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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-13984
Date of Report (Date of earliest event reported) January 12, 1999
----------------------
DIVERSIFIED CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Texas 0-13984 75-1565578
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
12801 North Central Expressway, Suite 350
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Dallas, Texas 75243
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (972) 458-8500
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N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS
On January 12, 1999, Diversified Corporate Resources, Inc., a
Texas corporation (the "Company"), entered into (a) a Note Purchase Agreement
(the "Agreement") with Compass Bank (the "Bank"), and DCRI L.P. No. 2, Inc., a
Texas corporation (the "Borrower"), which is principally owned by J. Michael
Moore, the Chairman of the Board and Chief Executive Officer of the Company
("Mr. Moore"), pursuant to which the Company agreed to purchase from the Bank,
in the event of a default by the Borrower and Mr. Moore (as guarantor), the
following: (i) two (2) promissory notes (collectively the "Notes") executed by
the Borrower payable to the Bank in the principal amount of $500,000 and (ii)
all instruments securing repaying of the Notes, including without limitation, a
Pledge Agreement related to 165,000 shares of the Company's common stock (the
"Common Stock") which are owned by the Borrower and which have been pledged by
the Borrower as collateral for the Notes, and (b) a Bank Transaction Agreement
(the "Related Agreement") with the Borrower and Mr. Moore, which obligated the
Borrower and/or Mr. Moore to (i) pledge to the Company an additional 50,000
shares of the Common Stock to secure the Company under the terms of both the
Agreement and the Related Agreement, (ii) pay the Company for entering into the
Agreement by conveying to the Company 5,000 shares of Common Stock which are
owned by the Borrower, and (iii) waive the right of Mr. Moore to exercise
options to purchase, at $2.50 per share, 5,000 shares of Common Stock pursuant
to options previously granted to Mr. Moore by the Company.
The proceeds from the loans evidenced by the Notes have been
advanced by the Bank and have been used in part to fund Mr. Moore's purchase, at
$2.50 per share (for an aggregate amount of $181,250), of 72,500 shares of
Common Stock pursuant to exercising stock options previously granted to him by
the Company. The balance of the loan proceeds involved are expected to be used
by the Borrower and Mr. Moore to pay certain income taxes and for general
corporate purposes.
The aforementioned transactions have been approved by both the
Board of Directors of the Company and the Audit Committee of the Board of
Directors of the Company.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
The following exhibits are furnished in accordance with Item
601 of Regulation S-K.
10.1 Note Purchase Agreement dated as of January 12, 1999 by and among
Diversified Corporate Resources, Inc., Compass Bank and DCRI L.P. No.
2 Inc.
10.2 Pledge Agreement dated as of January 12, 1999 between Compass Bank and
DCRI L.P. No. 2, Inc.
10.3 Bank Transaction Agreement dated as of January 12, 1999 by and among
Diversified Corporate Resources, Inc., DCRI L.P. No. 2, Inc. and J.
Michael Moore.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
DIVERSIFIED CORPORATE RESOURCES, INC.
Registrant
DATE: January 27, 1999 By: /s/ M. Ted Dillard
----------------------
M. Ted Dillard
President and Secretary
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit No. Exhibit Page
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Note Purchase Agreement dated as of January 12, 1999 by
10.1 and among the Diversified Corporate Resources, Inc.,
Compass Bank and DCRI L.P. No. 2 Inc.
10.2 Pledge Agreement dated as of January 12, 1999 between
Compass Bank and DCRI L.P. No. 2, Inc.
10.3 Bank Transaction Agreement dated as of January 12, 1999
by and among the Diversified Corporate Resources, Inc.,
DCRI L.P.
No. 2, Inc. and J. Michael Moore.
</TABLE>
NOTE PURCHASE AGREEMENT
-----------------------
THIS NOTE PURCHASE AGREEMENT ("Agreement") is executed to be effective
December ___, 1998, by and among COMPASS BANK, a Texas state chartered banking
institution ("Bank"), DCRI L.P. NO. 2, INC., a Texas corporation ("Borrower"),
J. MICHAEL MOORE ("Guarantor"), and DIVERSIFIED CORPORATE RESOURCES, INC., a
Texas corporation ("Purchaser"). Borrower, Guarantor and Purchaser are sometimes
referred to in this Agreement as "Obligors".
THE PARTIES, INTENDING TO BE LEGALLY BOUND HEREBY, AGREE AS FOLLOWS:
SECTION 1. Definitions.
-----------
1.1 "Liabilities" shall mean any and all obligations to pay money
related directly or indirectly to Borrower's obligations evidenced by the Notes.
1.2 "Notes" shall mean the Promissory Notes signed this date by
Borrower in the principal amounts of $300,000.00 and $200,000.00.
SECTION 2. Purchaser's Obligation to Purchase Loan Documents.
-------------------------------------------------
2.1 Identification of Documents. On or about this date, Borrower and
Guarantor have executed as applicable the following documents, collectively
referred to as the "Loan Documents":
(a) Promissory Note in the stated principal amount of
$300,000.00 executed by Borrower and Promissory Note in the stated principal
amount of $200,000.00 executed by Borrower (jointly, the "Notes");
(b) Pledge Agreement executed by Borrower and Guarantor;
(c) Guaranty executed by Guarantor; and
(d) UCC-1 Financing Statement executed by Borrower.
2.2 Upon written demand by Bank to Purchaser, Purchaser shall purchase
the interest of Bank in the Loan Documents for a purchase price equal to the
amount of the Liabilities (the "Purchase").
2.3 The closing of the Purchase shall be on a date mutually agreeable
to the parties, no more than ten (10) days following the giving of notice by
Bank to Purchaser. At such closing Bank shall execute such documents evidencing
assignment of Bank's interest in the Notes and other Loan Documents as Purchaser
shall reasonably request. Bank shall have no obligation to make any
representation or warranty with respect to the Purchase at closing other than a
representation as to the amount of principal, interest and other charges that
the books and records of the Bank reflect to be due and owing from Borrower as
of closing. The assignment by the Bank of the Loan Documents shall be without
recourse against Bank. At closing, Bank shall be obligated to deliver originals
of the Loan Documents, or if the original of any Loan Document has been lost or
destroyed, a photocopy of any such lost or destroyed Loan Document, together
with an affidavit in reasonable form and content executed by Bank stating that
the original of such document has been lost or destroyed.
2.4 Bank shall be entitled without notice to or consent by Purchaser to
renew, extend, refinance the Loan Documents and Liabilities, all without
limiting or effecting the obligations of Purchaser under this Agreement.
However, without the prior written consent of Purchaser, Bank shall not extend
the maturity of Loan Documents beyond December 31, 2000.
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<PAGE>
2.5 Borrower and Guarantor agree to execute such documents as may be
reasonably requested by Purchaser to evidence the consent of Borrower and
Guarantor to the purchase by Purchaser of the Loan Documents and the assignment
thereafter of obligations of Borrower and Guarantor to Purchaser.
SECTION 3. General.
-------
3.1 Obligors shall do, make, execute and deliver all such additional
and further acts, things, assurances and instruments which the Bank may require
to consummate the transactions described in this Agreement.
a. Bank shall not sell or release any of the collateral securing
the Loan Documents without first obtaining the written consent
thereto of Purchaser.
b. Borrower, Guarantor and Purchaser agree to indemnify Bank, its
officers, directors, employees, agents and attorneys
("Indemnified Parties") and hold them harmless against any and
all claims, demands, causes of action, loss, damage, liabili-
ties, costs and expenses (including, without limitation,
attorneys' fees and court costs) asserted against or incurred
by Indemnified Parties by reason of, arising out of, or in
connection with, any fact or circumstance relating to this
Agreement. The above notwithstanding Obligors shall have no
obligation to indemnify or hold harmless Bank from claims
resulting from the gross negligence or intentional misconduct
of Bank.
c. Borrower and Purchaser shall pay all reasonable and necessary
expenses, including, without limitation, reasonable legal
expenses, incurred by Bank in connection with the closing of
the Purchase.
d. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and
shall be considered as properly given if mailed by first class
United States mail, postage prepaid, registered or certified
with return receipt requested, or by delivering same to the
designated address of the addressee stated herein by a third
party commercial delivery service. Notice given in any other
manner shall be effective only if and when received by
addressee. For purposes of notice, the addresses of the
parties shall be as set below; provided, however, that either
party shall have the right to change its address for notice
hereunder to any other location within the continental United
States by the giving of thirty (30) days' notice to the other
party in the manner set forth hereinabove.
If to Bank:
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Compass Bank
P.O. Box 650561
Dallas, Texas 75265-0561
Attention: Jack F. Roberson
If to Borrower:
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DCRI L.P. No. 2, Inc.
12801 N. Central Expressway, Suite 350
Dallas, Texas 75243
Attention: J. Michael Moore
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<PAGE>
If to Guarantor:
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J. Michael Moore
5919 Club Hill Place
Dallas, Texas 75248
If to Purchaser:
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Diversified Corporate Resources, Inc.
12801 N. Central Expressway, Suite 350
Dallas, Texas 75243
Attention: M. Ted Dillard
e. This Agreement is performable in Dallas County, Texas, and any
action brought for the enforcement or construction of any term of
this Agreement or other instruments executed in connection
herewith shall be brought in a court of appropriate jurisdiction
in Dallas County, Texas.
f. This Agreement and the documents delivered hereunder or in
connection herewith contain the entire agreement between the
parties with respect to the subject matter hereof and thereof and
supersede all prior agreements relating to the subject matter
hereof and thereof. In the event of actual conflict in the terms
and provisions of this Agreement and any of such documents or any
other instrument or agreement executed in connection with this
Agreement or described or referred to in this Agreement, the
terms and provisions of this Agreement shall control. No
modification, consent, amendment or waiver or any provision of
this Agreement, nor consent to any departure by Obligors
therefrom, shall be effective unless the same shall be in writing
and signed by Bank, and then shall be effectively only in the
specific instance and for the purpose for which given. This
Agreement is binding upon Obligors, their heirs, successors and
assigns, and inures to the benefit of Bank, its successors and
assigns. All representations and warranties of Obligors herein,
and all covenants and agreements herein or in any document
delivered hereunder or in connection herewith that are not fully
performed before the effective date of this Agreement, shall
survive such date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BORROWER:
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DCRI L.P. NO. 2, INC.,
a Texas corporation
By: /s/ J. Michael Moore
------------------------
J. Michael Moore
Its: President
GUARANTOR:
/s/ J. Michael Moore
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J. Michael Moore, Individually
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<PAGE>
PURCHASER:
---------
DIVERSIFIED CORPORATE RESOURCES, INC.,
a Texas corporation
By:
/s/ M. Ted Dillard
--------------------------------
M. Ted Dillard
Its: President
BANK:
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COMPASS BANK
By: /s/ Jack F. Roberson
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Jack F. Roberson
Its: Senior Vice President
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT ("Agreement") is made as of the _____ day of
December, 1998, by DCRI L.P. No. 2, INC., a Texas corporation (hereinafter
called "Borrower"), in favor of COMPASS BANK ("Bank"). J. Michael Moore joins in
this Agreement to confirm consent to all provisions of this Agreement and for
the other purposes set forth herein.
BORROWER HEREBY AGREES WITH BANK AS FOLLOWS:
1. Definitions. As used in this Agreement, the following terms shall have
the meanings indicated below:
(a) The term "Bank" shall mean Bank, its successors and assigns,
including without limitation, any party to whom Bank, or its successors or
assigns, may assign its rights and interests under this Agreement.
(b) The term "Borrower" shall mean DCRI L.P. No. 2, Inc.
(c) The term "Code" shall mean the Uniform Commercial Code as in
effect in the State of Texas on the date of this Agreement or as it may
hereafter be amended from time to time.
(d) The term "Collateral" shall mean all property specifically
described on Exhibit "A" attached hereto and made a part hereof. The term
Collateral, as used herein, shall also include (i) all certificates,
instruments and/or other documents evidencing the foregoing, (ii) all
renewals, replacements and substitutions of all of the foregoing, (iii) all
Additional Property (as hereinafter defined), and (iv) all PRODUCTS and
PROCEEDS of all of the foregoing. The designation of proceeds does not
authorize Borrower to sell, transfer, or otherwise convey any of the
foregoing property. The delivery at any time by Borrower to Bank of any
property as a pledge to secure payment or performance of any indebtedness
or obligation whatsoever shall also constitute a pledge of such property as
Collateral hereunder.
(e) The term "Indebtedness" shall mean
(i) all indebtedness, obligations and liabilities of Borrower to
Bank of any kind or character, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several or joint and several, and
regardless of whether such indebtedness, obligations and liabilities
may, prior to their acquisition by Bank, be or have been payable to or
in favor of a third party and subsequently acquired by Bank (it being
Page 1 of 21
<PAGE>
contemplated that Bank may make such acquisitions from third parties),
including without limitation all indebtedness, obligations and
liabilities of Borrower to Bank now existing or hereafter arising by
note, draft, acceptance, guaranty, endorsement, letter of credit,
assignment, purchase, overdraft, discount, indemnity agreement or
otherwise; (ii) all indebtedness, liabilities and obligations of
Borrower to Bank, whether now existing or hereafter incurred, direct
or indirect, absolute or contingent, secured or unsecured, matured or
unmatured, joint or several, whether for principal, interest, fees,
expenses or otherwise, arising out of or in connection with the
Promissory Note dated December ___, 1998 in the stated principal
amount of $300,000.00 payable by Borrower to the order of Bank (the
"$300,000 Note") and the Promissory Note dated December ___, 1998 in
the stated principal amount of $200,000.00 (the "$200,000 Note";
together with the $300,000 Note, the "Notes"); (iii) all accrued but
unpaid interest on any of the indebtedness described in (i) and (ii)
above; (iv) all obligations of Borrower to Bank under any documents
evidencing, securing, governing and/or pertaining to all or any part
of the indebtedness described in (i), (ii) and (iii) above; (v) all
costs and expenses incurred by Bank in connection with the collection
and administration of all or any part of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above or the
protection or preservation of, or realization upon, the collateral
securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys' fees; and (vi)
all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii), (iv) and
(v) above.
(f) The term "Security Documents" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness.
(g) The term "Obligation Party" shall mean any party other than
Borrower who secures, guarantees and/or is otherwise obligated to pay all
or any portion of the Indebtedness, including without limitation J. Michael
Moore.
(h) The term "Securities Intermediary" shall mean such broker as shall
be approved in writing by Bank, if applicable.
(i) The term "Security Documents" shall mean all instruments and
documents evidencing, securing, governing, guaranteeing and/or pertaining
to the Indebtedness.
All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.
Page 2 of 21
<PAGE>
2. Security Interest. As security for the Indebtedness, Borrower, for
value received, hereby grants to Bank a continuing security interest in the
Collateral.
3. Additional Property. Collateral shall also include the following
property (collectively, the "Additional Property") which Borrower becomes
entitled to receive or shall receive in connection with any other Collateral:
(a) any stock certificate, including without limitation, any certificate
representing a stock dividend or any certificate in connection with any
recapitalization, reclassification, merger, consolidation, conversion, sale of
assets, combination of shares, stock split or spinoff; (b) any option, warrant,
subscription or right, whether as an addition to or in substitution of any other
Collateral; (c) any dividends or distributions of any kind whatsoever, whether
distributable in cash, stock or other property; (d) any interest, premium or
principal payments; (e) any conversion or redemption proceeds; and (f) any
additional Collateral delivered to or provided to Bank pursuant to Section 11(i)
of this Agreement. All Additional Property and all certificates or other written
instruments or documents evidencing and/or representing the Additional Property
that is received by Borrower, together with such instruments of transfer as Bank
may request, shall immediately be delivered to or deposited with Bank and held
by Bank as Collateral under the terms of this Agreement. If the Additional
Property received by Borrower shall be shares of stock or other securities, such
shares of stock or other securities shall be duly endorsed in blank or
accompanied by proper instruments of transfer and assignment duly executed in
blank with, if requested by Bank, signatures guaranteed by a bank or member firm
of the New York Stock Exchange, all in form and substance satisfactory to Bank.
Bank shall be deemed to have possession of any Collateral in transit to Bank or
its agent.
4. Rights of Borrower Prior to Any Default. As long as no Event of
Default or event which with notice or the passage of time would constitute an
Event of Default shall have occurred hereunder: (a) Borrower shall be entitled
to all cash dividends paid on the Collateral free of the security interest
created under this Agreement; (b) voting rights incident to any stock or other
securities pledged as Collateral may be exercised by Borrower; provided,
however, that Borrower will not exercise, or cause to be exercised, any such
voting rights, without the prior written consent of Bank, if the direct or
indirect effect of such vote will result in an Event of Default hereunder; and
(c) Borrower shall be entitled to direct the Securities Intermediary to sell
Collateral, provided, however, that Borrower must provide to Bank as Collateral
the proceeds from such sale or substitute securities satisfactory in the sole
discretion of Bank of equal or greater value.
5. Maintenance of Collateral. Other than the exercise of reasonable
care to assure the safe custody of any Collateral in Bank's possession from time
to time, Bank does not have any obligation, duty or responsibility with respect
to the Collateral. Without limiting the generality of the foregoing, Bank shall
not have any obligation, duty or responsibility to do any of the following: (a)
ascertain any maturities, calls, conversions, exchanges, offers, tenders or
similar matters; (b) fix, preserve or exercise any right, privilege or option
(whether conversion,
Page 3 of 21
<PAGE>
redemption or otherwise) with respect to the Collateral unless (i) Borrower
makes written demand to Bank to do so, (ii) such written demand is received by
Bank in sufficient time to permit Bank to take the action demanded in the
ordinary course of its business, and (iii) Borrower provides additional
collateral, acceptable to Bank in its sole discretion; (c) collect any amounts
payable in respect of the Collateral (Bank being liable to account to Borrower
only for what Bank may actually receive or collect thereon); (d) sell all or any
portion of the Collateral to avoid market loss; (e) sell all or any portion of
the Collateral unless and until (i) Borrower makes written demand upon Bank to
sell the Collateral, and (ii) Borrower provides additional collateral,
acceptable to Bank in its sole discretion; or (f) hold the Collateral for or on
behalf of any party other than Borrower.
6. Representations and Warranties. Borrower hereby represents and
warrants the following to Bank:
(a) Enforceability. This Agreement and other Security Documents
constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency or similar laws of general application relating to the
enforcement of creditor's rights and except to the extent specific remedies
may generally be limited by equitable principles.
(b) Ownership and Liens. Borrower has good and marketable title to the
Collateral free and clear of all liens, security interests, encumbrances or
adverse claims, except for the security interest created by this Agreement.
No dispute, right of setoff, counterclaim or defense exists with respect to
all or any part of the Collateral. Borrower has not executed any other
security agreement currently affecting the Collateral, and no financing
statement or other instrument similar in effect covering all or any part of
the Collateral is on file in any recording office except as may have been
executed or filed in favor of Bank.
(c) No Conflicts or Consents. Neither the ownership, the intended use
of the Collateral by Borrower, the grant of the security interest by
Borrower to Bank herein nor the exercise by Bank of its rights or remedies
hereunder, will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulations, (B) the articles or certificate
of incorporation, charter, bylaws, partnership agreement, or trust
documents as the case may be, of Borrower, or (C) any agreement, judgment,
license, order or permit applicable to or binding upon Borrower or
otherwise affecting the Collateral, or (ii) result in or require the
creation of any lien, charge or encumbrance upon any assets or properties
of Borrower or of any person except as may be expressly contemplated in the
Security Documents. Except as expressly contemplated in the Security
Documents, no consent, approval, authorization or order of, and no notice
to or filing with, any court, governmental authority or third party is
required in connection with the grant by Borrower of the security interest
herein or the exercise by Bank of its rights and remedies hereunder.
Page 4 of 21
<PAGE>
(d) Security Interest. Borrower has and will have at all times full
right, power and authority to grant a security interest in the Collateral
to Bank in the manner provided herein, free and clear of any lien, security
interest or other charge or encumbrance. This Agreement creates a legal,
valid and binding security interest in favor of Bank in the Collateral.
(e) Location. Borrower's address for notice, and the office where the
records concerning the Collateral are kept is located at the address set
forth on the signature page hereof.
(f) Solvency of Borrower. As of the date hereof, and after giving
effect to this Agreement and the completion of all other transactions
contemplated by Borrower at the time of the execution of this Agreement,
(i) Borrower is and will be solvent, (ii) the fair saleable value of
Borrower's assets exceeds and will continue to exceed Borrower's
liabilities (both fixed and contingent), and (iii) Borrower is and will
continue to be able to pay its debts as they mature.
(g) Securities. All certificates evidencing securities pledged as
Collateral are valid and genuine and have not been altered. All securities
pledged as Collateral have been duly authorized and validly issued, are
fully paid and nonassessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which Borrower or the
issuer thereof is bound. No restrictions or conditions exist with respect
to the transfer or voting of any securities pledged as Collateral, except
as has been disclosed to Bank in writing.
(h) Uncertificated Securities. Borrower's ownership of the securities
described in Exhibit A is registered on the issuer's books or on the books
maintained on behalf of the issuer for that purpose. With respect to such
securities as to which no certificate has been issued or delivered to
Borrower, Bank's security interest in such securities is registered on the
books maintained by the Securities Intermediary for that purpose.
7. Affirmative Covenants. Borrower will comply with the covenants
contained in this Section at all times during the period of time this Agreement
is effective unless Bank shall otherwise consent in writing.
(a) Ownership and Liens. Borrower will maintain good and marketable
title to all Collateral free and clear of all liens, security interests,
encumbrances or adverse claims, except for the security interest created by
this Agreement and the security interests and other encumbrances expressly
permitted by the other Security Documents. Borrower will not permit any
Page 5 of 21
<PAGE>
dispute, right of setoff, counterclaim or defense to exist with respect to
all or any part of the Collateral. Borrower will cause any financing
statement or other security instrument with respect to the Collateral to be
terminated, except as may exist or as may have been filed in favor of Bank.
Borrower will defend at its expense Bank's right, title and security
interest in and to the Collateral against the claims of any third party.
(b) Inspection of Books and Records. Borrower will keep adequate
records concerning the Collateral and will permit Bank and all
representatives and agents appointed by Bank to inspect Borrower's books
and records of or relating to the Collateral following reasonable advance
notice during normal business hours, to make and take away photocopies,
photographs and printouts thereof and to write down and record any such
information.
(c) Adverse Claim. Borrower covenants and agrees to promptly notify
Bank of any claim, action or proceeding affecting title to the Collateral,
or any part thereof, or the security interest created hereunder and, at
Borrower's expense, defend Bank's security interest in the Collateral
against the claims of any third party. Borrower also covenants and agrees
to promptly deliver to Bank a copy of all written notices received by
Borrower with respect to the Collateral, including without limitation,
notices received from the issuer of any securities pledged hereunder as
Collateral.
(d) Registration of Pledge. Borrower agrees that prior to or
contemporaneously with the execution of this Agreement Borrower will
deliver or cause to be delivered to Bank a confirmation of Bank's security
interest in the Collateral by the issuer(s) thereof in form acceptable to
Bank.
(e) Collateral Value. Borrower warrants that on the date of this
Agreement the stated principal amount under the $200,000 Note does not
exceed fifty percent (50%) of Portfolio Value (as defined below) of the
securities initially allocated to secure the $200,000 Note. Borrower
warrants that on the date of this Agreement the stated principal amount
under the $300,000 Note does not exceed seventy percent (70%) of Portfolio
Value of the securities initially allocated to secure the $300,000 Note.
Thereafter, Borrower agrees to maintain at all times the Portfolio Value of
the Collateral such that outstanding principal under the Notes does not
exceed seventy (70%) percent of Portfolio Value. In the event that at any
time outstanding principal under the Notes exceeds seventy (70%) percent of
the Portfolio Value for five (5) consecutive business days, then Borrower
agrees that Borrower will deliver to Bank additional Collateral
satisfactory to Bank in order to cause outstanding principal under the
Notes to be no higher than seventy (70%) percent of Portfolio Value. As
used herein, "Portfolio Value" shall mean the aggregate fair market value
of the Collateral as determined by reference to the last published bid
price quoted in The Wall Street Journal or other reference deemed
appropriate by Bank in its sole discretion on the date of such
Page 6 of 21
<PAGE>
determination. Nothing in this subsection 7(e) shall be construed as
limiting the right of Bank to rely on any Collateral to satisfy any of the
Indebtedness; any initial allocation of securities done in order to
calculate the initial ratios under the first two sentences of this
subsection 7(e) is done for the convenience of the Bank and shall give
Borrower no right to obtain a release of any Collateral prior to the
payment in full of the Indebtedness.
(f) Portfolio Reports. If applicable, Borrower shall deliver or cause
the Securities Intermediary to deliver to Bank, not later than the
fifteenth (15th) business day of each calendar month, a written statement
in form acceptable to Bank of the Portfolio Value of the Collateral as of
the last business day of the immediately preceding calendar month and a
copy of the Account Summary received by Borrower from the Securities
Intermediary or its successor (approved in writing by Bank) regarding the
status of the securities held in the account described in Exhibit A.
(g) Financial Reports. Borrower will deliver to Bank:
(i) within ninety (90) days following the end of each year the
financial statement and income statement of Borrower and each
Obligated Party; and
(ii) such other financial information as Bank may from time to
time request.
Nothing in this paragraph shall be construed as extending the maturity date of
the Notes or of any other Indebtedness.
(h) Further Assistance. Borrower agrees that from time to time, at
Borrower's expense, they will promptly execute and deliver all further
instruments and documents and take all further action that may be necessary
or desirable, or that Bank requests, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Bank to exercise and enforce its rights and remedies hereunder with respect
to any Collateral.
8. Negative Covenants. Borrower will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Bank shall otherwise consent in writing.
(a) Transfer or Encumbrance. Borrower will not (i) sell, assign (by
operation of law or otherwise) or transfer Borrower's rights in any of the
Collateral (ii) grant a lien or security interest in or execute, file or
record any financing statement or other security instrument with respect to
the Collateral to any party other than Bank, or (iii) deliver actual or
Page 7 of 21
<PAGE>
constructive possession of any certificate, instrument or document
evidencing and/or representing any of the Collateral to any party other
than Bank.
(b) Impairment of Security Interest. Borrower will not take or fail to
take any action which would in any manner impair the value or
enforceability of Bank's security interest in any Collateral.
(c) Restrictions on Securities. Borrower will not enter into any
agreement creating, or otherwise permit to exist, any restriction or
condition upon the transfer, voting or control of any securities pledged as
Collateral, except as consented to in writing by Bank.
9. Rights of Bank. Bank shall have the rights contained in this Section at
all times during the period of time this Agreement is effective.
(a) Power of Attorney. Borrower hereby irrevocably appoint Bank as
Borrower's attorneyinfact, such power of attorney being coupled with an
interest, with full authority in the place and stead of Borrower and in the
name of Borrower or otherwise, to take any action and to execute any
instrument which Bank may from time to time in Bank's discretion deem
necessary or appropriate to accomplish the purposes of this Agreement,
including without limitation, the following action: (i) transfer any
securities, instruments, documents or certificates pledged as Collateral in
the name of Bank or its nominee; (ii) use any interest, premium or
principal payments, conversion or redemption proceeds or other cash
proceeds received in connection with any Collateral to reduce any of the
Indebtedness; (iii) exchange any of the securities pledged as Collateral
for any other property upon any merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer thereof, and, in
connection therewith, to deposit and deliver any and all of such securities
with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as Bank may deem necessary
or appropriate; (iv) exercise or comply with any conversion, exchange,
redemption, subscription or any other right, privilege or option pertaining
to any securities pledged as Collateral; provided, however, except as
provided herein, Bank shall not have a duty to exercise or comply with any
such right, privilege or option (whether conversion, redemption or
otherwise) and shall not be responsible for any delay or failure to do so;
and (v) file any claims or take any action or institute any proceedings
which Bank may deem necessary or appropriate for the collection and/or
preservation of the Collateral or otherwise to enforce the rights of Bank
with respect to the Collateral.
(b) Performance by Bank. If Borrower fails to perform any agreement or
obligation provided herein, Bank may itself perform, or cause performance
of, such agreement or obligation, and the expenses of Bank incurred in
connection therewith shall be a part of the Indebtedness, secured by the
Collateral and payable by Borrower on demand.
Page 8 of 21
<PAGE>
(c) Notification of Account Debtors and Other Rights. With respect to
chattel paper or instruments which are Collateral, Bank, without notice to
Borrower, shall have the right at any time and from time to time to notify
and direct the account debtor and obligor thereon to thereafter make all
payments on such Collateral directly to Bank, regardless of whether
Borrower was previously making collections thereon. Each account debtor and
obligor making payment to Bank hereunder shall be fully protected in
relying on the written statement of Bank that it then holds a security
interest which entitles it to receive such payment, and the receipt of Bank
for such payment shall be full acquaintance therefor to the party making
such payment. Payments received by Bank shall be held or disposed of by it
in accordance with the terms of this Agreement. Bank shall, however, never
be obligated to collect, or use any effort to collect, any such payments,
its sole liability to the Borrower being to account for payments, if any,
actually received.
Notwithstanding any other provision herein to the contrary, Bank does not have
any duty to exercise or continue to exercise any of the foregoing rights and
shall not be responsible for any failure to do so or for any delay in doing so.
10. Events of Default. Each of the following constitutes an "Event of
Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal or neglect of
Borrower to make any payment of principal or interest on the Indebtedness,
or any portion thereof, within ten (10) days from the date such payment
shall become due and payable; or
(b) NonPerformance of Covenants. The failure of Borrower or any
Obligated Party to timely and properly observe, keep or perform any
covenant, agreement, warranty or condition required herein or in any of the
other Security Documents and such failure continues for thirty (30) days
following notice thereof received by Borrower or any Obligated Party, as
applicable; or
(c) Default Under other Security Documents. The occurrence of an event
of default under any of the other Security Documents or in any other note,
agreement or instrument between either Borrower and Bank, whether or not
executed in connection with or securing the Notes; or
(d) False Representation. Any representation contained herein or in
any of the other Security Documents made by Borrower or any Obligated Party
is false or misleading in any material respect; or
Page 9 of 21
<PAGE>
(e) Insolvency. If Borrower or any Obligated Party: (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due; (ii) generally is not paying its debts
as such debts become due; (iii) has a receiver or custodian appointed for,
or take possession of, all or substantially all of the assets of such party
or any of the Collateral, either in a proceeding brought by such party or
in a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within thirty (30) days
after the effective date thereof or such party consents to or acquiesces in
such appointment or possession; (iv) fails to have discharged within a
period of thirty (30) days any attachment, sequestration or similar writ
levied upon any property of such party; or (v) fails to pay within thirty
(30) days any final money judgment against such party; or
(f) Execution on Collateral. The Collateral or any portion thereof is
taken on execution or other process of law in any action against Borrower;
or
(g) Action by Other Lienholder. The holder of any lien or security
interest on any of the assets of Borrower, including without limitation,
the Collateral (without hereby implying the consent of Bank to the exercise
or creation of any such lien or security interest on the Collateral),
declares a default thereunder or institutes foreclosure or other
proceedings for the enforcement of its remedies thereunder; or
(h) Bankruptcy of Issuer. (i) The issuer of any securities
constituting Collateral files a petition for relief under any Applicable
Bankruptcy Law, (ii) an involuntary petition for relief is filed against
any such issuer under any Applicable Bankruptcy Law and such involuntary
petition is not dismissed within thirty (30) days after the filing thereof,
or (iii) an order for relief naming any such issuer is entered under any
Applicable Bankruptcy Law.
11. Remedies and Related Rights. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Security Documents or otherwise available to Bank, Bank
may exercise one or more of the rights and remedies provided in this Section.
(a) Remedies. Bank may from time to time at its discretion, without
limitation and without notice except as expressly provided in any of the
Security Documents:
(i) exercise in respect of the Collateral all the rights and
remedies of a Bank under the Code (whether or not the Code applies to
the affected Collateral);
(ii) reduce its claim to judgment or foreclose or otherwise
enforce, in part, the security interest granted hereunder by any
available judicial procedure;
Page 10 of 21
<PAGE>
(iii) sell or otherwise dispose of, at its office, on the
premises of Borrower or elsewhere, the Collateral, as a unit or in
parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Bank's power of sale, but
sales or other dispositions may be made from time to time until all of
the Collateral has been sold or disposed of or until the Indebtedness
has been paid and performed in full), and at any such sale or other
disposition it shall not be necessary to exhibit any of the
Collateral;
(iv) buy the Collateral, or any portion thereof, at any public
sale;
(v) buy the Collateral, or any portion thereof, at any private
sale if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed
standard price quotations;
(vi) apply for the appointment of a receiver for the Collateral,
and Borrower hereby consent to any such appointment;
(vii) notify any issuer of any of the Collateral consisting of
securities to liquidate such Collateral and promptly deliver the
proceeds thereof to Bank to be applied by Bank in accordance with the
provisions of this Agreement: and
(viii) at its option, retain the Collateral in satisfaction of
the Indebtedness whenever the circumstances are such that Bank is
entitled to do so under the Code or otherwise.
Borrower agree that in the event Borrower is entitled to receive any notice
under the Uniform Commercial Code, as it exists in the state governing any such
notice, of the sale or other disposition of any Collateral, reasonable notice
shall be deemed given when such notice is deposited in a depository receptacle
under the care and custody of the United States Postal Service, postage prepaid,
at Borrower's address set forth on the signature page hereof, ten (10) business
days prior to the date of any public sale, or after which a private sale, of any
of such Collateral is to be held. Bank shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Bank may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Borrower further acknowledge and
agree that the redemption by Bank of any certificate of deposit pledged as
Collateral shall be deemed to be a commercially reasonable disposition under
Section 9.504(c) of the Code.
Page 11 of 21
<PAGE>
(b) Private Sale of Securities. Borrower recognize that Bank may be
unable to effect a public sale of all or any part of the securities pledged
as Collateral because of restrictions in applicable federal and state
securities laws and that Bank may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers
who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. Borrower acknowledge that each such private
sale may be at prices and other terms less favorable than what might have
been obtained at a public sale and, notwithstanding the foregoing, agrees
that each such private sale shall be deemed to have been made in a
commercially reasonable manner and that Bank shall have no obligation to
delay the sale of any such securities for the period of time necessary to
permit the issuer to register such securities for public sale under any
federal or state securities laws. Borrower further acknowledge and agree
that any offer to sell such securities which has been made privately in the
manner described above to not less than five (5) bona fide offerees shall
be deemed to involve a "public sale" for the purposes of Section 9.504(c)
of the Code, notwithstanding that such sale may not constitute a "public
offering" under any federal or state securities laws and that Bank may, in
such event, bid for the purchase of such securities.
(c) Application of Proceeds. If any Event of Default shall have
occurred, Bank may at its discretion apply or use any cash held by Bank as
Collateral, and any cash proceeds received by Bank in respect of any sale
or other disposition of, collection from, or other realization upon, all or
any part of the Collateral as follows in such order and manner as Bank may
elect:
(i) to the repayment or reimbursement of the reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by Bank in connection with (A) the
administration of the Security Documents, (B) the custody,
preservation, use or operation of, or the sale of, collection from, or
other realization upon, the Collateral, and (C) the exercise or
enforcement of any of the rights and remedies of Bank hereunder;
(ii) to the payment or other satisfaction of any liens and other
encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as Collateral;
(v) to the payment of any other amounts required by applicable
law (including without limitation, Section 9.504(a)(3) of the code or
any other applicable statutory provision); and
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<PAGE>
(vi) by delivery to Borrower or any other party lawfully entitled
to receive such cash or proceeds whether by direction of a court of
competent jurisdiction or otherwise.
(d) Deficiency. In the event that the proceeds of any sale of,
collection from, or other realization upon, all or any part of the
Collateral by Bank are insufficient to pay all amounts which to which Bank
is legally entitled, Borrower and any party who guaranteed or is otherwise
obligated to pay all or any portion of the Indebtedness shall be liable for
the deficiency, together with interest thereon as provided in the Security
Documents.
(e) NonJudicial Remedies. Borrower recognize and concede that
nonjudicial remedies are consistent with the usage of trade, are responsive
to commercial necessity and are the result of a bargain at arm's length.
Nothing herein is intended to prevent Bank, Borrower from resorting to
judicial process at either party's option.
(f) Other Recourse. Borrower waive any right to require Bank to
proceed against any third party, exhaust any Collateral or other security
for the Indebtedness, or to have any third party joined with Borrower in
any suit arising out of the Indebtedness or any of the Security Documents
or pursue any other remedy available to Bank. Borrower further waive any
and all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension of the indebtedness.
Borrower further waive any defense arising by reason of any disability or
other defense of any third party or by reason of the cessation from any
cause whatsoever of the liability of any third party. Until all of the
Indebtedness shall have been paid in full, Borrower shall have no right of
subrogation and Borrower waives the right to enforce any remedy which Bank
has or may hereafter have against any third party, and waives any benefit
of and any right to participate in any other security whatsoever now or
hereafter held by Bank. Borrower authorize Bank, and without notice or
demand and without any reservation of rights against Borrower and without
affecting Borrower's liability hereunder or on the Indebtedness, to (i)
take or hold any other property of any type from any third party as
security for the Indebtedness, and exchange, enforce, waive and release any
or all of such other property, (ii) apply such other property and direct
the order or manner of sale thereof as Bank may in its discretion
determine, (iii) renew, extend, accelerate, modify, compromise, settle or
release any of the Indebtedness or other security for the Indebtedness,
(iv) waive, enforce or modify any of the provisions of any of the Security
Documents executed by any third party, and (v) release or substitute any
third party.
(g) Voting Rights. Borrower hereby irrevocably appoints Bank as
Borrower's attorney-in-fact (such power of attorney being coupled with an
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<PAGE>
interest) and proxy to exercise any voting rights with respect to
Borrower's securities pledged as Collateral upon the occurrence of an Event
of Default.
(h) Dividend Rights and Interest Payments. Upon the occurrence of an
Event of Default:
(i) all rights of Borrower to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to Section 4 shall automatically cease,
and all such rights shall thereupon become vested with Bank which
shall thereafter have the sole right to receive, hold and apply as
Collateral such dividends and interest payments; and
(ii) all dividend and interest payments which are received by
Borrower contrary to the provisions of clause (i) of this Subsection
shall be received in trust for the benefit of Bank, shall be
segregated from other funds of Borrower, and shall be forthwith paid
over to Bank in the exact form received (properly endorsed or assigned
if requested by Bank), to be held by Bank as Collateral.
(i) In addition to all other rights and remedies provided herein,
Borrower agrees that if at any time principal outstanding under the Notes
is greater than seventy (70%) percent of the Portfolio Value of the
Collateral for five (5) consecutive business days, then Borrower will
comply with its obligations under Section 7(e) of this Agreement. Any
failure by Borrower to comply with Section 7(e) shall constitute an Event
of Default hereunder, whereupon Bank shall have the right, to immediately
sell or otherwise dispose of all or any part of the Collateral, or direct
the sale or other disposition of all or any part of the Collateral, in
accordance with the provisions hereof, and to hold any proceeds of such
sale or other disposition as part of the Collateral or apply such proceeds
in accordance with the provisions hereof.
12. Indemnity. Borrower hereby indemnify and agree to hold harmless Bank,
and its officers, directors, employees, agents, representatives and attorneys
(each an "Indemnified Person") from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suit,
costs, expenses or disbursements of any kind or nature (collectively, the
"Claims") which may be imposed on, incurred by, or asserted against, any
Indemnified Person (whether or not caused by any Indemnified Person's sole,
concurrent or contributory negligence) arising in connection with the Security
Documents, the Indebtedness or the Collateral (including without limitation, the
enforcement of the Security Documents and the defense of any Indemnified
Person's actions and/or in actions in connection with the Security Documents),
except to the limited extent the Claims against an Indemnified Person are
proximately caused by such Indemnified Person's gross negligence or willful
misconduct. If Borrower or any third party ever alleges such gross negligence or
Page 14 of 21
<PAGE>
willful misconduct by any Indemnified Person, the indemnification provided for
in this Section shall nonetheless be paid upon demand, subject to later
adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the alleged
gross negligence or willful misconduct. The indemnification provided for in this
Section shall survive the termination of this Agreement and shall extend and
continue to benefit each individual or entity who is or has at any time been an
Indemnified Person hereunder.
13. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire agreement of
Bank and Borrower with respect to the Collateral. If the parties hereto are
parties to any prior agreement, either written or oral, relating to the
Collateral, the terms of this Agreement shall amend and supersede the terms
of such prior agreements as to transactions on or after the effective date
of this Agreement, but all security agreements, financing statements,
guaranties, other contracts and notices for the benefit of Bank shall
continue in full force and effect to secure the Indebtedness unless Bank
specifically releases its rights thereunder by separate release.
(b) Amendment. No modification, consent or amendment of any provision
of this Agreement or any of the other Security Documents shall be valid or
effective unless the same is in writing and signed by the party against
whom it is sought to be enforced.
(c) Actions by Bank. The lien, security interest and other security
rights of Bank hereunder shall not be impaired by (i) any renewal,
extension, increase or modification with respect to the Indebtedness, (ii)
any surrender, compromise, release, renewal, extension, exchange or
substitution which Bank may grant with respect to the Collateral, or (iii)
any release or indulgence granted to any endorser, guarantor or surety of
the Indebtedness. The taking of additional security by Bank shall not
release or impair the lien, security interest or other security rights of
Bank hereunder or affect the obligations of Borrower hereunder.
(d) Waiver by Bank. Bank may waive any Event of Default without
waiving any other prior or subsequent Event of Default. Bank may remedy any
default without waiving the Event of Default remedied. Neither the failure
by Bank to exercise, nor the delay by Bank in exercising, any right or
remedy upon any Event of Default shall be construed as a waiver of such
Event of Default or as a waiver of the right to exercise any such right or
remedy at a later date. No single or partial exercise by Bank of any right
or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right or remedy hereunder may be
exercised at any time. No waiver of any provision hereof or consent to any
departure by Borrower therefrom shall be effective unless the same shall be
Page 15 of 21
<PAGE>
in writing and signed by Bank and then such waiver or consent shall be
effective only in the specific instances, for the purpose for which given
and to the extent therein specified. No notice to or demand on Borrower in
any case shall of itself entitle Borrower to any other or further notice or
demand in similar or other circumstance.
(e) Costs and Expenses. Borrower will upon demand pay to Bank the
amount of any and all reasonable and necessary costs and expenses
(including without limitation, reasonable attorneys' fees and expenses),
which Bank may incur in connection with (i) the transactions which give
rise to the Security Documents, (ii) the preparation of this Agreement and
the perfection and preservation of the security interests granted under the
Security Documents, (iii) the administration of the Security Documents,
(iv) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, (v) the
exercise or enforcement of any of the rights of Bank under the Security
Documents, or (vi) the failure by Borrower to perform or observe any of the
provisions hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL
LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR
NONPERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in Dallas County,
Texas, and it shall be performable for all purposes in such county. Courts
within the State of Texas shall have jurisdiction over any and all disputes
arising under or pertaining to this Agreement and venue for any such
disputes shall be in Dallas County, Texas.
(h) Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable,
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be construed as an
obligation on the part of Bank to extend or continue to extend credit to
Borrower.
(j) Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and given by (i) personal delivery, (ii) expedited delivery service
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with proof of delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent to the
intended address at the address set forth on the signature page hereof or
to such different address as the addressee shall have designated by written
notice sent pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time of personal
delivery, in the case of expedited delivery services, as of the date of
first attempted delivery at the address and in the manner provided herein,
or in the case of mail, upon deposit in a depository receptacle under the
care and custody of the United States Postal Service. Either party shall
have the right to change its address for notice hereunder to any other
location within the continental United States by notice to the other party
of such new address at least thirty (30) days prior to the effective date
of such new address.
(k) Binding Effect and Assignment. This Agreement (i) creates a
continuing security interest in the Collateral, (ii) shall be binding on
Borrower and the heirs, executors, administrators, personal
representatives, successors and assigns of Borrower, and (iii) shall inure
to the benefit of Bank and its successors and assigns. Without limiting the
generality of the foregoing Bank may pledge, assign or otherwise transfer
the Indebtedness and its rights under this Agreement and any of the other
Security Documents to any other party. Borrower's rights and obligations
hereunder may not be assigned or otherwise transferred without the prior
written consent of Bank.
(l) Termination. It is contemplated by the parties hereto that from
time to time there may be no outstanding Indebtedness, but notwithstanding
such occurrences, this Agreement shall remain valid and shall be in full
force and effect as to subsequent outstanding Indebtedness. Upon (i) the
satisfaction in full of the Indebtedness, (ii) the termination or
expiration of any commitment of Bank to extend credit to Borrower, (iii)
written request for the termination hereof delivered by Borrower to Bank,
and (iv) written release delivered by Bank to Borrower, this Agreement and
the security interests created hereby shall terminate. Upon termination of
this Agreement and Borrower's written request, Bank will, at Borrower's
sole cost and expense, return to Borrower such of the Collateral as shall
not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and execute and deliver to Borrower such documents as Borrower
shall reasonably request to evidence such termination.
(m) Cumulative Rights. All rights and remedies of Bank hereunder are
cumulative of each other and of every other right or remedy which Bank may
otherwise have at law or in equity or under any of the other Security
Documents, and the exercise of one or more of such rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of any other
rights or remedies.
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(n) Gender and Number. Within this Agreement, words of any gender
shall be held and construed to include the other gender, and words in the
singular number shall be held and construed to include the plural and words
in the plural number shall be held and construed to include the singular,
unless in each instance the context requires otherwise.
(o) Descriptive Headings. The headings in this Agreement are for
convenience only and shall in no way enlarge, limit or define the scope or
meaning of the various and several provisions hereof.
EXECUTED as of the date first written above.
BORROWER:
--------
DCRI L.P. NO. 2, INC.,
a Texas corporation
By: /s/ J. Michael Moore
--------------------
Its: President
--------------------
OBLIGATION PARTY:
----------------
/s/ J. Michael Moore
---------------------------
J. Michael Moore
Borrower's Address:
- ------------------
12801 N. Central Expressway, Suite 350
Dallas, Texas 75243
Obligation Party's Address:
- --------------------------
5919 Club Hill Place
Dallas, Texas 75248
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<PAGE>
Bank's Address:
- --------------
Compass Bank
P.O. Box 650561
Dallas, Texas 75265-0561
Attn: Jack F. Roberson
Page 19 of 21
<PAGE>
EXHIBIT "A"
to
General Pledge Agreement
Dated December ___, 1998
by and between
COMPASS BANK
and
DCRI L.P. NO 2, INC.
Page 20 of 21
<PAGE>
SCHEDULE 1
----------
Page 21 of 21
BANK TRANSACTION AGREEMENT
THIS AGREEMENT is entered into by and between DCRI L.P. No. 2, Inc., a
Texas corporation (the "Company"), J. Michael Moore ("Moore") and Diversified
Corporate Resources, Inc., a Texas corporation ("DCRI").
W I T N E S S E T H:
WHEREAS, the Company plans to borrow from Compass Bank, a Texas state
chartered banking institution (the "Bank"), up to $500,000 in one or more loan
transactions (collectively the "Loan Transaction"), pursuant to which (a) the
Company will pledge as collateral approximately 165,000 shares of common stock
(the "Common Stock") of DCRI, (b) Moore will guarantee the repayment of all
amounts pursuant to the Loan Transactions, and (c) the Company and Moore will
execute such documents (collectively the "Loan Documents") as shall be required
of them by the Bank; and
WHEREAS, the Bank will not fund the Loan Transaction unless the Company
agrees to enter into a note purchase document (the "Note Purchase Agreement")
pursuant to which the Company will be obligated to purchase the Loan Documents
if the Company defaults in the repayment of the amount loaned to the Company by
the Bank pursuant to the Loan Transaction; and
WHEREAS, Moore owns all or substantially all of the capital stock of the
Company, and the Company owns a substantial portion of the issued and
outstanding shares of Common Stock; and
WHEREAS, the parties hereto have reached an agreement as to various matters
related to the Note Purchase Agreement; and
WHEREAS, the purpose of this Agreement is to set forth the understandings
of the parties related to the matters covered by this Agreement.
NOW, THEREFORE, for good and valuable consideration received, the parties
do hereby contract and agree as follows:
1. At the time of execution of this Agreement, Moore and the Company shall
execute and deliver to DCRI such documents as shall be required by the
terms of this Agreement including, but not by way of limitation, the
following: (a) a Security Agreement in the form as attached hereto as
Exhibit "A"; and (b) a UCC-1 Financing Statement in the form as attached
hereto as Exhibit "B".
2. Both the Company and Moore acknowledge that there is a possibility that the
Company may default in its obligations in connection with the Loan
Transaction and that DCRI may be required to purchase the Loan Documents
from the Bank. As a consequence, the Company agrees to pledge to DCRI
additional collateral as herein provided. Subject to the terms of this
Agreement, the Company and/or Moore shall and do hereby assign, pledge,
convey and hypothecate to DCRI 50,000 shares of Common Stock (the
"Shares"). At such time as the Loan Transaction has been paid in full, DCRI
will return the Shares to the Company and release its lien on the Shares.
3. As consideration to DCRI for entering into the Note Purchase Agreement
transaction, the Company and Moore agree as follows:
a. The Company shall and do hereby sell, assign, convey and deliver
5,000 shares of Common Stock to DCRI without any consideration
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required to be paid by DCRI to the Company in the form of
purchase price for such stock.
b. Moore will use part of the proceeds from the Loan Transaction to
exercise options to purchase 72,500 shares of Common Stock from
DCRI.
c. Moore shall and does hereby waive the right to purchase, at $2.50
per share, options to purchase 5,000 shares of Common Stock which
were granted to Moore by the Board of Directors of DCRI in 1996.
4. Each of the parties hereto agree to execute such documents as shall be
reasonably necessary to carry out the purpose and intent of this Agreement
of and to the extent requested to do so by one or more of the other parties
to this Agreement.
5. Representations and Warranties.
a. The Company and Moore shall and does hereby represent and warrant
to DCRI as follows:
i. The Company is a corporation duly organized and legally
existing in good standing under the laws of the State of
Texas.
ii. The Company and Moore have the full power and authority to
deliver and perform this Agreement and the transactions
contemplated by both this Agreement and the Loan Documents.
iii. Except with respect to the ownership claim of Donald Ditto,
the Company owns the Shares free and clear of any and all
liens, claims or other encumbrances.
iv. The Company and Moore expect that the Company will be able
to repay the Secured Notes in full at the time such
obligations become due and payable.
b. DCRI shall and does hereby represent and warrant to the Company
and Moore as follows:
i. DCRI is a corporation duly organized and legally existing in
good standing under the laws of the State of Texas.
ii. DCRI has the full corporate power and authority to execute,
deliver and perform this Agreement and the transactions
contemplated by this Agreement.
6. The Company and Moore will use the loan proceeds from the Loan Transactions
to fund those obligations as represented to the Bank and the Board of
Directors of DCRI including, but not by way of limitation, (a) exercise of
stock options by Moore to purchase shares of common stock of DCRI, (b)
payment of legal fees, and (c) payment of taxes.
7. In the event DCRI does in fact purchase the Loan Documents from the Bank,
DCRI hereby covenants and agrees to amend the Loan Documents to provide (a)
the Company shall have thirty (30) days from the date of closing of DCRI
purchasing the Loan Documents from the Bank, to pay in full all amounts
then due and payable with respect to the Secured Notes and, if the Company
does in fact make such payment in a timely fashion, the Company shall not
be deemed to be in default under the terms of the Secured Notes, and (b)
the Company will have thirty (30) days to cure non-monetary defaults under
the Loan Documents, instead of the ten (10) day curative period as now
provided in the Loan Documents.
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8. The representations, warranties, covenants and agreements made in this
Agreement or any certificate or instrument delivered in connection herewith
shall survive the closing of the transactions contemplated by this
Agreement.
9. The parties hereto agree to execute such additional instruments and/or
documents as shall be reasonable requested by the other party to carry out
the purpose and intent of this Agreement.
10. Any notices or other circumstances required or permitted hereunder shall be
sufficiently given if sent by certified mail, express mail service or
overnight delivery service, postage prepaid, addressed as follows:
If to the Company:
DCRI L.P. No. 2, Inc.
12801 North Central expressway
Suite 350
Dallas, Texas 75243
Attn: J. Michael Moore
If to J. Michael Moore:
J. Michael Moore
5919 Club Hill Place
Dallas, TX 75248
Attn: J. Michael Moore
If to Diversified Corporate Resources, Inc.:
Diversified Corporate Resources, Inc.
12801 North Central Expressway
Suite 350
Dallas, Texas 75243
Attn: M. Ted Dillard, Secretary
Or such other address as shall be furnished in writing by either party, and
such notice or communication shall be deemed to have been given five days
after the date of mailing if mailed prepaid and properly addressed.
11. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and there respective successors, heirs and assignees,
provided that this Agreement may not be assigned by either party without
the consent of the other party.
12. This Agreement may not be amended unless in writing signed by both of the
parties hereto.
13. This Agreement may be executed in one or more counterparts, each of which
shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party.
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14. One party may extend the time or waive the performance of any of the
obligations of the other party, waive any inaccuracies in the
representations or warranties by the other party, or waive compliance by
the other party with any of the covenants or conditions contained in this
Agreement. Any such extension or waiver shall be in writing and signed by
an authorized representative of the respective party. Any such extension or
waiver shall not act as a waiver or an extension of any other provisions of
this Agreement.
15. Nothing in this Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective heirs,
representatives, successors and assignees, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of
any third persons to any party to this Agreement, nor shall any provisions
give any third persons any rights of subrogation or action over or against
any party to this Agreement.
16. Upon request of either of the parties hereto, all disputes, claims or
controversies of any kind (herein referred to as "Disputes") between the
parties hereto, with respect to this Agreement, shall be resolved by
binding arbitration in accordance with the terms of this Agreement. All
Disputes (a) shall be resolved by a binding arbitration administered by the
American Arbitration Association (the "AAA") in accordance with the terms
of this provision of the Agreement, and (b) shall be decided by a majority
vote of three arbitrators, one each to be chosen by The Company and by DCRI
and the third arbitrator to be selected by the two arbitrators selected by
the parties. A judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction. The fees and expenses of the
arbitrator designated by a party shall be the responsibility of such party.
The fees and expenses of the third arbitrator shall be allocated in the
manner set forth in the award rendered by the arbitrators.
17. Each party hereto agrees to pay their own fees, expenses and disbursements
in connection with this Agreement.
18. This Agreement (including the schedules attached hereto) and the documents
delivered pursuant hereto constitute the entire agreement and understanding
between the parities and supersede any prior agreements and understandings
relating to the subject matter hereof.
19. This Agreement shall be governed by and interpreted in accordance with the
laws of the Texas.
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IN WITNESS WHEREOF, this Agreement has been executed by each of the
parties hereto effective as of the 12th day of January 1999.
DCRI L.P. No. 2, Inc.
By: /s/ J. Michael Moore
---------------------------
J. Michael Moore, President
Diversified Corporate Resources, Inc.
By: /s/ M. Ted Dillard
---------------------------
M. Ted Dillard, Secretary
/s/ J. Michael Moore
---------------------------------------
J. Michael Moore, Individually
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