SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
DIVERSIFIED CORPORATE RESOURCES, INC.
-----------------------------------------
(Name of Issuer)
Common Stock, Par Value $0.10
----------------------------------
(Title of Class of Securities)
255153 10 8
--------------
(CUSIP Number)
Mark D. Wigder, Esq.
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
(214) 855-4500
-----------------------------------------------
(Name, Address and Telephone Number
of Person Authorized to Receive
Notices and Communications)
October 3, 1997 (and certain earlier events referred
to herein)
--------------------------------------------------------
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4), check the following box. [ ]
heck the following box if a fee is being paid with this statement. |X| A fee is
not required only if the reporting person (1) has a previous statement on file
reporting beneficial ownership of more than five percent (5%) of the class of
securities described in Item 1 and (2) has filed no amendment subsequent thereto
reporting beneficial ownership of five percent (5%) or less of such class.
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CUSIP No. 255153 10 8
-------------
1. Names of Reporting Persons S.S. or I.R.S. Identification Nos. of
Persons: DCRI, L.P. No. 2, Inc., a Texas corporation, 75-2686994
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2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ] (b) [ ]
3. SEC Use Only
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4. Source of Funds (See instructions) BK
-----------------------------------
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization Texas
---------------------------------
7. Sole Voting Power 631,700
Number of Shares -----------
Beneficially Owned
8. Shared Voting Power 0
-----------
9. Sole Dispositive Power 611,700
-----------
10. Shared Dispositive Power 20,000
-----------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
631,700
-----------
12. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See
Instructions) [ ]
13. Percent of Class Represented by Amount in Row 11.
24.2%*
-----------
14. Type of Reporting Person (See Instructions):
CO
------
* Based on 2,611,211 shares of Common Stock outstanding proposed to be
outstanding after the consummation of the public offering (not including the
over-allotment option) as set forth in the Registration Statement of Diversified
Corporate Resources, Inc., on Form S-1, as amended (Registration No. 333-31825).
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CUSIP No. 255153 10 8
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1. Names of Reporting Persons S.S. or I.R.S. Identification Nos. of
Persons: J. Michael Moore, 450743011
---------------------------
2. Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ] (b) [ ]
3. SEC Use Only
-------------------------------------------------------
4. Source of Funds (See instructions) BK
-----------------------------------
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
6. Citizenship or Place of Organization Texas
---------------------------------
7. Sole Voting Power 656,700
Number of Shares -----------
Beneficially Owned by
Each Reporting Person 8. Shared Voting Power 12,000
With -----------
9. Sole Dispositive Power 714,200
-----------
10. Shared Dispositive Power 20,000
-----------
11. Aggregate Amount Beneficially Owned by Each Reporting Person
746,200
-----------
12. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See
Instructions) [ ]
13. Percent of Class Represented by Amount in Row 11.
28.1%*
-----------
14. Type of Reporting Person (See Instructions):
IN
------
* Based on 2,611,211 shares of Common Stock outstanding proposed to be
outstanding after the consummation of the public offering (not including the
over-allotment option) as set forth in the Registration Statement of Diversified
Corporate Resources, Inc., on Form S-1, as amended (Registration No. 333-31825).
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<PAGE>
SCHEDULE 13D
Item 1. Security and Issuer
- ----------------------------
This Schedule 13D relates to the common stock, par value $.10 per share
(the "Common Stock"), of Diversified Corporate Resources, Inc. (the "Company"),
whose principal executive offices are located at 12801 North Central Expressway,
Suite 350, Dallas, Texas 75243.
Item 2. Identity and Background
- --------------------------------
One of the persons filing this Schedule 13D is DCRI, L.P. No. 2 ("No. 2"),
a Texas corporation. The principal business address of this corporation is 12801
North Central Expressway, Suite 260, Dallas, Texas 75243. The principal office
address is the same as the principal business address. No. 2 is principally
engaged in the business of making investments. The executive officers of No. 2
are: J. Michael Moore ("Moore"), Chief Executive Officer; Terry O'Brien,
Secretary; and M. Ted Dillard ("Dillard"), Treasurer. The sole director of No. 2
is Moore. Although No. 2 is an entity wholly-owned by Moore, pursuant to an
agreement among Moore, No. 2 and Dillard, the President of the Company, Dillard
has the right to acquire a ten percent (10%) ownership interest in No. 2,
pursuant to a vesting schedule over a four (4) year period.
The other person filing this Schedule 13D is Moore, whose business address
12801 North Central Expressway, Suite 260, Dallas, Texas 75243. Moore's
principal occupation is serving as Chairman of the Board and Chief Executive
Officer of the Company. Moore is a citizen of the United States of America.
During the last five years, neither No. 2, any of No. 2's officers or
directors (the "Instruction C Individuals"), nor Moore has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanor) or has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding has been or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. and Item 4. Source and Amount of Funds or Other Consideration
- ----------------------------------------------------------------------
This Schedule 13D is an amendment to a prior Schedule 13D (the "No. 2
Schedule 13D"), that was filed by No. 2 and is the original Schedule 13D for
Moore. No. 2 and Moore are sometimes collectively referred to herein as the
"Reporting Persons." The No. 2 Schedule 13D was filed to reflect No. 2's
acquisition of 899,200 shares (the "Shares") of Common Stock, which represented
at that time approximately fifty-one percent (51%) of the issued and outstanding
shares of Common Stock. This amendment is being filed to report, inter alia, the
disposition by No. 2 of an aggregate of 267,500 shares of Common Stock, 175,000
of which shares were sold as a selling shareholder in the Company's underwritten
public offering (the "Offering"), which closed on October 3, 1997.
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The Shares were acquired by No. 2 from Ditto Properties Co. ("DPC") as a
result of a series of transactions culminating in March of 1993. Part of the
consideration for the acquisition of the Shares was the assumption of certain
indebtedness (the "D&H Note") to D&H Partners, L.P., a Texas limited partnership
("D&H"). The D&H Note was secured by 255,700 shares of Common Stock (the "D&H
Shares"). DPC has since filed a lawsuit (the "Ditto Lawsuit") against No. 2 in
which it claimed, among other things, that its sale of the Shares to No. 2 in
March 1993 pursuant to a stock purchase agreement should be rescinded. DPC has
also filed a Schedule 13D and amendments thereto claiming that it is the
beneficial owner of the Shares based on a successful outcome of DPC's rescission
claim. The trial court, however, granted the No. 2's motion for summary judgment
seeking dismissal of DPC's rescission claim.
In connection with the Ditto Lawsuit an agreement was reached by the
parties and approved by the court which provided that (i) No. 2 shall, at its
option, either deposit the certificates (the "Certificates") that it had in its
possession (which did not include the D&H Shares) or the sum of $1.5 million
(the "Cash Deposit") with a special master (the "Special Master") that had been
appointed by the court, (ii) in the event that No. 2 elected to deposit the
Certificates, No. 2 would be able to vote, sell, or otherwise dispose of the
Shares subject only to the final approval of the Special Master and to the
rights of D&H with respect to the D&H Shares, and (iii) in the event that No. 2
elected to deposit the Cash Deposit with the Special Master, No. 2 would be able
to vote, sell or otherwise transfer the Shares without the approval of the
Special Master, subject to the rights of D&H with respect to the D&H Shares. On
July 9, 1997 No. 2 deposited the Cash Deposit with the Special Master.
The D&H Note, which was in default, was paid off by No. 2 on July 24, 1997
and D&H's security interest in the D&H Shares was terminated at that time.
No. 2 borrowed $2.25 million (the "Imperial Loan") from Imperial Bank and
used the proceeds of the Imperial Loan, inter alia, to make the Cash Deposit and
to satisfy the D&H Note. As security for the Imperial Loan, No. 2 pledged (the
"Imperial Pledge") to Imperial Bank 818,500 shares of Common Stock and granted
to Imperial Bank an option (the "Imperial Option") to purchase 75,000 shares
(the "Imperial Shares") of Common Stock at an exercise price of $.01 per share.
In connection with its efforts to arrange financing with respect to the
Cash Deposit, No. 2 agreed to transfer to S.C. Fundamental Value Fund, L.P.
10,000 shares of Common Stock in payment of certain fees. In addition, in
consideration of certain services provided by Dillard to No. 2 in connection
with the Imperial Bank Loan, the Cash Deposit and the satisfaction of the D&H
Note, No. 2 transferred 7,500 shares of Common Stock to Dillard.
Effective October 1, 1997, Imperial Bank exercised the Imperial Option and
in connection therewith No. 2 transferred the Imperial Shares to Imperial Bank.
The Imperial Shares were sold by Imperial Bank in the Offering.
As noted above, No. 2 sold 175,000 shares of Common Stock in the Offering,
including certain shares that had been pledged to Imperial Bank (the "Offering
Shares"). Following the sale of the Offering Shares and the repayment by No. 2
CORPDAL:91151.4 28722-00003
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to Imperial Bank of $750,000 of the Imperial Bank Loan, No. 2 has pledged
375,000 shares of Common Stock to Imperial Bank to secure the Imperial Loan. No.
2 sold the Offering Shares at a net price of $9.00 per share after taking into
account underwriting discounts and commissions ($.80 per share) and the
underwriters non-accountable expense allowance ($.20 per share). In connection
with the Offering, each Reporting Person and Dillard executed lock-up letters
(the "Lock-Up Letters") in favor of Cruttenden Roth Incorporated ("Cruttenden
Roth"), as representative of the Underwriters. The Lock-Up Letters executed by
each of the Reporting Persons provide that for a period of three hundred
sixty-five (365) days after September 30, 1997 (the date of the Prospectus) (the
"Prospectus Date") such Reporting Person will not, directly or indirectly,
pledge (subject to certain exceptions related to the Imperial Bank Loan), offer,
sell, contract to sell, grant any option to sell, or otherwise dispose of shares
of Common Stock without the prior written consent (which consent would not be
unreasonably withheld) of Cruttenden Roth. The Lock-Up Letter executed by
Dillard provides that for a period of three hundred sixty-five (365) days after
the Prospectus Date, Dillard will not, directly or indirectly, pledge, offer,
sell, contract to sell, grant any option to sell, or otherwise dispose of shares
of Common Stock without the prior written of Cruttenden Roth. All of the Lock-Up
Letters provide for the sale of a number of shares of Common Stock to be agreed
upon by the person who executed the Lock-Up Letter and Cruttenden Roth upon the
expiration of six (6) months after the closing of the Offering provided that
such sale is handled by Cruttenden Roth.
Pursuant to the loan documents relating to the Imperial Loan, No. 2 paid
Imperial Bank $750,000 of the principal amount of the Imperial Loan plus a
prepayment of interest calculated through June 29, 1998 from the proceeds of the
Offering. The remaining outstanding principal balance of the Imperial Loan is
due June 29, 1998.
Moreover, No. 2 and Moore have granted an option (the "Hunter Option") to
Samuel E. Hunter, a director of the Company, to purchase an aggregate of 20,000
shares of Common Stock at an exercise price of $5.00 per share, which option
expires on July 31, 2000. The Hunter Option vests at certain intervals over a
three (3) year period and is subject to the approval of the disinterested
members of the Board of Directors.
In addition to the shares of Common Stock beneficially owned by No. 2,
Moore beneficially owns 127,500 shares of Common Stock. In October 1995, the
Company granted to Moore options to purchase 50,000 shares of Common Stock at an
exercise price of $.50 per share, which options were exercised by Moore in April
1997. In three (3) private transactions occurring in April, May and July of
1997, Moore sold 25,000 of such shares of Common Stock in the aggregate to
certain parties (the "Moore Transferees") at a per share price of $2.50 per
share. Moore has retained voting power with respect to 12,000 of such shares
pursuant to proxies (the "Proxies") granted by certain of the Moore Transferees
to Moore. In addition, the Company has granted to Moore options to purchase an
aggregate of 155,000 shares of Common Stock pursuant to the Company's Amended
and Restated 1996 Nonqualified Stock Option Plan (the "Nonqualified Plan"), of
which 77,500 shares are exercisable within sixty (60) days of the date hereof.
In addition, Moore will become vested as to an additional 46,500 shares and
31,000 shares, respectively on December 31, 1997 and 1998, contingent upon
Moore's continued involvement as an officer and director of the Company. The
CORPDAL:91151.4 28722-00003
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<PAGE>
per share exercise price for such options becoming vested in 1996, 1997 and 1998
are, respectively, $2.50, $4.00 and $8.00.
Dillard beneficially owns 110,000 shares of Common Stock. In October 1995,
the Company granted to Dillard options to purchase 50,000 shares of Common Stock
at an exercise price of $.50 per share, which options were exercised by Dillard
in April 1997. In July 1997, in consideration of financial services rendered to
No. 2, Dillard received 7,500 shares of Common Stock from No. 2. In addition,
the Company has granted to Dillard options to purchase an aggregate of 105,000
shares of Common Stock pursuant to the Nonqualified Plan, of which 52,500 shares
are exercisable within sixty (60) days of the date hereof. In addition, Dillard
will become vested as to an additional 31,500 shares and 21,000 shares,
respectively on December 31, 1997 and 1998, contingent upon Dillard's continued
involvement as an officer and director of the Company. The per share exercise
price for such options becoming vested in 1996, 1997 and 1998 are, respectively,
$2.50, $4.00 and $8.00.
At the present time, but subject to the Reporting Persons' and Dillards'
continuing evaluation of the factors noted below, it is intended that the
Reporting Persons (subject to the Imperial Pledge) and Dillard will retain the
shares of Common Stock beneficially owned by them and, through such ownership,
will exercise significant influence over almost all matters relating to the
Company requiring shareholder approval, including the election of the directors
of the Company and through such influence will exercise significant influence
over the operations and financial policies of the Company and its subsidiaries.
In connection with the Company's listing application to the American Stock
Exchange (the "Exchange") with respect to the Common Stock, the Company agreed
with the Exchange to use its best efforts to add to the Board of Directors a
second independent director (the "Second Independent Director"). The Reporting
Persons and Dillard understand that the Company has made a proposal to a
prospective Second Independent Director and is awaiting a response.
Additionally, the Company is actively searching for a third independent director
(the "Third Independent Director"). The Reporting Persons and Dillard intend to
continue to exercise significant influence over the selection of the Second
Independent Director and the Third Independent Director.
In light of the Reporting Persons' reduced beneficial ownership of Common
Stock, the Reporting Persons and Dillard may consider in the future proposing to
the Board of Directors changes to the articles or bylaws of the Company or the
adoption of other measures that are intended to maximize shareholder value but
may impede acquisitions of the Company that the Board of Directors do not
believe are in the best interests of the shareholders of the Company.
Whether the Reporting Persons or Dillard purchase or otherwise acquire or
dispose of additional shares of Common Stock, and the amount, method and timing
of any such purchases or acquisitions, will depend upon the Reporting Persons'
or Dillards' continuing assessment of pertinent factors, including, among other
things: the availability of such shares for purchase or acquisition at
particular price levels or upon particular terms; the business and prospects of
the Reporting Persons or Dillard and the Company; other business and investment
opportunities available to the Reporting Persons or Dillard; economic
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<PAGE>
conditions; money market and stock market conditions; the attitude and actions
of other shareholders of the Company; the availability and nature of
opportunities to dispose of Common Stock; and other plans and requirements of
the Reporting Persons or Dillard. Depending upon their assessment of these
factors from time to time and the provisions of the Imperial Loan documents and
the Lock-Up Letters, the Reporting Persons or Dillard may elect to acquire
additional shares of Common Stock (by means of privately negotiated purchases of
shares, market purchases, a tender offer, a merger or otherwise) or to dispose
of some or all of their shares of Common Stock.
Other than as mentioned above, neither the Reporting Persons, Dillard nor,
to the best knowledge of such persons, any of the other Instruction C
Individuals have any present plans or proposals that relate to or would result
in:
(a) The acquisition or disposition by any persons of additional
securities of the Company;
(b) Any extraordinary corporate transactions, such as mergers,
reorganizations or liquidations, involving the Company or any of
its subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company
or any of its subsidiaries;
(d) A change in the current board of directors or management of the
Company, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
(e) Any material change in the current capitalization or dividend
policy of the Company;
(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's articles or bylaws or other actions that
may impede the acquisition of control of the Company by any
person;
(h) Causing a class of the Company's securities to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered
national securities association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to ss.12(g)(4) of the
Securities and Exchange Act of 1934; or
(j) Any action similar to those enumerated above.
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Item 5. Interest in Securities of the Issuer
- ---------------------------------------------
(a) Number and Percentage of Securities Owned:
-----------------------------------------
(i) The aggregate number of shares of Common Stock owned
beneficially and of record by No. 2 is 631,700 shares of
Common Stock, amounting to approximately 24.2% of the Common
Stock outstanding, based on 2,611,212 shares outstanding as
of October 20, 1997 as set forth in the Company's
Registration Statement on Form S-1, as amended, in
connection with the Offering (Registration No. 333-31825).
(ii) The aggregate number of shares of Common Stock beneficially
owned by Moore is 734,200 shares of Common Stock, amounting
to approximately 28.1% of the Common Stock outstanding,
based on 2,611,212 shares outstanding as of October 20,
1997. Such number of shares beneficially owned is based on
(a) Moore's control of No. 2; (b) Moore's record and
beneficial ownership in his individual capacity of 25,000
shares of Common Stock and options to purchase 77,500 shares
of Common Stock that are exercisable within sixty (60) days
of the date hereof; and (c) Moore's shared voting rights
with respect to 12,000 shares pursuant to the Proxies.
(iii)The aggregate number of shares of Common Stock beneficially
owned by Dillard is 110,000 shares of Common Stock,
amounting to approximately 4.2% of the Common Stock
outstanding, based on 2,611,212 shares outstanding as of
October 20, 1997. Such number of shares beneficially owned
is based on Dillard's record and beneficial ownership of
57,500 shares of Common Stock and options to purchase 52,500
shares of Common Stock that are exercisable within sixty
(60) days of the date hereof.
(b) Type of Ownership:
-----------------
No. 2 is deemed to have the sole power to vote or to direct the
voting of and the sole power to dispose or to direct the disposition
of all of the shares of Common Stock indicated in item 5(a)(i), except
that 20,000 shares are subject to the Hunter Option. Consequently,
Hunter may be deemed to have shared dispositive power with respect to
20,000 shares of Common Stock indicated in Item 5(a)(i). Moore is
deemed to have the sole power to vote or to direct the voting of and
the sole power to dispose or to direct the disposition of all of the
shares of Common Stock indicated in Item 5(a)(ii), except as noted
above with respect to No. 2, and except with respect to shared voting
power with the Moore Transferees with respect to the shares referenced
to in Item 5(a)(ii)(c). Dillard is deemed to have the sole power to
vote or to direct the voting of and the sole power to dispose or to
direct the disposition of all of the shares of Common Stock indicated
in item 5(a)(iii). Except as stated herein, the Reporting Persons and
the Instruction C Individuals do not currently share the power to vote
or to direct the voting of or the power to dispose or direct the
disposition of any shares of Common Stock.
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(c) Transactions in Securities:
--------------------------
Except as disclosed herein, there have been no transactions in
the securities of the Company by the Reporting Persons and Dillard,
nor to the best knowledge of such persons, by the other Instruction C
Individuals, since the No. 2 Schedule 13D.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
- --------------------------------------------------------------------------------
to Securities of the Issuer
- ---------------------------
Other than as described previously in this Schedule 13D, including, without
limitation, Items 3 and 4 hereof, and other than standard pledges of Common
Stock to banks to secure loans in the normal course of business, the Reporting
Persons and Dillard have no contracts, arrangements or understandings with any
person with respect to any securities of the Company.
Item 7. Material to be Filed as Exhibits
Exhibit 1. Agreement regarding filing of Schedule 13D;
2. Proxies from certain of the Moore Transferees;
3. Imperial Bank documents;
a. Commitment Letter: June 27, 1997
b. Commitment Letter: July 21, 1997
c. Credit Terms and Conditions
d. Note
e. General Security Agreement
f. Option to Purchase Stock
g. Amendment No. 1
4. Lock-Up Letter, dated August 20, 1997 between DCRI, L.P.
No. 2 and Cruttenden Roth; and
5. Lock-Up Letter, dated August 20, 1997 between J. Michael
Moore and Cruttenden Roth.
6. Lock-Up Letter, dated August 6, 1997 between M. Ted
Dillard and Cruttenden Roth.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November , 1997 DCRI L.P. No. 2, Inc.
----
By: /s/J. Michael Moore
------------------------------
J. Michael Moore
Chief Executive Officer
/s/ J. Michael Moore
-------------------------------------
J. Michael Moore
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EXHIBIT 1
The undersigned, pursuant to Rule 13d-1(f)(1), hereby acknowledge and agree
that the foregoing Schedule 13D is filed on behalf of each of the undersigned.
Acknowledged and agreed on this day of November, 1997
DCRI L.P. No. 2, Inc.
By: /s/ J. Michael Moore
-----------------------------------
J. Michael Moore
Chief Executive Officer
/s/ J. Michael Moore
---------------------------------------
J. Michael Moore
CORPDAL:91151.4 28722-00003
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July 1, 1997
J. Michael Moore
Diversified Corporate Resources, Inc.
12801 N. Central Expressway
Suite 350
Dallas, Texas 75243
Dear Mr. Moore:
Please let this letter serve as an instrument designed to give you the right to
vote the shares below DC 1466 for an amount of 4,000 shares. This is a Voting
Permission Proxy only.
You may vote them up until the time I either trade them or serve them.
Sincerely,
/s/ Bruce M. Kaminski
- ---------------------
Bruce M. Kaminski
CORPDAL:92102.1 28722-00003
Imperial Bank
- --------------------------------------------------------------------------------
Special Markets Group, Southwest Regional Office
8911 Capitol of Texas Highway, Suite 3320 * Austin, Texas 78759 *
Tel: (512) 349-2333 Fax: (512) 349-2888
June 27, 1997
Mr. Michael Moore
C/O Diversified Corporate Resources, Inc.
12801 N. Central Expressway, Ste. 350
Dallas, Texas 75243
Dear Michael,
We are pleased to provide this commitment letter for the financing that Imperial
Bank ("Bank") is willing to provide to USFG/DHRG LP No. 2, Inc. ("Borrower").
This commitment to lend is subject to execution of a definitive written
agreement and documentation for the transaction described in this letter. The
terms of the financing are as follows:
1. CREDIT FACILITY
---------------
$1,750,000 Bridge Loan to support working capital requirements to be repaid
from the infusion of new equity at IPO.
2. TERMS
-----
Interest payable monthly with all interest and Principal due at maturity.
3. MATURITY
--------
364 days from date of executed documents.
4. PRICING
-------
Interest: 8.0% fixed for the first 90 days. 10.0% fixed for the next
90 days. 12.0% fixed for the next 90 days. Thereafter,
14% until maturity.
Facility Fee: $15,000.
Warrant: As additional consideration, Lender will receive a Warrant
to purchase 60,000 shares of the Borrower's DCRI stock
(pre-split basis) or 120,000 shares on a post-split basis
(split is 2:1 of original shares) at a price of $0.01/share.
The Warrants will expire at the earlier of five years from
the date of closing or the date of an initial public
offering (they will be converted and liquidated at IPO).
The Warrant will include Registration Rights and Anti-
Dilution provisions.
5. COLLATERAL
----------
Blanket security interest perfected by a UCC-1 filing on all assets of
Borrower with the Bank in first position. Additionally, Bank will hold
773,500 shares on a pre-split basis (or 1,547,000 on a post-split basis) of
DCRI stock owned by Michael Moore as collateral.
6. REPORTING REQUIREMENTS (as will be further detailed in loan documents)
----------------------
1. Monthly financial statements within 25 days of month-end and annual
statements within 45 days of FYE.
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7. FINANCIAL COVENANTS
-------------------
None
8. OTHER COVENANTS
---------------
1. Provide to Lender proof of general business and casualty insurance on
all corporate assets with Lender as Loss Payee.
2. Borrower to pay for costs incurred in the Bank perfecting its security
interest and completing due diligence (i.e. UCC Search fees, filing
fees, etc.). Fees to be capped at $10,000.
3. Borrower to be limited as to dividends, indebtedness, liens,
investments, and be subject to approval of material acquisitions (as
will be further detailed in loan documentation).
9. EXPIRATION
----------
Unless Borrower accepts this commitment letter on or before July 1, 1997,
this commitment letter will expire and be of no further effect.
10. REQUIREMENTS PRIOR TO FUNDING
-----------------------------
1. Bank will require proof of dismissal of rescission claims by DPC
releasing any claims and encumbrances on any DCRI Shares of stock.
2. Bank will require in it's possession, stock certificates for 773,500
shares on a pre-split basis (or 1,547,000 on a post-split basis) of
DCRI stock owned by Michael Moore.
3. Borrower and Bank will work together on best efforts to close the
transaction by Thursday, July 3, 1997.
This letter is provided solely for your information and is delivered to you with
the understanding that neither it nor its substance shall be disclosed to any
third person, except those who are in confidential relationship with you, or
where the same is required by law.
If the terms set forth above are acceptable to you, please so indicate by
signing and returning the original of this letter to us, along with the $15,000
in fees referred to above. Upon return of this letter and receipt of payment,
the Bank will prepare drafts of definitive loan documents for your review. If
you and the Bank do not enter into definitive loan documents, the Bank will
refund to you the amount of the loan fee payment less the amount of the Bank's
expenses for the foregoing.
It is intended that all legal rights and obligations of the Bank and you would
be set forth in the signed definitive loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to USFG/DHRG LP No. 2 , Inc. and look
forward to a long and mutually rewarding relationship. Please don't hesitate to
call if you have any questions, we can be reached at (512) 349-2333.
Sincerely,
/s/ Tony Schell /s/ Mansoor A. Chori
- ------------------------------- -------------------------------------
Tony Schell Mansoor A. Ghori
Assistant Vice President Senior Vice President & Manager
Special Markets Group Special Markets Group
Southwest Regional Office Southwest Regional Office
Accepted and agreed to:
USFG/DHRG LP No. 2, Inc.
By:
----------------------
Title:
----------------------
Date:
----------------------
CORPDAL:92304.1 28722-00003
2
Imperial Bank
- --------------------------------------------------------------------------------
Special Markets Group, Southwest Regional Office
8911 Capitol of Texas Highway, Suite 3320 * Austin, Texas 78759 *
Tel: (512) 349-2333 Fax: (512) 349-2888
July 21, 1997
Mr. Michael Moore
C/O Diversified Corporate Resources, Inc.
12801 N. Central Expressway, Ste. 350
Dallas, Texas 75243
Dear Michael,
We are pleased to provide this commitment letter for the financing that Imperial
Bank ("Bank") is willing to provide to USFG/DHRG LP No. 2, Inc. ("Borrower").
This commitment to lend is subject to execution of a definitive written
agreement and documentation for the transaction described in this letter. The
terms of the financing are as follows:
1. CREDIT FACILITY
---------------
$500,000 Bridge Loan to be repaid from the infusion of new equity at public
offering.
2. TERMS
-----
Interest payable quarterly with all interest and Principal due at maturity.
3. MATURITY
--------
July 8, 1998.
4. PRICING
-------
Interest: Imperial Bank Prime Rate + 1.5% (floating).
Facility Fee: $2,500.
Doc Fee: $250.
Option: As additional consideration, Lender will receive an
Option to purchase 15,000 shares of the Borrower's DCRI
stock (pre-split basis) or 30,000 shares on a post-split
basis (split is 2:1 of original shares) at a price of
$0.01/share. The Option will expire at the earlier of
five years from the date of closing or the date of a
public offering (they will be converted and liquidated at
the public offering). The Option will include
Registration Rights and Anti-Dilution provisions.
5. COLLATERAL
----------
Blanket security interest perfected by a UCC-1 filing on all assets of
Borrower with the Bank in first position. Additionally, Bank will hold
44,300 shares on a pre-split basis (or 88,600 on a post-split basis) of
DCRI stock owned by Michael Moore/USFG/DHRG L.P. No. 2 as collateral. This
facility will have cross-default provisions and will be
cross-collateralized with the $1,750,000 commitment extended to borrower on
July 9, 1997.
6. REPORTING REQUIREMENTS (as will be further detailed in loan documents)
----------------------
1. Monthly financial statements within 25 days of month-end and annual
statements within 45 days of FYE.
CORPDAL:92306.1 28722-00003
<PAGE>
USFG/DHRG L.P. No. 2
July 21, 1997
Page 2 of 3
- --------------------------------------------------------------------------------
7. FINANCIAL COVENANTS
-------------------
None.
8. OTHER COVENANTS
---------------
1. Provide to Lender proof of general business and casualty insurance on
all corporate assets with Lender as Loss Payee.
2. Borrower to pay for costs incurred in the Bank perfecting its security
interest and completing due diligence (i.e. UCC Search fees, filing
fees, etc.).
3. Borrower to be limited as to dividends, indebtedness, liens,
investments, and be subject to approval of material acquisitions (as
will be further detailed in loan documentation).
9. EXPIRATION
----------
Unless Borrower accepts this commitment letter on or before July 28, 1997,
this commitment letter will expire and be of no further effect.
10. REQUIREMENTS PRIOR TO FUNDING
-----------------------------
1. Bank will require proof of dismissal of any and or all
encumbrances/claims by D&H on any DCRI Shares of stock.
2. Bank will require in its possession, stock certificates for 44,300
shares on a pre-split basis (or 88,600 on a post-split basis) of DCRI
stock owned by J. Michael Moore or USFG/DHRG L.P. No. 2, Inc.
3. Bank will require in its possession, remaining stock certificates due
Bank under terms of first loan (105,700 shares).
This letter is provided solely for your information and is delivered to you with
the understanding that neither it nor its substance shall be disclosed to any
third person, except those who are in confidential relationship with you, or
where the same is required by law.
If the terms set forth above are acceptable to you, please so indicate by
signing and returning the original of this letter to us, along with the $2,750
in fees referred to above. Upon return of this letter and receipt of payment,
the Bank will prepare drafts of definitive loan documents for your review. If
you and the Bank do not enter into definitive loan documents, the Bank will
refund to you the amount of the loan fee payment less the amount of the Bank's
expenses for the foregoing.
It is intended that all legal rights and obligations of the Bank and you would
be set forth in the signed definitive loan documents.
On behalf of the Senior Management of the Bank, we are delighted to propose
making this credit facility available to USFG/DHRG L.P. No. 2 , Inc. and look
forward to a long and mutually rewarding relationship. Please don't hesitate to
call if you have any questions, we can be reached at (512) 349-2333.
Sincerely,
/s/ Tony Schell /s/ Mansoor A. Ghori
- -------------------------------- ------------------------------------
Tony Schell Mansoor A. Ghori
Assistant Vice President Senior Vice President & Manager
Special Markets Group Special Markets Group
Southwest Regional Office Southwest Regional Office
CORPDAL:92306.1 28722-00003
<PAGE>
USFG/DHRG L.P. No. 2
July 21, 1997
Page 3 of 3
- --------------------------------------------------------------------------------
Accepted and agreed to:
USFG/DHRG LP No. 2, Inc.
By:
---------------------------
Title:
---------------------------
Date:
---------------------------
CORPDAL:92306.1 28722-00003
Imperial Bank
Member FDIC
226 Airport Parkway
San Jose, CA 95110
July 21, 1997
Subject: Credit Terms and Conditions ("Agreement")
Borrower: USFG/DHRG LP No. 2, Inc.
Gentlemen:
To induce you to make loans to the undersigned (herein called "Borrower"), and
in consideration of any loan or loans you, in your sole discretion, may make to
Borrower, Borrower warrants and agrees as follows:
A. Borrower represents and warrants that:
1. Existence and Rights.
Borrower is a Texas corporation.
Borrower is duly organized and existing and in good standing under the laws of
the State of Texas and is authorized and in good standing to do business in the
State of Texas. Borrower has powers and adequate authority, rights and
franchises to own its property and to carry on its business as now conducted,
and is duly qualified and in good standing in each State in which the character
of the properties owned by it therein or the conduct of its business makes such
qualification necessary, and Borrower has the power and adequate authority to
make and carry out this Agreement. Borrower has no investment in any other
business entity.
2. Agreement Authorized. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of any
governmental body or other regulatory authority; are not in contravention of or
in conflict with any law or regulation or any term or provision of Borrower's
articles of incorporation, by-laws, or Articles of Association, as the case may
be, and this Agreement is the valid, binding and legally enforceable obligation
of Borrower in accordance with its terms.
3. No Conflict. The execution, delivery and performance of this Agreement
are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its property
may be bound or affected, and do not cause any lien, charge or other encumbrance
to be created or imposed upon any such property by reason thereof, other than
what has been disclosed in writing.
4. Litigation. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority, other than what has been disclosed in
writing.
5. Financial Condition. The balance sheet of Borrower as of December 96,
and the related profit and loss statement for the 12 months ended on that date,
a copy of which has heretofore been delivered to you by Borrower, and all other
statements and data submitted in writing by Borrower to you in connection with
this request for credit are true and correct, and said balance sheet and profit
and loss statement truly present the financial condition of Borrower as of the
date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date there
have been no materially adverse changes in the financial condition or business
of Borrower. Borrower has no knowledge of any liabilities, contingent or
otherwise, at such date not reflected in said balance sheet, and Borrower has
not entered into any special commitments or substantial contracts which are not
reflected in said balance sheet, other than in the ordinary and normal course of
its business, which may have a materially adverse effect upon its financial
condition, operations or business as now conducted.
6. Title to Assets. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
C.3 hereof.
7. Tax Status. Borrower has no liability for any delinquent state, local or
federal taxes, and if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. Trademarks, Patents. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
9. Regulation U. The proceeds of this loan shall not be used to purchase or
carry margin stock (as defined with Regulation U of the Board of Governors of
the Federal Reserve system).
CORPDAL:92302.1 28722-00003
1
<PAGE>
B. Borrower agrees that so long as it is indebted to you, it will, unless you
shall otherwise consent in writing:
1. Rights and Facilities. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair, conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. Insurance. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses.
3. Taxes and Other Liabilities. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as: (a)
The same are being contested in good faith and by appropriate proceedings in
such manners as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder, and
(b) it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it adequate with
respect thereto.
4. Records and Reports. Maintain a standard and modern system of accounting
in accordance with generally accepted accounting principles on a basis
consistently maintained; permit your representatives to have access to, and to
examine its properties, books and records at all reasonable times; and furnish
you:
(a) As soon as available, and in any event within 25 days after the close of
each month of each fiscal year of Borrower, commencing with the month next
ending, a balance sheet, profit and loss statement and reconciliation of
Borrower's capital accounts as of the close of such period and covering
operations for the portion of Borrower's fiscal year ending on the last day of
such period, all in reasonable detail and stating in comparative form the
figures for the corresponding date and period in the previous fiscal year,
prepared in accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate officer of
Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 45 days after the close of
each fiscal year of Borrower, a report of annual statements of Company as of the
close of and for such fiscal year, all in reasonable detail and stating in
comparative form the figures as of the close of and for the previous fiscal
year, with the unqualified opinion of accountants satisfactory to you.
(c) Within 25 days after the close of each month of each fiscal year of
Borrower, a certificate by chief financial officer or partner of Borrower,
stating that Borrower has performed and observed each and every covenant
contained in this Letter of Inducement to be performed by it and that no event
has occurred and no condition then exists which constitutes an event of default
hereunder or would constitute such an event of default upon the lapse of time or
upon the giving of notice and the lapse of time specified herein, or, if any
such event has occurred or any such condition exists, specifying the nature
thereof.
(d) Promptly after the receipt thereof by Borrower, copies of any detailed audit
reports submitted to Borrower by independent accountants in connection with each
annual or interim audit of the accounts of Borrower made by such accountants;
(e) Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower shall send to its stockholders, if
any, and copies of all reports which Borrower may file with the Securities and
Exchange Commission or any governmental authority at any time substitutes
therefor; and
(f) Such other information relating to the affairs of Borrower as you reasonably
may request from time to time.
(g) Notice of Default. Promptly notify the Bank in writing of the occurrence of
any event of default hereunder or any event which upon notice and lapse of time
would be an event of default.
CORPDAL:92302.1 28722-00003
2
<PAGE>
C. Borrower agrees that so long as it is indebted to you, it will not, without
your written consent:
1. Type of Business; Management. Make any substantial change in the
character of its business; or make any change in its executive management.
2. Outside Indebtedness. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you except obligations
now existing as shown in financial statement dated December 96, excluding those
being refinanced by your bank; or sell or transfer, either with or without
recourse, any accounts or notes receivable or any moneys due to become due.
3. Liens and Encumbrances. Create, incur, or assume any mortgage, pledge
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
liens for taxes not delinquent and liens in your favor.
4. Loans, Investments, Secondary Liabilities. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in securities other than United
States Government Treasuries or Agencies, Imperial Bank sponsored paper, or the
Monarch Money Market Funds; or guarantee or otherwise become liable upon the
obligation of any person or other entity, except by endorsement of negotiable
instruments for deposit or collection in the ordinary and normal course of its
business.
5. Acquisition or Sale of Business; Merger or Consolidation. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor,
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same. Bank's consent to such matters will not be unreasonably withheld.
6. Dividends, Stock Payments. If a corporation, declare or pay any dividend
(other than dividends payable in common stock of Borrower) or make any other
distribution on any of its capital stock now outstanding or hereafter issued or
purchase, redeem or retire any of such stock.
D. The occurrence of any one of the following events of default shall, at your
option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived. It shall not be an event of default
hereunder for obligor's failure to perform any monetary or non-monetary
covenant until thereafter that Bank has provided obligor with written
notice and thirty (30) days thereafter in which to in good faith cure such
default.
1. Failure to Pay. Failure to pay any installment of principal or of
interest on any interest of Borrower to you.
2. Breach of Covenant. Failure of Borrower to perform any other term or
condition of this Agreement or any other agreement or document executed by
Borrower in favor of Bank binding upon Borrower.
3. Breach of Warranty. Any of Borrower's representations or warranties made
herein or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
4. Insolvency; Receiver or Trustee. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an assignment for
the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. Judgments, Attachments. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated unbonded or unstayed for a period of 10
days or in any event later than five days prior to the date of any proposed sale
thereunder.
6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
CORPDAL:92302.1 28722-00003
3
<PAGE>
E. Miscellaneous Provisions.
1. Failure or Indulgence Not Waiver. No failure or delay on the part of
your Bank or any holder of Notes issued hereunder, in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under this agreement or any note issued in
connection with a loan that your Bank may make hereunder, are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
2. Commitment Letter, Prior Credit Terms and Conditions Superseded,
Collateral. The Commitment Letter dated July 21, 1997 is attached hereto and
incorporated herein by this reference for additional terms. In the event of a
conflict between this Agreement and the Letter, the terms in the Letter shall
take precedence. This Agreement with the attached commitment letter shall
supersede that Credit Terms and Conditions dated July 9, 1997. The $1,750,000
commitment extended to Borrower on July 9, 1997 shall also be subject to the
terms of this Agreement and the attached commitment letter. The Borrower agrees
that all collateral in which the Borrower has granted the Bank a security
interest shall secure all obligations of Borrower to Bank.
USFG/DHRG LP No. 2, Inc.
By
-------------------------------------
(Authorized Signature)
By
-------------------------------------
(Print Name)
By
-------------------------------------
(Title)
CORPDAL:92302.1 28722-00003
4
IMPERIAL BANK
Member FDIC
NOTE
$1,750,000.00 San Jose, California July 9, 1997
On July 8, 1998 , and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Santa Clara Valley Regional office, the principal
sum of $ 1,750,000.00 or such sums up to the maximum if so stated, as the Bank
may now or hereafter advance to the undersigned in accordance with the terms
hereof, together with interest from date of disbursement or N/A , whichever is
later, on the unpaid principal balance |X| at the rate of *% per year |_| at the
rate of ____% per year in excess of the rate of interest which Bank has
announced as its prime lending rate (the "Prime Rate"), which shall very
concurrently with any change in such Prime Rate, or $ 250.00 , whichever is
greater. Interest shall be computed at the above rate on the basis of the actual
number of days during which the principal balance is outstanding, divided by
360, which shall for interest computation purposes, be considered one year.
Interest shall be payable |_| monthly |X| quarterly |_| included with principal
|_| in addition to principal |_| beginning October 9, 1997 , and if not so paid
shall become a part of the principal. All payments shall be applied first to
interest, and the remainder, if any, on principal. |_| (If checked), Principal
shall be payable in installments of $_______________, or more, each installment
on the _____ day of each ______________, beginning __________________. Advances
not to exceed any unpaid balance owing at any one time equal to the maximum
amount specified above, may be made at the option of Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of the principal and accrued interest then remaining unpaid shall
(a) become immediately due and payable, and (b) thereafter bear interest, until
paid in full, at the increased rate of 5% per year in excess of the rate
provided for above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the maker(s)
to pay principal or interest when due; the filing as to each person obligated
hereto, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; the death of any
Creditor; or any deterioration of the financial condition of any Obligor which
results in the holder hereof considering itself, in good faith, insecure.
CORPDAL:92111.1 28722-00003
1
<PAGE>
|X| If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all costs
and expenses of collection and reasonable attorney's fees incurred by the holder
hereof on account of such collection, plus interest at the rate applicable to
principal, whether or not suit is filed hereon. Each Obligor shall be jointly
and severally liable hereon and consents to renewals, replacements and
extensions of time for payment hereof, before, at, or after maturity; consents
to the acceptance, release or substitution of security for this note; and waives
demand and protest and the right to assert any statute of limitations. Any
married person who signs this note agrees that recourse may be had against
separate property for any obligations hereunder. The indebtedness evidenced
hereby shall be payable in lawful money of the United States. In any action
brought under or arising out of this note, each Obligor, including successor(s)
or assign(s) hereby consents to the application of California law, to the
jurisdiction of any competent court within the State of California, and to
service of process by any means authorized by California law.
No single or partial exercise of any power hereunder, or under any deed of
trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order an in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
USFG/DHRG L.P. NO. 2, INC.,
a Texas corporation
- ----------------------------------- -----------------------------------
- ----------------------------------- BY: /s/ J. Michael Moore
-------------------------------
J. Michael Moore, CEO/President
*See attached addendum.
CORPDAL:92111.1 28722-00003
2
<PAGE>
USFG/DHRG L.P. No. 2
Addendum to Note Dated July 9, 1997
*The interest rate applicable to the Note shall be as follows:
1) 8.00% from June 30, 1997 to September 28, 1997
2) 10.00% from September 29 to December 26, 1997
3) 12.00% from December 27, 1997 to March 26, 1998
4) 14.00% from March 27, 1998 to Maturity of June 29, 1998
USFG/DHRG L.P. NO. 2, INC., a Texas corporation
By: /s/ J. Michael Moore
-------------------------------
J. Michael Moore, CEO/President
CORPDAL:92111.1 28722-00003
3
[IMPERIAL BANK LOGO]
IMPERIAL BANK
Member FDIC
GENERAL SECURITY AGREEMENT
(Tangible and Intangible Personal Property)
This Agreement is executed on July 9, 1997 , by
USFG/DHRG L.P. NO. 2, INC.
(hereinafter called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called "Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which shall
be in Bank's possession or control in any matter or for any purpose, (iii)
described below, (iv) now owned or hereafter acquired by Obligor of the type or
class described below and/or in any supplementary schedule hereto, or in any
financing statement filed by Bank and executed by or on behalf of Obligor; (b)
the proceeds, increase and products of such property, all accessions thereto,
and all property which Obligor may receive on account of such collateral which
Obligor will immediately deliver to Bank (collectively referred to as
"Collateral") to secure payment and performance of all of Obligor's present or
future debts or obligations to Bank, whether absolute or contingent (hereafter
referred to as "Debt"). Unless otherwise defined, words used herein have the
meanings given them in the California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
- --------------------------------------------------------------------------------
Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
- --------------------------------------------------------------------------------
N/A
- --------------------------------------------------------------------------------
Engine or other equipment:
--------------------------------------------------
(For aircraft - original ink signature on copy to FAA)
B. DEPOSIT ACCOUNTS:
Type Account Number Amount $
-------------------- ------------------ ----------
In name of Depository
---------------------------- ----------------------------
AND ALL EXTENSIONS OR RENEWALS THEREOF.
CORPDAL:92109.1 28722-00003
<PAGE>
SECURITY AGREEMENT CONTINUED
C. ACCOUNTS, INTANGIBLES AND OTHER: (Describe)
All personal property, whether presently existing or hereafter
created or acquired, including but not limited to: All accounts,
chattel paper, documents, instruments, money, deposit accounts and
general intangibles including returns, repossessions, books and
records relating thereto, and equipment containing said books and
records. All goods including equipment and inventory. All proceeds
including, without limitation, insurance proceeds. All guarantees
and other security therefor. All investment property including
securities and securities entitlements.
The collateral not in Bank's possession will be located at: 12801 N. Central
Expressway #350, Dallas, TX 75243
[ ] If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower").
All the terms and provisions on the reverse side hereof are incorporated herein
as though set forth in full, and constitute a part of this Agreement.
Signature
(indicate title,
Name if applicable) Address
USFG/DHRG L.P. NO. 2, INC. BY: 12801 N. Central Expwy. #350
- -------------------------- ---------------------- ----------------------------
J. Michael Moore Dallas, Texas 75243
CEO/President
- -------------------------- ---------------------- ----------------------------
- -------------------------- ---------------------- ----------------------------
CORPDAL:92109.1 28722-00003
<PAGE>
SECURITY AGREEMENT CONTINUED
Obligor represents, warrants and agrees:
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs
of collecting the Debt, of protecting, insuring or realizing on
Collateral, and any expenditure of Bank pursuant hereto, including
attorney's fees and expenses, with interest at the rate of 24% per
year, or the rate applicable to the Debt, whichever is less, from the
date of expenditure, and (c) any deficiency after realization of
Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefore, and will
promptly contract to purchase and pay the purchase price of any
property which becomes Collateral hereunder from the proceeds of any
loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically
otherwise agreed by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location
disclosed to Bank and will not remove the Collateral from the
location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it
if necessary, clean, feed, shelter, water, medicate, fertilize,
cultivate, irrigate, prune and otherwise deal with the Collateral
in all such ways as are considered good practice by owners of
like property, use it lawfully and only as permitted by insurance
policies, and permit Bank to inspect the Collateral at any
reasonable time.
(d) Not sell, lease, encumber or transfer the Collateral (other than
Inventory Collateral) until the Debt has been paid, even though
Bank has a security interest in proceeds of such Collateral.
4. As to Collateral which is Inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
Inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as
received in a demand deposit account with Bank containing only
such proceeds and deliver statements identifying units of
inventory disposed of, accounts which gave rise to proceeds, and
all acquisitions and returns of Inventory, as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank
and deliver to Bank all noncash proceeds other than Inventory
received in trade.
(d) If not in default, may obtain release of Bank's interest in
individual units of inventory upon request, therefore, payment to
Bank of the release price of such units shown on any Collateral
schedule supplementary hereto, and compliance herewith as to
proceeds thereof.
corpdal:92109.1 28722-00003
<PAGE>
SECURITY AGREEMENT CONTINUED
5. As to Collateral which is accounts, chattel paper, general intangibles
and proceeds described in 4(c) above, Obligor warrants, represents and
agrees:
(a) All such Collateral is genuine, enforceable in accordance with
its terms, free from default, prepayment, defense and conditions
precedent (except as disclosed to and accepted by Bank in
writing) and is supported by consecutively numbered invoices to,
or rights against, the debtors thereon. Obligor will supply Bank
with duplicate invoices or other evidence of Obligor's rights on
Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content
and manner of preparation and execution and has been properly
registered, recorded, and/or filed to protect Obligor's interest
thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated
to be applied on any particular obligation shall be considered to
be a payment on the account in which Bank has a security
interest. Should any remittance include a payment not on an
account, it shall be delivered to Bank and if no event of default
has occurred, Bank shall pay Obligor the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely and no other person has or
claims any interest in any Collateral, except as disclosed to and
accepted by Bank in writing. Obligor will defend any proceeding which
may affect title to or Bank's security interest in any Collateral, and
will indemnify and hold Bank free and harmless from all costs and
expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed
on or affecting the Collateral and, if the Collateral is in Obligor's
possession, the realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee, in form
and amounts, with companies, and against risks and liability
satisfactory to Bank, and hereby assigns such policies to Bank, agrees
to deliver them to Bank at Bank's request, and authorizes Bank to make
any claim thereunder, to cancel the insurance on Obligor's default,
and to receive payment of and endorse any instrument in payment of any
loss or return premium. If Obligor should fail to deliver the required
policy or policies to the Bank, Bank may, at Obligor's cost and
expense, without any duty to do so, get and pay for insurance naming
as the insured, at Bank's option, either both Obligor and the Bank, or
only the Bank, and the cost thereof shall be secured by this security
agreement, and shall be repayable as provided in Paragraph 1 above.
corpdal:92109.1 28722-00003
<PAGE>
SECURITY AGREEMENT CONTINUED
9. Obligor will give Bank any information it requires. All information at
any time supplied to Bank by Obligor (including, but not limited to,
the value and condition of Collateral, financial statements, financing
statements, and statements made in documentary Collateral), is correct
and complete, and Obligor will notify Bank of any adverse change in
such information. Obligor will promptly notify Bank of any change of
Obligor's residence, chief executive office or mailing address.
10. Bank is irrevocably appointed Obligor's attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as
Obligor may exercise, to use such equipment as Obligor might use, to
enter Obligor's premises to give notice of Bank's security interest
in, and to collect Collateral and proceeds and to execute and file in
Obligor's name any financing statements and amendments thereto
required to perfect Bank's security interest hereunder, all to protect
and preserve the Collateral and Bank's rights hereunder, Bank may:
(a) Endorse, collect and receive delivery or payment of instruments
and documents constituting Collateral;
(b) Make extension agreements with respect to or affecting
Collateral, exchange it for other Collateral, release persons
liable thereon or take security for the payment thereof, and
compromise disputes in connection therewith;
(c) Use or operate Collateral for the purpose of preserving
Collateral or its value and for preserving or liquidating
Collateral.
11. If more than one Obligor signs this agreement, their liability is
joint and several. Any Obligor who is married, agrees that recourse
may be had against separate property for The Debt. Discharge of any
Obligor except for full payment, or any extension, forbearance, change
of rate of interest, or acceptance, release or substitution of
Collateral or any impairment or suspension of Bank's rights against an
Obligor, or any transfer of an Obligor's interest to another shall not
affect the liability of any other Obligor. Until the Debt shall have
been paid or performed in full, Bank's rights shall continue even if
the Debt is outlawed. All Obligors waive:
(a) any right to require Bank to proceed against any Obligor before
any other, or to pursue any other remedy;
(b) presentment, protect and notice of protest, demand and notice of
nonpayment, demand or performance, notice of sale, and
advertisement of sale;
(c) any right to the benefit of or to direct the application of any
Collateral until the Debt shall have been paid;
(d) and any right of subrogation to Bank until Debt shall have been
paid as performed in full.
12. Upon default, at Bank's option with notice, all or any part of the
Debt shall immediately become due. Bank shall have all rights given by
law, and may *12 sell, in one or more sales. Collateral in any county
where Bank has an office, Bank may purchase at such sale. Sales for
cash or on credit to a wholesaler, retailer or user of the Collateral
or at public or private auction, are all to be considered commercially
reasonable. Bank may require Obligor to assemble the Collateral and
make it available to Bank at the entrance to the location of the
Collateral, or a place designated by Bank. Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with
Bank or breach of any warranty herein, or Borrower's failure to
pay or perform any agreement with Bank.
CORPDAL:92109.1 28722-00003
<PAGE>
SECURITY AGREEMENT CONTINUED
(b) Any change in Obligor's or Borrower's financial condition which
in Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the
Collateral or in the market price thereof which causes it in
Bank's judgment to become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors,
insolvency, appointment of receiver, or the filing of any
petition under bankruptcy or debtor's relief laws of, by or
against Obligor or Borrower or any guarantor of the Debt.
(f) Any warranty or representation is false or is believed in good
faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of
Obligor or Borrower or right of Bank or modify this agreement, or
waive any other similar default.
14. On transfer of all or any part of the Debt, Bank may transfer all or
any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Obligor at any time. Any such transfer or delivery
shall discharge Bank from all liability and responsibility with
respect to such Collateral transferred or delivered. This agreement
benefits Banks's successors and assigns and binds Obligor's heirs,
legatees, personal representatives, successors and assigns. Obligor
agrees not to assert against any assignee of Bank any claim or defense
that may exist against Bank. Time is of the essence. This agreement
and supplementary schedules herein contain the entire security
agreement between Bank and Obligor. Obligor will execute any
additional agreements, assignments or documents reasonably required by
Bank to carry this agreement into effect.
15. This agreement shall be governed by and construed in accordance with
the laws of the State of California, to the jurisdiction of whose
courts the Obligor hereby agrees to submit. Obligor agrees that
service of process may be accomplished by any means authorized by
California law. All words used herein in the singular shall be
considered to have been used in the plural where the context and
construction so require.
CORPDAL:92109.1 28722-00003
<PAGE>
ADDENDUM TO General Security Agreement
Dated July 9, 1997
USFG/DHRG L.P. NO. 2, INC.
12. "Provided, however, it shall not be an event of default hereunder for
Obligor's failure to perform any monetary or non-monetary covenant
until thereafter that Bank has provided Obligor with written notice
and thirty (30) days thereafter in which to in good faith cure such
default.
USFG/DHRG L.P. NO. 2, INC.
BY: /s/ J. Michael Moore
-------------------------------
J. Michael Moore, CEO/President
CORPDAL:92109.1 28722-00003
OPTION TO PURCHASE STOCK
Issuing Corporation: Diversified Corporate Resources, Inc. ("DCRI"), a
Texas corporation
Number of Shares: 60,000 (pre-split basis)
Class of Stock: Common
Option Price: $0.01 per share
Issue Date: July 9, 1997
Expiration Date: July 9, 2002 (subject to Article 4.1)
THIS OPTION GRANTED BY USFG/DHRG L.P. No. 2 ("Owner") CERTIFIES THAT, in
consideration of the payment of $1.00, the loan to Owner by the Holder (the
"Loan") and for other good and valuable consideration, IMPERIAL BANK or
registered assignee ("Holder"), 9920 S. LaCienega Blvd., Suite 636, Inglewood,
CA 90301, Facsimile (310) 417-5695, is entitled to purchase the number of fully
paid and nonassessable shares of the class of securities (the "Shares") of the
issuing corporation (the "Company") at the initial exercise price per Share (the
"Option Price") all as set forth above and as adjusted pursuant to Article 1 and
2 of this Option, subject to the provisions and upon the terms and conditions
set forth in this Option.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Option in whole and not in
part by delivering this Option and a duly executed Notice of Exercise in
substantially the form attached as Appendix 1 to Owner at the address set forth
below. Holder shall deliver to Owner notice of loan reduction to the extent of
any balance of the Loan and funds for any excess for the aggregate Option Price
for the Shares being purchased against delivery of a certificate or certificates
endorsed or registered to Holder.
1.2 Delivery of Certificate and New Option. Upon Holder exercise of this
Option, Owner shall cause the Company to deliver to Holder certificates for the
Shares acquired.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend to its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then, upon exercise of this Option, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities purchased upon exercise of this Option, Holder
shall be entitled to receive, upon exercise or conversion of this Option, the
CORPDAL:92105.1 28722-00003
1
<PAGE>
number of kind of securities and property that Holder would have received for
the Shares if this Option had been exercised immediately before such
reclassification, exchange, substitution, or other event. Such an event shall
include any automatic conversion of the outstanding or issuable securities of
the Company of the same class or series as the Shares to common stock pursuant
to the terms of the Company's Articles of Incorporation upon the closing of a
registered public offering of the Company's common stock. Owner or its successor
shall promptly issue to Holder a new Option for such new securities or other
property. The new Option shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
2 including, without limitation, adjustments to the Option Price and to the
number of securities or property purchased upon exercise of the new Option. The
provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc.. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, Holder upon exercise of the Option shall be entitled to receive the
number and kind of securities and property that Holder would have received for
the Shares if this Option had been exercised immediately prior to such event.
2.4 Certificate as to Adjustments. Upon each adjustment of the Option
Price, Owner at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate setting forth such adjustment and the facts upon which
such adjustment is based. Owner shall, upon written request, furnish Holder a
certificate setting forth the Option Price in effect upon the date thereof and
the series of adjustments leading to such Option Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF OWNER.
3.1 Representations and Warranties. Owner hereby represents and warrants to
Holder that all Shares which may be sold upon the exercise of the purchase right
represented by this Option shall, upon sale, be duly authorized, validly issued,
fully paid and non-assessable, and free of any liens and encumbrances except for
restrictions on transfer provided for herein or under applicable federal and
state securities laws.
3.2 Notice of Certain Events. If Owner as a shareholder receives notice
from the Company that the Company proposes at any time (a) to declare any
dividend or distribution upon its common stock, whether in cash, property,
stock, or other securities and whether or not a regular cash dividend; (b) to
offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights; (c)
to effect any reclassification or recapitalization of common stock; (d) to merge
or consolidate with or into any other corporation, or sell, lease, license, or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; or (e) offer holders of registration rights the opportunity to participate
in and underwritten public offering of the company's securities for cash, then,
in connection with each such event, Owner shall promptly give Holder written
notice of these matters.
3.3 Information Rights. So long as Holder holds this Option, Owner shall,
promptly after receipt from the Company as a shareholder, (a) deliver to Holder
copies of all communiques to the shareholders of the Company, (b) as soon as
available to shareholders of the Company, the annual audited financial
CORPDAL:92105.1 28722-00003
2
<PAGE>
statements of the Company certified by independent public accountants of
recognized standing and (c) as soon as available to shareholders from the
Company after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. If any shares of
the Company's common stock held by Owner are to be registered by the Company,
Owner shall cause the Shares to be registered.
3.5 Public Offering. In any public offering of common stock of the Company
subsequent to the date of this Option, Owner shall cause the Shares shall be
included in such offering on the same terms as any other common stock so
included.
ARTICLE 4. MISCELLANEOUS.
4.1 Term. This Option is exercisable at any time on or before the
Expiration Date set forth above.
4.2 Legends. Holder acknowledges (a) that the Shares have not been
registered and (b) that the Shares may be imprinted with a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Option and the Shares
purchased upon exercise of this Option may not be transferred or assigned in
whole or in part by Holder without compliance with applicable federal and state
securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company).
4.4 Transfer Procedure. Subject to the provisions of Section 4.2, Holder
may transfer all of this Option only to a Permitted Transferee by giving Owner
40 business days written notice of the Option being transferred, setting forth
the name, address and taxpayer identification number of the Permitted Transferee
and surrendering this Option to Owner for reissuance to the Permitted
Transferee, which shall thereafter be the Holder. A Permitted Transferee shall
only be (i) an affiliate of Holder as affiliate is defined under the Glossary to
FAS 57 or (ii) any investment banking firm which is a member of the New York or
any regional stock exchange, solely for the purpose of realizing upon the value
of this Option by exercise thereof and a sale of the Shares. Upon a transfer to
an investment banking firm, the Option shall expire ten business days after such
transfer and such Permitted Transferee shall complete a sale of the Shares
within 10 days or Owner shall have the right to reacquire the Shares for the
Option Price for 10 days thereafter.
CORPDAL:92105.1 28722-00003
3
<PAGE>
4.5 Notices. All notices and other communications from Owner to Holder, or
vice versa, shall be deemed delivered and effective when delivered personally or
by facsimile transmission or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to Owner or Holder,
as the case may be, in writing by Owner or Holder from time to time.
4.6 Waiver. This Option and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Option, the party prevailing in such
dispute shall be entitled to collect from the other party all costs incurred in
such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Option shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
USFG-DHRG L.P. No. 2
By:
----------------------------------------
Title:
-----------------------------------
CORPDAL:92105.1 28722-00003
4
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the Common
Stock of Diversified Corporate Resources, Inc. pursuant to the terms of the
attached Option, and tenders herewith payment of the purchase price of such
shares in full by payment.
2. Please deliver a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
Ms. Christine McCarthy
Chief Financial Officer
Controllers Department
Imperial Bank
P. O. Box 92991-2991
Los Angeles, CA 90009
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
IMPERIAL BANCORP
- -------------------------------
(Signature)
- -------------------------------
(Date)
CORPDAL:92105.1 28722-00003
5
Amendment No. 1 to Credit Terms and Condition
and Commitment Letter Attached Thereto
This Amendment No. 1 dated as of October 1, 1997 ("Amendment") amends that
certain Credit Terms and Conditions ("Credit Agreement") dated July 21, 1997 by
and between Imperial Bank ("Bank") and USFG/DHRG LP No. 2, Inc. ("Borrower"),
the Commitment Letter dated July 21, 1997 attached thereto (the "July
Commitment"), the Commitment Letter dated June 27, 1997 attached thereto (the
"June Commitment") (collectively herein the Credit Agreement and the Commitments
are referred to as the "Agreement") as follows:
1. The following is hereby added as Section B.10 of the Credit Agreement:
"10. Prepayment. Upon the completion of the Borrower's public offering
scheduled to close on October 3, 1997, prepay the loans from Borrower to
Bank by at least $750,000."
2. The following is hereby added as Section B.11 of the Credit Agreement:
"11. Pledged Securities Equity. Pledge to, and maintain with Bank
those securities in Diversified Human Resources Group Inc. (also known as
Diversified Corporate Resources, Inc.) pledged by Borrower pursuant to a
General Security Agreement executed by Borrower on July 9, 1997 and a
General Security Agreement executed by Borrower on July 22, 1997 ("Eligible
Securities"), with the fair market value (as determined by the closing
price on the applicable market as shown in the Wall Street Journal for the
previous day) at all times equal to or exceeding two times the outstanding
principal balance of all loans from Bank to Borrower (the "Minimum
Equity"); provided that the minimum number of shares of the Eligible
Securities pledge to the Bank shall never be less than 1 share for each
$5.00 of the principal of the loans outstanding from the Bank to the
Borrower. If at any time the aggregate fair market value of the Eligible
Securities pledged to Bank is less than the Minimum Equity, Borrower agrees
to pledge additional Eligible Securities to Bank to make up any such
deficiency. If such additional Eligible Securities are not added within
five (5) business days after Borrower's receipt of written notice from Bank
of such deficiency, Bank shall have the option of causing to become
immediately due and payable, regardless of their stated terms (any cure
periods allowed upon the occurrence of a default pursuant to the terms and
conditions of the Credit Agreement or either Security Agreement shall not
apply to Borrower's obligations under this Section B.11), the portion of
the loans from the Bank to the Borrower outstanding as will cause the
aggregate fair market value of the Eligible Securities to bear the same
relationship to outstanding principal of the loans as the Minimum Equity
set forth above. Upon receipt of at least the minimum pay down, Bank will
return excess shares held as collateral. Said return will be performed on a
timely basis."
CORPDAL:92104.1 28722-00003
1
<PAGE>
3. The following is hereby added as Section B.12 of the Credit Agreement.
"12. Interest Reserve. Pledge to, and maintain with Bank a demand
deposit account in an amount at least equal to the interest due on all
loans from the Bank until the maturity of such loans of July 8, 1998."
4. Except as provided above, the Agreement remains unchanged and the parties
hereby confirm that the Agreement as herein amended is in full force and
effect.
The parties hereto have executed this Amendment the date first written above.
Imperial Bank
By:
----------------------------------
Title:
-----------------------------
USFG-DHRG L.P. No. 2, Inc.
By:
----------------------------------
Title:
-----------------------------
CORPDAL:92104.1 28722-00003
2
DIVERSIFIED CORPORATE RESOURCES, INC.
LOCK-UP LETTER
August 20, 1997
CRUTTENDEN ROTH INCORPORATED
18301 Von Kannan, Suite 100
Irvine, California 92715
Ladies and Gentlemen:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $0.10 per share (the "Common Stock"), of
Diversified Corporate Resources, Inc., a Texas corporation (the "Company") and
that the Underwriters propose to reoffer the Shares to the public (the "Public
Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Cruttenden
Roth Incorporated (which approval shall not be unreasonably withheld) the
undersigned will not sell, offer to sell, solicit an offer to buy, contract to
sell, loan, pledge, grant any option to purchase, or otherwise transfer or
dispose of (collectively, a "Disposition"), any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for Common Stock
(collectively, "Securities"), now owned or hereafter acquired by the undersigned
or with respect to which the undersigned has or hereafter acquires the power of
disposition, for a period of 365 days after the date of the final Prospectus
relating to the offering of the Shares to the public by the Underwriters (the
"Lock-Up Period"). The foregoing restriction is expressly agreed to preclude the
holder of the Securities from engaging in any hedging, pledge or other
transaction which is designed to, or which may reasonably be expected to lead to
or result in a Disposition of Securities during the Lock-Up Period even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging, pledge or other transactions would include without
limitation any short sale (whether or not against the box), any pledge of shares
covering an obligation that matures, or could reasonably mature during the
Lock-Up Period, or any purchase, sale or grant of any right (including without
limitation any put or call option ) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities.
Notwithstanding the foregoing, the undersigned may (i) exercise (on a cash
or cashless basis, whether in a traditional cashless exercise or in a "brokers"
cashless exercise), Common Stock options or warrants outstanding on the date
hereof, it being understood, however, that the shares of Common Stock received
(net of shares sold by or on behalf of the undersigned in a "brokers" cashless
exercise or shares delivered to the Company in a traditional cashless exercise
thereof) by the undersigned upon exercise thereof shall be subject to the terms
of this agreement, and (ii) make a Disposition of Securities in the Public
Offering, and (iii) transfer shares of Common Stock or Securities during the
CORPDAL:92101.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 20, 1997
Page 2
undersigned's lifetime by bona fide gift, to the undersigned's equity owners or
members of the undersigned's immediate family, or to a trust for such members'
benefit, or upon death by will or intestacy, provided that any transferee agrees
to be bound by the terms of this agreement. In addition, the undersigned may
pledge up to 300,000 shares of the 818,500 shares of Common Stock currently
pledged to Imperial Bank to secure a loan in the aggregate principal amount of
$2.25 million (the "$2.25 Million Loan") to Imperial Bank or another financial
institution approved by Cruttenden Roth Incorporated, which approval shall not
be unreasonably withheld, to refinance the $2.25 Million Loan, provided that the
term of any such refinancing shall not be less than one (1) year and shall be on
such other commercially reasonable terms as approved by Cruttenden Roth
Incorporated, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, at any time during the Lock-Up Period after
the six (6) month anniversary of the closing of the Public Offering, the
undersigned shall be permitted to sell a number of shares of Common Stock to be
mutually agreed upon with Cruttenden Roth Incorporated, provided that the sale
of such shares is handled by Cruttenden Roth Incorporated.
The undersigned understands that the Underwriters will rely upon the
representations set forth in this Lock-Up Agreement in proceeding with the
Public Offering. The undersigned agrees that the provisions of this agreement
shall be binding upon the successors, assigns, heirs, personal and legal
representatives of the undersigned. Furthermore, the undersigned hereby agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by the undersigned
except in compliance with this Lock-Up Agreement.
CORPDAL:92101.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 20, 1997
Page 3
It is understood that, if the Underwriting Agreement does not become
effective prior to December 1, 1997, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Shares, the obligations
under this letter agreement shall automatically terminate and be of no further
force and effect.
Very truly yours,
USFG-DHRG L.P. NO. 2, INC.
By: /s/ J. Michael Moore
----------------------------------------
J. Michael Moore
Additional signature(s) if stock jointly held
By:
----------------------------------------
Name:
----------------------------------------
Title:
-----------------------------------
CORPDAL:92101.1 28722-00003
DIVERSIFIED CORPORATE RESOURCES, INC.
LOCK-UP LETTER
August 20, 1997
CRUTTENDEN ROTH INCORPORATED
18301 Von Kannan, Suite 100
Irvine, California 92715
Ladies and Gentlemen:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $0.10 per share (the "Common Stock"), of
Diversified Corporate Resources, Inc., a Texas corporation (the "Company") and
that the Underwriters propose to reoffer the Shares to the public (the "Public
Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Cruttenden
Roth Incorporated (which approval shall not be unreasonably withheld) the
undersigned will not sell, offer to sell, solicit an offer to buy, contract to
sell, loan, pledge, grant any option to purchase, or otherwise transfer or
dispose of (collectively, a "Disposition"), any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for Common Stock
(collectively, "Securities"), now owned or hereafter acquired by the undersigned
or with respect to which the undersigned has or hereafter acquires the power of
disposition, for a period of 365 days after the date of the final Prospectus
relating to the offering of the Shares to the public by the Underwriters (the
"Lock-Up Period"). The foregoing restriction is expressly agreed to preclude the
holder of the Securities from engaging in any hedging, pledge or other
transaction which is designed to, or which may reasonably be expected to lead to
or result in a Disposition of Securities during the Lock-Up Period even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging, pledge or other transactions would include without
limitation any short sale (whether or not against the box), any pledge of shares
covering an obligation that matures, or could reasonably mature during the
Lock-Up Period, or any purchase, sale or grant of any right (including without
limitation any put or call option ) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities.
Notwithstanding the foregoing, the undersigned may (i) exercise (on a cash
or cashless basis, whether in a traditional cashless exercise or in a "brokers"
cashless exercise), Common Stock options or warrants outstanding on the date
hereof, it being understood, however, that the shares of Common Stock received
(net of shares sold by or on behalf of the undersigned in a "brokers" cashless
exercise or shares delivered to the Company in a traditional cashless exercise
thereof) by the undersigned upon exercise thereof shall be subject to the terms
of this agreement, and (ii) make a Disposition of Securities in the Public
Offering, and (iii) transfer shares of Common Stock or Securities during the
CORPDAL:92099.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 20, 1997
Page 2
undersigned's lifetime by bona fide gift, to the undersigned's equity owners or
members of the undersigned's immediate family, or to a trust for such members'
benefit, or upon death by will or intestacy, provided that any transferee agrees
to be bound by the terms of this agreement. In addition, the undersigned may
pledge up to 300,000 shares of the 818,500 shares of Common Stock currently
pledged to Imperial Bank to secure a loan in the aggregate principal amount of
$2.25 million (the "$2.25 Million Loan") to Imperial Bank or another financial
institution approved by Cruttenden Roth Incorporated, which approval shall not
be unreasonably withheld, to refinance the $2.25 Million Loan, provided that the
term of any such refinancing shall not be less than one (1) year and shall be on
such other commercially reasonable terms as approved by Cruttenden Roth
Incorporated, which approval shall not be unreasonably withheld.
Notwithstanding the foregoing, at any time during the Lock-Up Period after
the six (6) month anniversary of the closing of the Public Offering, the
undersigned shall be permitted to sell a number of shares of Common Stock to be
mutually agreed upon with Cruttenden Roth Incorporated, provided that the sale
of such shares is handled by Cruttenden Roth Incorporated.
The undersigned understands that the Underwriters will rely upon the
representations set forth in this Lock-Up Agreement in proceeding with the
Public Offering. The undersigned agrees that the provisions of this agreement
shall be binding upon the successors, assigns, heirs, personal and legal
representatives of the undersigned. Furthermore, the undersigned hereby agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by the undersigned
except in compliance with this Lock-Up Agreement.
CORPDAL:92099.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 20, 1997
Page 3
It is understood that, if the Underwriting Agreement does not become
effective prior to December 1, 1997, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Shares, the obligations
under this letter agreement shall automatically terminate and be of no further
force and effect.
Very truly yours,
/s/ J. Michael Moore
---------------------------------------------
J. MICHAEL MOORE
Additional signature(s) if stock jointly held
By:
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Name:
----------------------------------------
Title:
-----------------------------------
CORPDAL:92099.1 28722-00003
DIVERSIFIED CORPORATE RESOURCES, INC.
LOCK-UP LETTER
August 6, 1997
CRUTTENDEN ROTH INCORPORATED
18301 Von Kannan, Suite 100
Irvine, California 92715
Ladies and Gentlemen:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock, par value $0.10 per share (the "Common Stock"), of
Diversified Corporate Resources, Inc., a Texas corporation (the "Company") and
that the Underwriters propose to reoffer the Shares to the public (the "Public
Offering").
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Cruttenden
Roth Incorporated (which consent may be withheld in its sole discretion) the
undersigned will not sell, offer to sell, solicit an offer to buy, contract to
sell, loan, pledge, grant any option to purchase, or otherwise transfer or
dispose of (collectively, a "Disposition"), any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for Common Stock
(collectively, "Securities"), now owned or hereafter acquired by the undersigned
or with respect to which the undersigned has or hereafter acquires the power of
disposition, for a period of 365 days after the date of the final Prospectus
relating to the offering of the Shares to the public by the Underwriters (the
"Lock-Up Period"). The foregoing restriction is expressly agreed to preclude the
holder of the Securities from engaging in any hedging, pledge or other
transaction which is designed to, or which may reasonably be expected to lead to
or result in a Disposition of Securities during the Lock-Up Period even if such
Securities would be disposed of by someone other than the undersigned. Such
prohibited hedging, pledge or other transactions would include without
limitation any short sale (whether or not against the box), any pledge of shares
covering an obligation that matures, or could reasonably mature during the
Lock-Up Period, or any purchase, sale or grant of any right (including without
limitation any put or call option ) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities.
Notwithstanding the foregoing, the undersigned may (i) exercise (on a cash
or cashless basis, whether in a traditional cashless exercise or in a "brokers"
cashless exercise), Common Stock options or warrants outstanding on the date
hereof, it being understood, however, that the shares of Common Stock received
(net of shares sold by or on behalf of the undersigned in a "brokers" cashless
exercise or shares delivered to the Company in a traditional cashless exercise
thereof) by the undersigned upon exercise thereof shall be subject to the terms
of this agreement, and (ii) transfer shares of Common Stock or Securities during
the undersigned's lifetime by bona fide gift, to the undersigned's equity owners
CORPDAL:92097.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 6, 1997
Page 2
or members of the undersigned's immediate family, or to a trust for such
members' benefit, or upon death by will or intestacy, provided that any
transferee agrees to be bound by the terms of this agreement.
Notwithstanding the foregoing, at any time during the Lock-Up Period after
the six (6) month anniversary of the closing of the Public Offering, the
undersigned shall be permitted to sell a number of shares of Common Stock to be
mutually agreed upon with Cruttenden Roth Incorporated, provided that the sale
of such shares is handled by Cruttenden Roth Incorporated.
The undersigned understands that the Underwriters will rely upon the
representations set forth in this Lock-Up Agreement in proceeding with the
Public Offering. The undersigned agrees that the provisions of this agreement
shall be binding upon the successors, assigns, heirs, personal and legal
representatives of the undersigned. Furthermore, the undersigned hereby agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by the undersigned
except in compliance with this Lock-Up Agreement.
CORPDAL:92097.1 28722-00003
<PAGE>
CRUTTENDEN ROTH INCORPORATED
August 6, 1997
Page 3
It is understood that, if the Underwriting Agreement does not become
effective prior to December 1, 1997, or if the Underwriting Agreement (other
than the provisions thereof which survive termination) shall terminate or be
terminated prior to payment for and delivery of the Shares, the obligations
under this letter agreement shall automatically terminate and be of no further
force and effect.
Very truly yours,
By: /s/ M. Ted Dillard
----------------------------------------
Name: M. Ted Dillard
----------------------------------------
Title: President
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Additional signature(s) if stock jointly held
By:
----------------------------------------
Name:
----------------------------------------
Title:
-----------------------------------
CORPDAL:92097.1 28722-00003
