other jurisdiction. The Maker agrees that any suit brought in connection with this Agreement shall be brought in the state or federal courts located in the in the State of New
York, County of New York. The Maker consents to the personal jurisdiction of such courts. THE MAKER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO VENUE, INCLUDING AN OBJECTION BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT THE MAKER NOW HAS OR HEREAFTER MAY HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION. 

    (c) This
Note shall be paid without claim of set-off or deduction of any nature or for any cause whatsoever. 

E–27

 

    (d) Upon receipt of evidence reasonably satisfactory to the Maker of the loss, theft, destruction or mutilation of this Note, and of indemnity reasonably satisfactory
to the Maker, if lost, stolen, destroyed or mutilated, the Maker shall execute and deliver to the Holder a new note identical in all respects to this Note. 

    (e) No
failure on the part of the Holder to exercise, and no delay in exercising, any right, power or privilege under this Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege under this Note preclude any other or further exercise thereof or the exercise of any right, power or privilege. The remedies
herein provided are cumulative and not exclusive of any and all other remedies provided by law. 

	

 	
 	
BUSINESS SOLUTIONS GROUP, INC
	

 	
 	

By:	
 	

/s/ DMITRI V. SIMONENKO   

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EXHIBIT 10.17

SECURITY AGREEMENT

PROMISSORY NOTEPrepared by MERRILL CORPORATION

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EXHIBIT 10.18    
  

    STOCK OPTION AGREEMENT (hereinafter called this "Agreement") made as of this 27th day of November, 2000 between PerfectData
Corporation, a California corporation (hereinafter called the "Corporation"), and Terry J. Baker (hereinafter called the "Optionee"). 

    WHEREAS, in accordance with the Consulting Agreement dated as of August 29, 2000 (the "Consulting Agreement") between the
Corporation and the Optionee, the Corporation desires, in connection with the Optionee's service as a consultant to the Corporation, to provide the Optionee with an opportunity to acquire shares of
the Corporation's Common Stock, no par value (hereinafter called the "Common Stock"), on favorable terms and thereby increase his proprietary interest in the continued progress and success of the
business of the Corporation; and 

    WHEREAS, the Optionee has been serving the Corporation as a consultant pursuant to the Consulting Agreement through the date hereof; 

    NOW, THEREFORE, in consideration of the premises, the mutual covenants herein set forth and other good and valuable consideration, the
Corporation and the Optionee hereby agree as follows: 

    1.  Grant of Option.  The Board of Directors of the Corporation (the "Board") hereby grants to the
Optionee, as of the date hereof (the "Date of Grant"), a stock option (the "Option") to purchase 20,000 shares of the Common Stock, subject to adjustment as provided in Section 8 hereof: 

    2.  Exercise Price.  The Exercise Price of the shares of the Common Stock covered by the Option will be
$3.00 per share (the "Exercise Price"), subject to adjustment as provided in Section 8 hereof. 

    3.  Exercise of Option.  (a) Subject to earlier termination or cancellation as provided in this
Agreement, the Option may be exercised from time to time, in whole or in part, on or prior to November 26, 2003 (the "Expiration Date") and as to not more than the 20,000 shares of the Common
Stock originally subject
thereto (subject to giving effort to any adjustment pursuant to Section 8 hereof and rounding any fraction to the nearest lower whole number). 

    (b) An
Option may be exercised as provided in this Section 3 by notice and payment to the Corporation as provided in Sections 7, 10 and 11 hereof. 

    4.  Term and Rights as a Shareholder.  Subject to earlier termination or cancellation as provided in this
Agreement, the Option will be exercisable only (a) on or prior to the Expiration Date and (b) as otherwise provided in Sections 5 and 6 hereof. The holder of the Option will not have any
right to dividends or any other rights of a shareholder with respect to a share of the Common Stock subject to the Option until such share shall have been issued to him following exercise of the
Option. Such issuance shall be evidenced by the appropriate entry on the books of the duly authorized transfer agent of the Corporation, provided that the date of issue shall not be earlier than the
Exercise Date (as hereinafter defined in Section 7(b) hereof) with respect to such share. 

    5.  Non-transferability of Option.  The Option will not be transferable otherwise than by
will or by the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by him or, in the case of the Optionee's certified incompetency, his duly
authorized legal representative(s). More particularly, but without limiting the generality of the foregoing, the Option may not be assigned, transferred (except as provided in the preceding sentence)
or otherwise disposed of, or pledged or hypothecated in any way (whether by operation of law or otherwise), and shall not be subject to execution, attachment, or other process. Any assignment,
transfer, pledge, hypothecation or other disposition of the Option attempted contrary to the provisions of this Agreement, or any levy of execution, attachment or other process attempted upon the
Option, will be null and void and without effect. Any attempt to make any such assignment, transfer, pledge, hypothecation or other disposition of the Option or any attempt to make any such levy of
execution, attachment or other process will 

E–29

 

cause the Option to terminate immediately upon the happening of any such event if the Board should, at any time, in its sole discretion, so elect by written notice to the Optionee (or to the person
then entitled to exercise the Option under the provisions of the Plan); provided, however, that any such termination of the Option under the foregoing provisions of this Section 5 will not
prejudice any rights or remedies which the Corporation may have under this Agreement, the Consulting Agreement or otherwise. 

    6.  Exercise Upon Termination of Relationship.  

    (a) If
the Optionee ceases to be a consultant to the Corporation because of Cause (as hereinafter defined), the Option will forthwith terminate. The term "Cause" shall
mean (i) an action by the Optionee involving dishonesty, fraud, embezzlement or any other crime with respect to the
Corporation, whether before or after his service as a consultant, (ii) disclosing trade secrets or other confidential information of the Corporation or any subsidiary, whether before or after
his service as a consultant, or (iii) while a consultant having entered into competition, directly or indirectly, with the Corporation or any subsidiary or having used the Corporation's or any
subsidiary's facilities or premises for the conduct of illegal or unlawful activities, transactions or business. 

    (b) If
the Optionee dies prior to the Expiration Date of the Option, the Option may, subject to the provisions of Section 5 hereof, be exercised, by the estate
of the Optionee, or the duly appointed representative, or beneficiary who acquires the Option by will or by the laws of descent and distribution, at any time within one year after the date of death,
at the end of which period the Option will terminate unless terminated sooner as a result of the Expiration Date occurring prior thereto. 

    (c) In
no event set forth in this Agreement may the Option be exercised after the Expiration Date. 

    7.  Method of Exercise of Option.  

    (a) Subject
to the terms and conditions of this Agreement, the Option will be exercisable by notice and payment to the Corporation in accordance with the procedure
prescribed herein. Each such notice, which may be in the form of Exhibit A hereto, shall: 

	(i)
	state
the election to exercise the Option and the number of shares of the Common Stock in respect of which it is being exercised;

	(ii)
	be
signed by the person or persons entitled to exercise the Option, including the address to which share certificates are to be delivered, and, if
the Option is being exercised by any person or persons other than the Optionee, be accompanied by proof, satisfactory to counsel for the Corporation, of the right of such person or persons to exercise
the Option;

	(iii)
	be
accompanied by payment in full of the purchase price for the shares of the Common Stock covered by the notice in the form of a check, bank
draft or money order payable to the Corporation, or payment shall be made in any other manner permitted by Section 8(b) of the Corporation's Stock Option Plan of 2000, but only if such other
method is approved by the Board of Directors of the Corporation for use by the Optionee at the time of exercise; and

	(iv)
	make
such arrangements, if requested by the Corporation and in form and substance satisfactory to counsel to the Corporation, with respect to
applicable withholding tax requirements, if any. 

    (b) Upon
receipt of a notice in accordance with subsection (a) of this Section 7 (such date and time of receipt being herein called the "Exercise Date"),
the Option will be deemed to have been exercised with respect to such particular shares of the Common Stock if, and only if, the provisions of 

E–30

 

subsection (a) of this Section 7 and the provisions of Section 11 hereof shall have been complied with. Notwithstanding anything in this Agreement to the contrary, any notice of
exercise given pursuant to the provisions of this Section 7 will be void and of no effect if all the provisions of subsection (a) of this Section 7 and the provisions of
Section 11 shall not have been complied with. The certificate or certificates representing the shares of the Common Stock as to which the Option shall be exercised will be registered in the
name of the person or persons exercising the Option and will be delivered, as soon as practicable after the Exercise Date, to the person or persons exercising the Option at the place specified in the
notice of exercise of the Option, but only upon compliance with all of the provisions of this Agreement. 

    (c) In
the event that the Optionee shall exercise the Option for less than the total number of shares of the Common Stock subject to the Option, this Agreement shall be
deemed automatically amended to reflect the reduced number of shares post-exercise, without the necessity of the Optionee surrendering this Agreement for issuance of a new agreement
reflecting the reduced number of shares then still subject to the exercised Option. To evidence such amendment, the Corporation shall deliver to the Optionee (or such other permissible person
executing the Option) a notice in the form of Exhibit B hereto. 

    8.  Stock Dividend and Capital Changes.  

    (a) In
the event that the Corporation shall pay a stock dividend with respect to the Common Stock, the number of shares of the Common Stock subject to the Option shall
be increased by the number of shares which would have been issuable to the holder if such holder had exercised the Option immediately prior to the record date related to the declaration and payment of
such share dividend. The Exercise Price of the shares subject to the Option shall be appropriately adjusted as provided in subsection (d) of this Section 8. 

    (b) If
the Corporation shall at any time subdivide its outstanding Common Stock by recapitalization, reclassification or split-up thereof, the number of
shares of the Common Stock subject to the Option immediately prior to such subdivision shall be proportionately increased and, if the Corporation shall at any time combine the outstanding Common Stock
by recapitalization, reclassification or combination thereof, the number of shares of the Common Stock subject to the Option immediately prior to such combination shall be proportionately decreased.
The adjustment to the Exercise Price pursuant to subsection (d) of this Section 8 and the adjustment to the number of shares shall become effective at the close of business on the record
date for such subdivision or combination. 

    (c) In
case of any reclassification or capital reorganization of the outstanding shares of the Common Stock (other than a change covered by subsection (b) of
this Section 8 which solely affects the par value of such shares of the Common Stock) or in the case of any merger or consolidation of the Corporation with or into another corporation (other
than a merger or consolidation in which the Corporation is the continuing corporation) or in the case of any sale or conveyance to another corporation of the property of the Corporation as an entirety
or substantially as an entirety in connection with which the Corporation is dissolved, the holder of the Option shall have the right thereafter (until the expiration of the right of exercise of the
Option) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or
property receivable upon such reclassification, capital reorganization, merger or consolidation, or upon the dissolution following any sale or other transfer, by a holder of the number of shares of
the Common Stock obtainable upon the exercise of the Option immediately prior to such event. The provisions of this subsection (c) of this Section 8 shall similarly apply to successive
reclassifications, capital reorganizations, mergers or consolidations, sales or other transfers. 

E–31

 

    Anything in the preceding paragraph to the contrary notwithstanding, if the other corporation does not agree to assume any stock option of the Corporation, including the Option, or to
substitute an equivalent option for any stock option of the Corporation, including the Option, in the case of a merger or consolidation or a sale of assets, then the Option shall terminate upon the
consummation of the merger, consolidation or sale of assets. 

    (d) Whenever
the number of shares of the Common Stock purchasable upon the exercise of the Option is adjusted, as provided in this Section 8, the Exercise Price
shall be adjusted (to the nearest one tenth of a cent) by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of
the Common Stock purchasable upon the exercise of the Option immediately prior to such adjustment and the denominator of which shall be the number of shares of the Common Stock so purchasable
immediately thereafter. 

    (e) Upon
the occurrence of each event requiring an adjustment of the Exercise Price and the number of shares of the Common Stock obtainable upon exercise of the Option
in accordance with, and as required by, the terms of this Section 8, the Corporation may employ a firm of certified public accountants (which may be the regular accountants for the Corporation)
which shall compute the adjusted Exercise Price and the adjusted number of shares of the Common Stock purchasable at such adjusted Exercise Price by reason of such event in accordance with the
provisions of this Section 8. The Corporation shall mail forthwith to the Optionee a copy of the certification containing such computation which shall be conclusive and shall be binding upon
the Optionee and the Corporation. 

    9.  Registration.  

    (a) The
Optionee understands that at the Date of Grant neither the Option nor the shares of the Common Stock subject to the Option and issuable upon the exercise
thereof (the "Underlying Shares") have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The Optionee represents that the Option is being, and the Underlying Shares
(if not registered under the Securities Act on the Exercise Date) will be, acquired by him for investment for his own account and not with a view to, or in connection with, the sale or other
distribution thereof. If the Underlying Shares are not registered under the Securities Act on the Exercise Date, the certificate or certificates for the Underlying Shares shall bear the following
legend: 

"The
shares evidenced by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, may not be sold or transferred unless
registered under the Securities Act or unless there is an opinion of counsel to the Company that the shares may be sold or transferred without violating Section 5 of the Securities Act." 

    (b) In
the event that, at the Exercise Date, the Optionee is required by the Securities Act, if he or she desires to sell the Underlying Shares, to deliver a prospectus
complying with Section 10(a) of the Securities Act naming him as a selling stockholder, the certificate or certificates for the Underlying Shares shall bear the following legend: 

"The
shares evidenced by this certificate have been registered under the Securities Act of 1933, as amended (the "Securities Act"); however, the holder is required under the Securities Act to use a
prospectus to resell the shares. Accordingly, the shares may not be sold or transferred unless there is delivered an opinion of counsel to the Company that either (1) there is in effect a
current prospectus meeting the requirements of Section 10(a) of the Securities Act which is being or will be delivered to the purchaser or transferee at or prior to the time of delivery of such
shares for sale or transfer, or (2) such shares may be sold without violating Section 5 of the Securities Act." 

    (c) If
at any time the Corporation proposes to register under the Securities Act (including for this purpose a registration effected by the Corporation for shareholders
other than the Optionee) any 

E–32

 

shares of the Common Stock or other securities in connection with the public offering of such shares or securities solely for cash (other than pursuant to a registration statement on
Form S-4 or S-8 or any successor form thereto), the Corporation shall, at such time promptly give to the Optionee written notice of such proposed registration. The
Corporation shall, subject to the other provisions of this Section 9, cause to be registered under the Securities Act all of the Underlying Shares in the proposed registration unless, within
20 days after the mailing of the notice by the Corporation, the Optionee gives the Corporation notice that he does not want all or a portion of the Underlying Shares to be so registered. 

    (d) If
the registration involves an underwritten public offering, then 

	(i)
	The
Corporation shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing
underwriter;

	(ii)
	The
Optionee or any other permitted holder of the shares of the Underlying Shares participating in such underwriting shall also enter into, and
perform his, her or its obligations under, the underwriting agreement; and

	(iii)
	In
the event that the managing underwriter, in its sole discretion, shall determine that inclusion of the Underlying Shares would jeopardize the
offering by the Corporation, then either (1) the Company shall include in the registration only such number of shares which the managing underwriter, in its sole discretion, shall determine
will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders (including the
Optionee) according to the total amount of securities entitled to be included therein owned by each such selling shareholder or in such other proportions as shall be mutually agreed by the selling
shareholders) or (2) the offering by the Optionee or any other permitted holder of shares of the Underlying Shares shall be delayed for a period of 90 days from the effective date of the
subject registration statement. 

    (e) The
Company shall bear and pay all expenses incurred in connection with the registration, filing and qualification, including (without limitation) all registration,
filing and qualification fees, printing expenses and legal and accounting fees and expenses relating or apportionable thereto, but excluding underwriting discounts and commissions relating to the
Underlying Shares and the fees and expenses of any counsel used by the Optionee or any other permitted holder of the Underlying Shares. 

    (f)  The
Company agrees to use its best efforts to cause the registration statement to be filed pursuant to this Section 9 to become effective and to remain
effective for a period of one year from its effective date or for such lesser period (i) until all of the Underlying Shares are sold or (ii) as requested by the Optionee. Anything in
this Section 9 to the contrary notwithstanding, the Company shall not be obligated to register the Underlying Shares or to keep the registration effective if counsel to the Company shall opine
to the Transfer Agent for the Common Stock that the Optionee or his permitted transferees may sell all of the Underlying Shares pursuant to Rule 144 under the Securities Act or another
exemption from the registration requirement of Section 5 of the Securities Act. 

    (g) Anything
in this Section 9 to the contrary notwithstanding, the Company may fulfill its registration commitment to the Optionee in the Consulting Agreement
to register the Underlying Shares within one year by registering the Underlying Shares in a Registration Statement on Form S-8 if such Form may be used for such purpose under the
rules and regulations of the Securities and Exchange Commission. 

    10.  Notices.  Each notice relating to this Agreement will be in writing and delivered in person or by
registered or certified mail or by express courier service to the proper address. All notices to the Corporation shall be addressed to it at its principal office, now at 110 West Easy Street, Simi
Valley, CA 93065, attention of the Chief Executive Officer. All notices to the Optionee or other person or 

E–33

 

persons then entitled to exercise the Option shall be addressed to the Optionee or such other person or persons at the address set forth below the Optionee's name following the Corporation's
signature. Anyone to whom a notice may be given under this Agreement may designate a new address by notice to that effect given in accordance with this Section 10. 

    11.  Approval of Counsel.  The exercise of the Option and the issuance and delivery of the Underlying
Shares shall be subject to approval by the Corporation's counsel of all legal matters in connection therewith, including compliance with the requirements of the Securities Act, or corresponding
provision of future law, and the Securities Exchange Act of 1934, as amended, or corresponding provision of future law, and the rules and regulations under each such Act, and the requirements of any
stock exchange upon which the Common Stock may then be listed or, if applicable, of The Nasdaq Stock Market, Inc. (including its parent, the National Association of Securities
Dealers, Inc.). In furtherance thereof, such counsel may request that the Optionee or other permissible person exercising the Option deliver such investment representation or other documents as
such counsel deems necessary or appropriate. 

    12.  Reservation of Shares.  The Corporation shall at all times during the term of the Option reserve and
keep available such number of shares of the class of stock then subject to the Option as will be sufficient to satisfy the requirements of this Agreement. 

    13.  Disputes.  Any dispute or disagreement which arises under, or as a result of, or in any way relates
to, the interpretation, construction or application of this Agreement will be resolved by the Board. Any such resolution made hereunder shall be final, binding and conclusive for all purposes upon all
persons. In the event of a difference between the terms and conditions of this Agreement and those of the Consulting Agreement, the terms and conditions of this Agreement shall govern. 

    14.  Limitation of Action.  The Optionee agrees that every right of action accruing to him and arising
out of, or in connection with, this Agreement against the Corporation will, irrespective of the place where an action may be brought, cease and be barred by the expiration of three years from the date
of the act or omission in respect of which such right of action arises. 

    15.  Counterparts.  This Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signature thereto were upon the same instrument. 

    16.  Benefits of Agreement.  This Agreement will inure to the benefit of, and be binding upon, each
successor and assign of the Corporation. All obligations imposed upon the Optionee and all rights granted to the Corporation under this Agreement will be binding upon the Optionee's heirs, legal
representatives and successors. 

E–34

 

    IN WITNESS WHEREOF, the Corporation and the Optionee have caused this Agreement to be executed as of March 2, 2001. 

	 	 	PERFECTDATA CORPORATION
	

 	
 	

By:	
 	

/s/ HARRIS SHAPIRO   
Chairman of the Board and Chief Executive Officer
	

 	
 	

 	
 	

/s/ TERRY J. BAKER   
 Signature of Optionee
	

 	
 	

 	
 	

Terry J. Baker
 Name of Optionee
	

 	
 	

 	
 	

1595 Rogatta Road

Laguna Beach, CA 92651
 (Address of Optionee)

E–35

  

 
 

EXHIBIT A
  ELECTION TO PURCHASE    
  

To
PerfectData Corporation: 

110
West Easy Street

Simi Valley, CA 93065

Attention: Chief Executive Officer 

    The
undersigned hereby irrevocable elects to exercise the Option expiring November 26, 2003 to purchase            shares of the Common Stock issuable upon the exercise
of the Option and requests that a certificate for such shares shall be issued in the name of 

	
 (Name)
	

 (Address)
	

 (Taxpayer Social Security Number)

	and be delivered to	 
	 	
 (Name)

	

at	

 
	 	
 (Address)

	

Dated:	
 	

 	
 	

,	
 	

 	
 	

 
	 	 	
	 	 	 	
	 	 

Name of holder of Option: 

	

 (Please Print)
	

 (Address)
	

 (Signature)

E–36

  

 
 

EXHIBIT B
  NOTICE AS TO PARTIAL EXERCISE
  BY    
  

	To:	 	 	 	Date:	 	 
	 	 	
	 	 	 	 
	

 	
 	

	
 	

 	
 	

 
	

 	
 	

 (Address)

	
 	

 	
 	

 

    WHEREAS, you are the named Optionee in a Stock Option Agreement dated as of September 7, 2000 and have exercised an Option
expiring November 26, 2003 (the "Exercised Option") as to            shares; 

    PLEASE TAKE NOTICE that the Stock Option Agreement is, by its terms, automatically amended so that the Option now covers only
            shares. 

	 	 	PERFECTDATA CORPORATION
	

 	
 	

By:	
 	

	

 	
 	

 	
 	

 (Title)

E–37

QuickLinks

EXHIBIT 10.18

EXHIBIT A ELECTION TO PURCHASE

EXHIBIT B NOTICE AS TO PARTIAL EXERCISE BY

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