Ok I installed the DB2 Server client and I now see Toad can recognize the default DB2 Client.
Now When I click on Catalog Server / DB window while cataloging I get following errror
"DB21018E A system error occurred. The command line processor could not continue processing."
Also when I open my DB2 Command line processor I get the following error.
DB21018E A system error occurred. The command line processor could not
continue processing.
C:\Program Files\IBM\SQLLIB\BIN>